Fitch Ratings this week noted that Sri Lanka’s insurance industry is faced with a myriad of cyclical and structural challenges, including a slowing economy, falling interest rates, price competition and a lack of breadth and depth in the capital markets.
Despite upgrading Sri Lanka Insurance Corp Ltd's (SLIC) National Long-term Issuer Default Rating (IDR) to 'AA-(lka)' from 'A+(lka)' last week, Fitch stated in a press release that the major challenge for SLIC on the non-life side is to maintain appropriate pricing and underwriting standards in the face of rising price competition, where premium rates for certain business lines have fallen dramatically due to de-tariffication.
In its life insurance business, the challenge for the company is to manage a significant asset-liability duration mismatch. Fitch stated that the upgrade of SLIC's National IDR reflects the company's recent nationalisation, which indicates potential for government support, should this be required.
Fitch also affirmed SLIC's National Insurer Financial Strength (IFS) rating at 'AA-(lka)'. The Outlooks on both the National IDR and the National IFS rating are Stable.
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