Fitch Ratings, based in Sydney, has confirmed the ‘CCC+’ Insurer Financial Strength (IFS) Rating for Sri Lanka Insurance Corporation General Limited (SLIC General). In a related move, Fitch has decided to withdraw this IFS Rating.
The reaffirmation of the rating underscores the company’s ‘Favourable’ profile and adequate capital resources, although these positives are tempered by significant investment and asset risks stemming from its exposure to sovereign investments. Fitch generally refrains from assigning Outlooks for entities rated ‘CCC+’ or lower.
The withdrawal of the IFS Rating was conducted for commercial reasons, and it should be noted that SLIC General’s ‘A+(lka)’/Stable National IFS Rating remains unaffected by this action.
Key Factors Influencing the Rating:
Favourable Company Profile: Fitch classifies SLIC General’s profile as ‘Favourable’, which is indicative of a strong business framework and a neutral stance on corporate governance compared to other insurers in Sri Lanka. This robust business profile is bolstered by a significant market presence, extensive domestic operations, and a comprehensive distribution network. In terms of gross written premiums (GWP), SLIC General held the title of the largest primary non-life insurer in Sri Lanka as of 2025.
High Sovereign Asset Exposure: The ongoing weakness in Sri Lanka’s sovereign credit quality, currently rated ‘CCC+’, continues to heighten the investment and liquidity risks for domestic insurers, even after the sovereign upgrade in December 2024. SLIC General’s risky-asset ratio, as calculated by Fitch, remains elevated at 296% at the end of 2025, down from 371% in 2024. Fitch assesses its investment and asset risks at ‘ccc+’ on the international scale due to significant exposure to sovereign-related assets, placing its final IFS Rating beneath its implied IFS Rating of ‘b’.
Satisfactory Regulatory Capital Position: As of the end of 2025, SLIC General’s regulatory capital adequacy ratio slightly decreased to 269%, down from 277% at the end of the previous year. However, this figure significantly exceeds the 120% regulatory minimum and is competitive compared to other non-life insurers in Sri Lanka. The Fitch Prism Global score for SLIC General is estimated to have remained ‘Weak’ in 2025, consistent with the previous year, due to persistent high investment risks.
Impact of Cyclone Losses on Underwriting: The combined ratio for SLIC General rose to 105% in 2025, compared to 100% in 2024, primarily due to an increased net loss ratio after accounting for reinsurance, which was influenced by claims related to Cyclone Ditwah. Despite this, net profit held relatively steady at LKR 2.5 billion in 2025, compared to LKR 2.7 billion in 2024, aided by investment income that mitigated the adverse underwriting outcome. GWP experienced a 20% increase in 2025, driven by a 30% surge in motor insurance following the easing of vehicle import restrictions. While the GWP remains heavily weighted towards motor insurance, management is focused on enhancing contributions from non-motor segments, such as fire and engineering, to achieve greater earnings diversification.
RATING SENSITIVITIES:
As the IFS Rating has been withdrawn, the factors that could lead to negative or positive rating actions are no longer applicable.
