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Sri Lanka: Interview with the Regulator: A need to develop products that meet diverse needs

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Source: Asia Insurance Review | Dec 2015

Mrs Indrani Sugathadasa, Chairperson, Insurance Board of Sri Lanka (IBSL), is on a mission to change the functioning of the insurance industry for which a number of regulatory changes have been implemented over the past year. In an exclusive interview with Asia Insurance Review, she speaks of the challenges facing the industry in implementing the changes and the future of the insurance industry in Sri Lanka.
By Jimmy John
Q: What steps have you taken as Regulator to boost the image of the industry across the country? 
Insurance penetration in 2014 was recorded at 1.02% and indicated a decline compared to 1.1% recorded in 2013. This is because we witnessed a higher growth level in GDP compared to the growth level of GWP in 2014. 
   There is a need to develop insurance products that meet diverse needs of different communities whilst improving public confidence on “insurance”. Awareness and appreciation on the concept of insurance among the public is another important factor to be considered to develop the sector. 
   Regular and focused awareness programmes on insurance should be done by the industry and by the regulator, jointly or individually at different forums to cover the general public. Awareness among school children is also important to boost the confidence levels and to drive a demand for insurance. 
   The development of the sector is also dependent on the spending power/higher disposable income of people. Regulatory measures are being taken by the IBSL to increase confidence levels of the public. 
Q: The insurance industry’s growth declined in 2014 in comparison to 2013. Do you expect this to change in 2015? 
We expect the industry to perform better in 2015, with higher growth in Long Term insurance (life) due to various promotional programmes launched by the industry. 
   The industry recorded a growth of 11.73% in terms of GWP in the first half of 2015 when compared to the said period of 2014. This growth is relatively higher than the growth experienced in the first half of 2014 which was 3.07%.
Q: How has the market responded to the new regulations for RBC, segregation and listing?
We have worked very closely with the industry on the new regulatory changes through discussions, forums and working committees in order to provide early solutions for emerging issues. 
   Implementation of RBC will be from January 2016. The industry has gone through a Road Test phase and a two-year parallel run on the new RBC framework and the currently applicable solvency requirements. 
   On the segregation requirement, the market response has been very positive despite many limitations and challenges. Out of the 12 composite companies, nine have already bifurcated the two business lines (life and non-life). 
   As for the listing requirement, out of the 30 insurance companies, seven companies are already listed. The listing requirement deadline will be in February 2016 for companies who were licensed as insurers in 2011 while others have been given a period of three years from the date of licensing. 
Q: How do you see the future of the insurance industry in Sri Lanka?
There is potential for further growth of business in Sri Lanka. Due to key regulatory changes, the industry is expected to go through many changes, such as mergers and takeovers and is expected to settle down by the later part of 2016 or 2017. 
   We are also moving ahead in developing the microinsurance market and expect the entire industry to grow in years to come.
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