Sri Lanka’s non-life insurance sector is poised for gradual improvements in underwriting profitability, driven by enhanced practices and a strategic shift towards more profitable non-motor segments, according to a new report by Fitch Ratings.
The sector is adjusting policy pricing, particularly for motor and medical insurance, to address challenges posed by inflation and rising claim costs. However, profitability within motor insurance faces pressure from regulatory changes, including a requirement to remit full premiums to the National Insurance Trust Fund Board.
In response to prolonged import restrictions on motor vehicles, non-life insurers have diversified into non-motor segments such as health insurance. This strategic shift contributed to an 11% increase in non-motor gross premiums in 2023.
Fitch further notes that investment and liquidity risks in the sector have decreased following Sri Lanka’s sovereign rating upgrade in December 2024. Additionally, the anticipated implementation of IFRS 17 in January 2026 is expected to improve transparency and comparability within the insurance market, benefiting both insurers and policyholders.
