Insurance claims arising from recent flooding in Sri Lanka are likely to be manageable for most local insurers due to low retention levels, but changing weather patterns raise long-term risks, says Fitch Ratings.
The agency expects the sector’s underwriting profitability to weaken in 2016, although this is unlikely to threaten most insurers’ credit profiles. A severe tropical storm in mid-May caused flooding and landslides in several parts of the country, with areas along the Kelani River in the western province, north-east of the capital, Colombo, among the worst affected.
National Insurance Trust Fund (NITF), the state-owned local reinsurer, estimates claims from the disaster of around LKR15.5bn (USD107m).
Fitch expects record-high claims to worsen the combined ratio of non-life insurers in 2016, with higher reinsurance premiums raising future expense ratios. In addition, lower profitability, stemming from higher claims, could affect capitalisation of some lower-capitalised insurers.
-Reuters
-Agencies
