Fitch Ratings has reaffirmed the ‘CCC+’ Insurer Financial Strength (IFS) rating and the ‘A+(lka)’ National IFS rating for Sri Lanka Insurance Corporation General Limited (SLIC General). According to the ratings agency, these ratings are indicative of SLIC General’s ‘Favourable’ company profile and significant investment and asset risk, primarily due to its exposure to sovereign-related investments.
The agency also anticipates that insurance losses stemming from flooding associated with Cyclone Ditwah will have a minimal impact on SLIC General’s credit profile. This assessment is underpinned by the insurer’s substantial reinsurance coverage and low retention levels, which mitigate non-motor losses. Although increased motor claims and reinsurance reinstatement premiums might affect underwriting profitability in 2025, these challenges are expected to be manageable within the company’s existing earnings and capital reserves.
Fitch regards SLIC General’s company profile as ‘Favourable’ due to its robust business operations, extensive domestic presence, and a wide distribution network. The insurer’s market share increased to 19.4% in 2024 from 18.9% in 2023, making it the largest primary non-life insurer in Sri Lanka.
Underwriting profitability is projected to improve gradually, supported by growth in the lower-claim motor and fire/engineering segments. However, near-term challenges persist due to flood-related losses and government directives impacting motor insurance premiums. The company’s combined ratio rose slightly to 102% in the first half of 2025, up from 100% in 2024, driven by an increase in the expense ratio. Despite these challenges, SLIC General’s long-term underwriting performance is expected to improve.
The growth in gross written premiums (GWP) is primarily driven by an 18% increase in motor insurance following the relaxation of motor imports in 2025. Motor insurance remains a significant component of the GWP mix, although efforts are being made to diversify earnings by increasing contributions from non-motor lines.
SLIC General maintains a satisfactory regulatory capital position, with a risk-based capital ratio of 277% at the end of December 2024 and 298% at the end of the first half of 2025, which is well above the regulatory minimum. Nevertheless, the company’s high exposure to sovereign assets continues to pose investment and liquidity risks, despite a recent upgrade in sovereign credit quality.
The investment portfolio is largely composed of fixed-income securities, including government securities and corporate debt. Foreign-currency assets constitute approximately 13% of the invested assets as of the first half of 2025.
Rating Sensitivities
Factors that could lead to a negative rating action include a significant weakening of SLIC General’s business profile, increased investment and asset risks, or a downgrade of financial institutions or sovereign ratings that form a large part of the investment portfolio.
Conversely, factors that could lead to a positive rating action include improvements in the company profile, a reduction in investment and asset risks, and an enhanced risk-based capital ratio while maintaining a favorable combined ratio.
