The overall gross written premium from long term and general insurance businesses added up to Rs.58,166 million showing an annual growth of 12.11%, when compared with previous year’s total of Rs.51,885 million and an annual growth of 20.56%. The decline in the premium income growth during the year has resulted in a lower GDP contribution of 1.32% when compared with the previous three years.General insurance business with a gross written premium of Rs.34,553 million (2007: Rs.31,156 million) accounted for 59.40% (2007: 60.05%) of the total gross written premium, while long term

Total Shareholders’ Funds of Insurance Companies

Total Shareholders’ Funds as at December 2008 amounted to Rs.25,055 million, showing a 28.34% increase when compared with the previous year’s total of Rs.19,521 million. Company wise analysis of Shareholders’ Funds for 2007 and 2008 is shown in Table 2, and the company-wise distribution of Shareholder’s Fund for the year 2008 is shown in Chart 1.

Total Assets of Insurance Companies

Total assets of insurance companies as at 31 December 2008 was Rs.155,994 million, which shows an increase of 15.7% when compared with the previous year’s total of Rs.134,876 million.

SLICL : Sri Lanka Insurance Corporation Ltd.
NICL : National Insurance Corporation Ltd.
CIPLC : Ceylinco Insurance PLC.
UAPLC : Union Assurance PLC.
EIPLC : Eagle Insurance PLC.
JIPLC : Janashakthi Insurance PLC.
COICL : Co-operative Insurance Company Ltd.
AAIPLC : Asian Alliance Insurance PLC.
HAIGICL : Hayleys AIG Insurance Company Ltd.
HNBAPLC : HNB Assurance PLC.
ATPLC : Amana Takaful PLC
LICLL : Life Insurance Corporation (Lanka) Ltd.
SSRS : Seemasahitha Sanasa Rakshama Samgama
AICLL : Allianz Insurance Lanka Ltd.
ABCICL : ABC Insurance Company Ltd.
CTL : Ceylinco Takaful Ltd.
ALILL : Allianz Life Insurance Lanka Ltd.

Concentration of Assets of Long Term Insurance Business of Insurance Companies

The distribution of the assets of long term insurance business is shown in Table 4 and Chart 3. Investments in government securities amounting to Rs.48,405 million (2007: Rs.41,901 million) represents 49.53% (2007:49.61% ) of the total assets of Rs.97,730 million (2007: Rs.84,822 million) of long term insurance business. This shows that insurance companies have invested in government securities exceeding the statutory minimum investment of 30% as required under the Act.

Concentration of Assets of General Insurance Business of Insurance Companies

Total assets of general insurance business for 2008 amounted to Rs.58,263 million (2007: Rs.50,054 million). Investment in  government securities amounting to Rs.15,956 million (2007: Rs.11,494 million) represents 27.39% (2007:22.96% ) of the total assets of general insurance business, which exceeds the minimum of 20% required under the Act. Table 5 and Chart 4 show the distribution of assets of general insurance business. There has been a 16.40% increase in the assets of general insurance business in 2008, when compared with 2007.

Distribution of Total Assets of Major Financial Institutions

Total Assets of major Financial Institutions amounted to Rs. 4,790.8 billion (2007: Rs. 4,311.1 billion), and the insurance sector accounted for 3.2% (2007:3.1%), with total assets of 155.1 billion (2007: 134.9 billion) which was almost at the same level as in the previous year.

Table 6 shows the percentage share of each sector of the Financial System for years 2005 to 2008, and the distribution of Assets for the year 2008 is indicated in chart 5.

Long Term Insurance Business - Gross Written Premium

Long term insurance business with a gross written premium  of Rs.23,613 million (2007: Rs.20,729 million) shows a lower growth of 13.9% (2007: 21.2%) when compared with the previous years, as shown in Table 7 and Chart 6.

Analysis of Data in Table 7

Life Insurance Penetration

Table 8 shows the total number of new policies issued during each year and the total number of policies in force at the end of each year from 2002 to 2008. The data given in Table 8 shows that the penetration of life insurance business as a percentage of the total population and the total labour force increased from 6.3% and 16.8% in 2002 to 10.4% and 27.8% in 2008 respectively. The 555,886 new life insurance policies issued during the year showed an increase of only 5.40% when compared with the previous year’s increase of 28.65%. Factors that may have contributed to the decline in growth during 2008 include a slowdown in economic growth, the sharp rise in fuel and commodity prices resulting in lower personal disposable incomes, and weakened consumer confidence in finance as well as long term insurance companies.

General Insurance Business

Gross Written Premium

Analysis of Data in Table 9

The following insurance companies showed marginal increases in their market shares during 2008:

Union Assurance PLC with a premium income of Rs.3,182 million (2007:Rs.2,815 million) and a market share of 9.21% (2007:9.03%), Asian Alliance Insurance PLC with a premium income of Rs.459 million (2007: Rs.384 million) and market share of 1.33% (2007:1.23%), Hayleys AIG Insurance Company
Ltd with a premium income of Rs.909 million (2007:Rs.681million) and a market share of 2.63% (2007: 2.19%), HNB Assurance PLC with a premium income of Rs.925 million (2007: Rs.705 million) and a market share of 2.68% (2007:2.26%),Amana Takaful PLC with a premium income of Rs.835 million (2007:Rs.678 million) and a market share of 2.42% (2007:2.18%), and Allianz Insurance Lanka Ltd with a premium income of Rs.601 million (2007:Rs.414 million) and a market share of 1.74% (2007:1.33 %).

Co-operative Insurance Company Ltd with a premium income of Rs.522 million (2007:Rs.289 million) and a market share of1.51% (2007:0.93%) showed a substantial growth of around 80.6% in its premium income during 2008 when compared with 2007.

Eagle insurance PLC with a premium income of Rs.2,064 million (2007:Rs.1,867 million) and a market share of 5.97% (2007:5.99%) maintained its market share at the same level as in the previous year.

The following insurance companies showed marginally lower market shares in 2008:

Companies with less than 1% market share were not analyzed.

Gross Written Premium – General Insurance

Class-wise Analysis

As in the previous years, highest contribution of 54.17% (2007:54.76%) was from motor insurance, with a premium income of Rs.18,717 million (2007:Rs.17,060 million) showing a lower growth of 9.71% when compared with the previous year’s growth of 21.81%.

Miscellaneous insurance with a premium income of Rs.7,529 million (2007: Rs.6,734 million) accounted for 21.79% (2007:21.61%) of the total premium, showing a lower growth of 11.81% when compared with the previous year’s growth of 17.24%.

Fire insurance with a premium income of Rs.6,480 million (2007:Rs.5,724 million) accounted for 18.75% (2007:18.37%) of the total premium, showing a lower growth of 13.21% when compared with the previous year’s growth of 23.71%.

Marine insurance with a premium income of Rs.1,825 million (2007:Rs.1,637 million) accounted for 5.28% (2007:5.25%) of the total premium, showing a growth of 11.53% which is significantly higher than the previous year’s growth of 5.34%.

General Insurance – Claims Ratio

During the year, the overall claims ratio of 64.92% (2007: 64.95%) remained at the same level as in the previous year. During 2008, marine insurance showed a low claims ratio of 28.39% when compared with 35.56% during the previous year. Fire insurance with a claims ratio of 73.20% showed an improvement during the year when compared with the previous year’s claims ratio of 84.79%. Motor insurance with a claims ratio of 64.07% showed a marginal improvement when compared with the previous year’s claims ratio of 65.15%.

Retention of Gross Written Premium and Reinsurance

Motor insurance continued to maintain the highest retention of 95.03% (2007: 94.61%) when compared with the other classes.

Miscellaneous insurance with a retention of 67.62%, and Marine insurance with a retention of 36.13%, showed marginal decreases in retention levels when compared with the previous year’s retentions of 70.46% and 39.73% respectively.

Fire insurance with 12.64% retention showed a significant decrease when compared with the previous year’s retention of 24.06%.

As in the previous year, 54 insurance brokers operated during 2008, concentrating mainly on general insurance business.

Their premium contribution of Rs.8,781 million (2007:Rs.7,393 million) accounted for 25.4% (2007:23.7%) of the total gross written premium of Rs.34,553 million (2007:Rs.31,156 million)

for general insurance, which was 1.7% higher than in the previous year.

Insurance brokers’ contribution towards the long term insurance business continued to be low as in the previous years. Their premium contribution of Rs. 195 million (2007:Rs.158 million) represented only 0.83% (2007:0.76%) of total premium income of Rs.23,613 million (2007:Rs.20,729 million) for the long term insurance business, and showed a marginal increase.

Nineteen insurance brokers, whose gross written premium income through insurance business procured by them was more than Rs.100 million each, are represented in Table 13 below. They accounted for a total of 91.74% (2007:92.17%) of the total gross written premium of Rs.8,975 million (2007:Rs.7,551 million) collected as gross written premium by all insurance brokers for both classes of insurance.