ECONOMYNEXT – Sri Lanka’s People’s Insurance PLC’s National Insurer Financial Strength Rating has been affirmed at ‘A(lka)’ by Fitch Ratings, with a Stable Outlook.
The full statement is reproduced below:
Fitch Affirms People’s Insurance at ‘A(lka)’ IFS; Outlook Stable
Fitch Ratings – Colombo: Fitch Ratings has affirmed Sri Lanka-based People’s Insurance PLC’s ‘A(lka)’ National Insurer Financial Strength (IFS) Rating. The Outlook is Stable.
The affirmation reflects the insurer’s ‘Moderate’ company profile and adequate regulatory capital position compared with that of other domestic non-life insurers, which offset the weaker underwriting performance in recent periods.
Key Rating Drivers
Premium Growth Continues: People’s Insurance continued to expand its topline in 2025 with gross written premiums (GWP) increasing by 34%, exceeding industry growth of 13%, driven by higher motor insurance premiums, following the relaxation of vehicle import restrictions. Motor premiums rose by 42% while the non-motor segment’s rose by 11%. The insurer’s GWP mix is heavily weighted towards the motor segment, whose share of gross premiums increased to 79% (2024: 75%). We expect premium growth to moderate over the medium term as pent-up demand following the easing of vehicle import restrictions normalizes.
Capital Buffer Reduced: The risk-based capital (RBC) ratio declined to 246% by end-2025 from 389% at end-2024, reflecting a higher concentration risk charge associated with deposits placed with finance companies that were above regulatory admissible limits. Nevertheless, the RBC ratio remains supportive of the current rating and is broadly in line with the industry average of around 231% at end-2025. Capital generation remained positive through retained earnings.
Underwriting Performance Remains Weak: We expect underwriting profitability to remain under pressure in the near term, but to improve gradually in the longer term, supported by stronger GWP growth in lower-claim non-motor segments as part of the company’s selective expansion strategy. The Fitch-calculated combined ratio increased to 112% in 2025 (2024: 110%), reflecting a higher net loss ratio following claims arising from Cyclone Ditwah.
This was in line with the broader market, as industry-wide combined ratios remained elevated above 100% and Fitch-rated non-life insurers averaged a combined ratio of 112% in 2025. People’s Insurance’s three-year average (2023-2025) combined ratio was 113% while the three-year average return on equity was 8%.
Moderate Company Profile: We regard the insurer’s company profile as ‘Moderate’ compared with that of other insurers in Sri Lanka, based on a ‘Moderate’ business profile and ‘Neutral’ corporate governance. The business profile is helped by its established People’s brand, but constrained by a moderate operating scale and limited business diversification compared with similarly rated peers.
Conservative Investment Portfolio: We expect the insurer to continue maintaining a conservative investment mix. The investment portfolio had no exposure to equities at end-December 2025, with the majority allocated to fixed-income instruments, including 52% in fixed deposits with banks and non-bank financial institutions, 27% in government securities and 7% in corporate debt.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
– Deterioration in the regulatory RBC ratio to below 200% for a sustained period;
– Sustained deterioration in financial performance or weaker risk-management practices;
– Rising investment and asset risks, including a downgrade of the ratings on Sri Lankan financial institutions or the sovereign.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
– Maintaining the combined ratio below 98% consistently for a sustained period;
– Improving the business profile in terms of broader diversification of business lines.