Economy to drive Sri Lankan insurance market, says central bank

In 2023, the sector contributed 0.8% to GDP, penetration rates remaining below 2%.

Sri Lanka’s central bank Governor, Nandalal Weerasinghe, said the insurance industry is slated to benefit from the continuous recovery in economic activity, reported Daily Mirror.

Weerasinghe highlighted that improved business conditions, low inflation, and reduced interest rates on conventional financial products are likely to boost demand for insurance services.

“This indicates that Sri Lanka’s insurance industry perhaps has not expanded sufficiently. As the economy progresses on its recovery path, the insurance sector will need to play a vital role in fostering economic growth,” Weerasinghe said.

Despite these positive factors, Weerasinghe pointed out that the sector’s heavy reliance on government securities might have resulted in lower returns due to current low yields compared to those during the crisis period. 

Weerasinghe further said that whilst Sri Lanka's insurance industry is smaller compared to some regional peers, it holds significant growth potential. 

In 2023, the sector contributed 0.8% to GDP, with penetration rates remaining below 2% over the past decade. 

In contrast, countries like Hong Kong, Taiwan, and South Korea have penetration rates above 10%, and Japan, Singapore, Thailand, Malaysia, and India exceed 4%.

“Local insurers will need to stay ahead of the curve, protecting themselves whilst seeking opportunities through suitable risk-sharing mechanisms,” he concluded.