GWP increases by Rs 11,778 mn with 5.99% growth | Daily News

GWP increases by Rs 11,778 mn with 5.99% growth

Performance of the Insurance Industry – 2020
Total Assets and Assets Growth Rate of the Insurance Industry.
Total Assets and Assets Growth Rate of the Insurance Industry.

The insurance industry overall reported a total Gross Written Premium (GWP) Income of LKR 208,250 million in 2020 compared to LKR 196,472 million reported in 2019, recording an increase of LKR 11,778 million and demonstrated a growth rate of 5.99% (2019: 8.62%) according to Insurance Regulatory Commission of Sri Lanka.

The pandemic has improved the level of awareness on risks that can be mitigated through life insurance which again positively impacted the performance of the life insurers. However, lockdowns subdued the demand for most general insurance products. In particular, insurance classes like motor, marine, travel and aviation have mainly affected and reported premium declines compared to the previous year.

The long term insurance sector generated a GWP of LKR 102,974 million in 2020, up by 15.98% against the GWP of LKR 88,787 million generated in 2019. Product innovation, digitization of operations, remodelling distribution channels, and usage of customer-centric operating models were a few of the key strategies used by long term insurers to achieve business growth during the year.

In contrast, the general insurance sector recorded a GWP of LKR 105,276 million in 2020, posting a decline of 2.24% compared to LKR 107,685 million recorded in 2019 and this restrained performance was mainly due to the sharp decline in motor vehicle imports.

The reinsurance premium income generated by the National Insurance Trust Fund (NITF) from the compulsory reinsurance cession of general insurance business amounted to LKR 3,235 million during 2020, recording a decline of 22.49% against the reinsurance premium of LKR 4,174 million generated in 2019.

Insurance penetration which is reflected by the insurance premium generated by licensed insurance companies as a percentage of GDP amounted to 1.39% in 2020. Although insurance penetration had slightly increased in 2020 compared to 1.31%, which was recorded in 2019, it is still low compared to other countries in the Asian region.

The value of total assets of insurance companies has increased to LKR 796,791 million in 2020, when compared to LKR 696,941 million recorded in 2019, reflecting a fair growth of 14.33% in comparison to 10.55% growth recorded in 2019. The assets of the Long Term Insurance Business amounted to LKR 563,769 million (2019: LKR 485,121 million) indicating a growth of 16.21%. The assets of the General Insurance Business amounted to LKR 225,956 million (2019: LKR 205,130 million) and recorded a growth of 10.15%.

NITF managed to maintain the growing trend in total assets of the reinsurance business displaying a slight increase of 5.62% persuaded by the upturns in government securities and premium receivables. A total of LKR 37,903 million (2019: LKR 35,139 million) claims were incurred in the Long Term Insurance Business recording an increase of 7.86% over 2019.

Overall net claims incurred by the general insurance sector unveiled a drop of 26.88% to LKR 41,517 million (2019: LKR 58,149 million). Hence, the overall net claims ratio dropped to 49.16% which is the lowest recorded in the past five years.

At the end of 2020, the total number of long term insurance policies in force was 3,593,454 an increase of 6.21% compared to 3,383,290 policies in force at the end of 2019. The new policies issued marked 739,784 in 2020 (2019: 734,896) with a slight improvement compared to 2019 despite the challenges emanating from the pandemic.

The number of life policies in force as a percentage of the total population and the number of life policies in force as a percentage of the labour force amounted to 16.39% (2019: 15.52%) and 42.60% (2019: 39.48%) respectively.

Total insurance policies lapsed as a percentage of total policies in force and new insurance policies lapsed as a percentage of new policies issued were 7.13% (2019: 7.84%) and 9.51% (2019: 11.37%) respectively demonstrating a decline compared to 2019. New policies issued during the year 2020 were reduced by 13.90% compared to the previous year & totalled 2,850,308 & the decline was majorly triggered by motor insurance policies. As aforementioned, new comprehensive motor policies were reduced and third party motor policies increased and altogether new policies issued under the category of motor stood at 2,471,051. In addition, new policies under the health insurance business also presented an increase of 3,725 policies.

On the flip side, the number of policies renewed by the policyholders with the same insurer presented a moderate growth of 8.39% & recorded as 3,663,655 & exclusively driven by motor & health insurance policies. The number of policies in force at the end of 2020 declined by 2.82% & stood at 6,474,623.

During 2020, the insurance industry displayed a significant financial performance by posting year-over-year profit growth of 29.26%. Accordingly, the total profitability (profit before tax) of the industry was reported as LKR 41,767 million, whereas the same amounted to LKR 32,311 in 2019.

NITF and Allianz General were the key drivers of profit growth while SLIC also remained among the highest profit generators despite displaying a slight contraction in profits compared to last year. The profits of the long term insurance business contracted by 17.89% and this reduction was a result of decreased surplus transfers and enlarged claim provisions of major long term insurers. Ceylinco Life was the highest contributor to overall long term profitability, reporting a profit of LKR 8,767 million while Softlogic Life, Union Life and SLIC exhibited subsequent highest profits respectively.

By the end of 2020, sixty-eight (68) insurance broking companies operated in the market and generated a Gross Written Premium (GWP) amounting to LKR 28,912 million (2019: LKR 29,317 million)

Details of New, Renewed and Policies in Force - General Insurance Business.

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