National Insurance Trust Fund Board’s gross premiums surge this year

However, Fitch Ratings sees risk-management weaknesses in the insurer.

Sri Lanka-based National Insurance Trust Fund Board’s gross premiums are projected to skyrocket this year thanks to a “recent directive requiring primary insurers to remit 100% of motor SRCCT premiums to NITF, up from the previous 12%.”

NITF's moderate company profile reflects a favourable business scale supported by full state ownership and substantial involvement in government policies, as assessed by Fitch Ratings. 

However, its corporate governance is deemed less favourable due to its weak structure and limited financial transparency.

Risk-management weaknesses are evident as NITF has faced challenges in renewing reinsurance contracts, notably for strikes, riots, civil commotion, and terrorism (SRCCT) since January 2023. 

This lack of reinsurance exposes NITF to potential volatility in capital and earnings from unforeseen losses.

SRCCT contributes significantly to profitability, with claims remaining modest. Despite this, Fitch views the concentration of profitability in SRCCT as a credit weakness, exacerbated by restricted cash flow between SRCCT and other segments.

Whilst NITF has shown improvement in its consolidated combined ratio to 72% in 2023, reflecting better underwriting performance primarily in health and SRCCT segments, non-SRCCT segments struggle with combined ratios surpassing 100%.

Capital adequacy remains a concern in non-SRCCT lines like reinsurance, despite a robust consolidated regulatory risk-based capital ratio of 613% by end-2023, bolstered by strong earnings.

Investment risks have eased with NITF's conservative portfolio focused on government securities, although 97% of sovereign assets expose them to sovereign risk.