The insurance industry reported an overall gross written premium of Rs.51,885 million (2006:  Rs.43,035 million) from long term insurance business and general insurance business, recording a higher growth of 20.56% when compared with the previous year’s growth of 15.61%. The total gross written premium represents 1.46% of the gross domestic product (GDP), which is at the same level as in the previous year based on the revised GDP for the year 2006 in the Central Bank Annual Report for the year 2007.

General insurance business contributed the major share of 60.05% (2006: 60.26) with a gross written premium of Rs.31,156 million (2006: Rs.25,931 million), while contribution from long term insurance business was 39.95% (2006: 39.74%) with a premium income of Rs. 20,729 million (2006: Rs.17,104 million).

Contribution from general insurance business was higher than long term insurance business to total premium income during the year, but both classes showed higher growth than the previous year as shown in Table 1.

Table 1

Total Shareholders’ Funds of Insurance Companies

Total Shareholders’ Funds as at 31st December 2007 amounted to Rs.19,521 million showing a 7.2% increase when compared with the previous year’s total Shareholders’ Funds of Rs.18,208 million. Company wise analysis of Shareholders Funds for the years 2006 and 2007 is shown in Table 2, and the distribution of Shareholder’s Funds for the year 2007 is shown in Chart 1.

Table 2
Total Shareholder’s Funds of Insurance Companies

Table 3
Total Assets of Insurance Companies

Total Assets of Insurance Companies

Total assets of insurance companies as at 31st December 2007 was Rs.134,876 million (2006: Rs.117,658 million) which reflects an increase of 14.63% when compared with the previous year.

Assets of long term insurance business amounting to Rs.84,821 million (2006:Rs.72,077 million) represents 62.89% (2006:61.26%) of the total assets of insurance companies while assets of general insurance business amounting to Rs.50,054 million (2006: Rs. 45,581million) accounts for 37.11% (2006:38.74%).

Ref: Table 3 and Chart 2

Chart 2

Concentration of Assets of Long Term Insurance Business of Insurance Companies

Table 4 and Chart 3 show the distribution of the assets of long term insurance business. Investment in government securities amounting to Rs.41,901 million represents 49.61% of the total fund.
Table 4

Concentration of Assets of General Insurance Business of Insurance Companies

Total assets of general insurance business for the year amounted to Rs.50,054 million. Investment in government securities amounting to Rs.11,494 million represents 22.96% of the total assets. Table 5 and Chart 4 show the distribution of assets of general insurance business.

Table 5
Distribution of Assets of General Insurance Business - 2007

Distribution of Total Assets of Major Financial Institutions

Total assets of Major Financial Institutions amounted to Rs. 4,324.0 billion (2006: Rs.3,733.5 billion) and the insurance sector accounted for 3.1.% (2006: 3.1%), with total assets of Rs. 134.8 billion (2006: Rs. 117.6 billion) which was 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 2007, and the distribution of assets for the year 2007 is indicated in Chart 5.

Table 6

Long Term Insurance Business Gross Written Premium

Long term insurance business demonstrated a significant growth of 21.2%, with a premium income of Rs.20.729 million when compared with the previous three years, as shown in Table 7 and Chart 6.

Analysis of data in Table 7

Ceylinco Insurance PLC with a premium income of Rs.6,847 million (2006: Rs.5,718 million) accounted for 33.03% (2006: 33.43%) of market share and recorded a 19.74% growth which was marginally below the industry growth rate of 21.2%. Sri Lanka Insurance Corporation Ltd., with a premium income of Rs.4,478 million (2006: Rs.3.885 million), had a market share of 21.60% (2006: 22.71) with a growth of 15.26% which was below industry growth. Eagle Insurance
PLC with a premium income of Rs.3,788 million (2006: Rs.3,150 million) and a market share of 18.28% (2006:18.42%) reflected a growth of 20.25% which was closer to industry growth. Union Assurance PLC with a premium income of Rs.2,163 million (2006: Rs.1,672 million) and a market share of 10.44% (2006: 9.78%) demonstrated a growth of 29.36% which was well above

industry growth. Janashakthi Insurance Company with a premium income of Rs.1,108 million (2006: Rs.912 million) and market share of 5.35% (2006: 5.34%) had a growth of 21.49%, similar to industry growth.
Asian Alliance Insurance PLC with a premium income of Rs.890 million (2006: Rs.747 million) and a market share of 4.30% (2006: 4.37%) showed a growth of 19.14% which indicates a lesser rate of growth when compared to industry growth. HNB Assurance with a premium income of Rs.767 million (2006: Rs.503 million) and a market share of 3.70% (2006: 2.94%) reflected a substantial growth of 52.48% which is well above industry growth. Life Insurance Corporation

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 for the years 2002 to 2007.

General Insurance Business Gross Written Premium
Industry performance with regards to general insurance business also demonstrated a higher growth of 20.15% during the year with a premium income of Rs.31,156 million (2006:Rs.25,930 million) when compared with previous year’s growth of 15.7%.

Analysis of data in Table 9

Ceylinco Insurance PLC with a premium income of Rs.10,350 million (2006: Rs.9,561 million) and a market  share of 33.22 (2006: 36.87%) showed a decrease in its market share and its growth of 8.25% was below industry growth of 20.2%. Sri Lanka Insurance Corporation Ltd., with a premium income of Rs.8,848 million (2006: Rs.6,640 million) and a market share of 28.40% (2006: 25.61%) improved its market share during the year and also showed a growth of 33.25%
which was well above the industry growth. Janashakthi Insurance Company Ltd., with a premium income of Rs.3,678 million (2006: Rs.3,100 million) and a market share of 11.81% (2006: 11.95%) showed a growth of 18.64% which was marginally below the industry growth. HNB Assurance PLC with a premium income of Rs.704 million (2006: Rs.618 million) and market share of 2.26% (2006: 2.39%) showed a growth of 13.91% which was lower than the industry growth. Hayleys AIG Insurance Company Ltd., with a premium income of Rs.681 million (2006: Rs.444 million) and a market share of 2.19% (2006:1.71%) showed a significant growth of 53.38% which was well above the industry growth. Amana Takaful PLC with a premium income of Rs.678 million (2006: Rs.589 million) and market share of 2.18% (2006: 2.27%) recorded a growth of 15.11% which was lower than the industry growth. Asian Alliance Insurance PLC with a premium income of Rs.383 million (2006: Rs.417 million) and a market share of 1.23% (2006: 1.61%) showed a negative growth of 8.15%. Allianz Insurance Company Lanka Ltd., with

Distribution of Gross Written Premium Class-wise - General Insurance 2007

As in previous years, the highest contribution of 54.76% (2006:54.01%) was from motor  Insurance with a premium income of Rs.17,060 million (2006: Rs.14,005 million) showing a growth rate of 21.81% when compared with the previous year. Miscellaneous insurance with a premium income of Rs.6,733 million (2006: Rs.5,743 million) accounted for 21.61 % of the total premium and showed a growth of 17.24% when compared with the negative growth of 1.12% during the previous year.  Fire insurance with the premium income of Rs.5,721 million (2006: Rs.4,627 million) accounted for 18.37% of the total premium and demonstrated significant growth of 23.64% when compared with the previous year’s growth of 11.75%. As in the previous years, the contribution of 5.21% (2006: 6.00%) from marine insurance with a premium income of Rs.1, 637 million (2006: Rs.1,554 million) was the lowest and further, growth of 5.34% was significantly lower when compared with the growth of 14.47% during the previous year.
Ref: Table 10 and Chart 8.

Table 10
Class-wise Analysis of Gross Written Premium

General Insurance – Claims Ratio

Overall, a claims ratio of 64.95% indicates higher claims during the year when compared with the overall claims ratio of 60.64% during the previous year.
As in the previous year, marine insurance showed the lowest claims ratio of 35.56%, although it is higher when compared with the previous year’s claims ratio of 30.34%. Claims ratio of 63.94% for miscellaneous insurance indicates that there has been an improvement in this class when compared with the previous year’s claims ratio of 65.20%. The claims ratio of motor insurance increased during the year to 65.15% when compared with the previous year’s claims ratio of
60.44%. Very high claims ratio of 84.79% for fire insurance compared with the previous year’s claims ratio of 68.81%, indicates that the rate of premium charged by insurance companies is not in keeping with the risks involved.Ref: Table 11

Table 11

Reinsurance and Retention of Gross Written Premium

As in the previous years, motor insurance showed the highest retention of 94.61% (2006: 5.55%), which is around 1% less than the previous year. Retention by insurance companies in respect of miscellaneous insurance was 70.46% which is also marginally lower than the previous year’s retention of 71.37%. Retention in respect of fire insurance showed a significant increase of 24.06% when compared with the retention during the previous five years. Retention of 39.73% in respect of marine insurance also showed a lower retention when compared with the previous year’s retention of 41.14%. The overall retention of 73.78% shows that the premium retained by insurance companies is higher than the previous years. This is due to the high retention of motor insurance premium and fire insurance premium. Ref: Table 12

Table 12
Gross Written Premium, Reinsurance Premium and Retention by Insurer

Performance of Insurance Brokers

Fifty four insurance brokers operated during the year.
As in the previous years they concentrated on general insurance business and collected gross written premium amounting to Rs.7,393 million (2006: Rs. 6,028 million) which accounted for 23.7% (2006: 23.8%) of the total gross written premium of Rs.31,156 million (2006: Rs. 25,931 million), thereby maintaining their contribution at the same level as in the previous year.
As regards long term insurance business, insurance brokers contribution continued to be low. The premium of Rs.158 million (2006: Rs.144 million) collected by them towards life insurance represented 0.76% (0.84%) of the total gross written premium of Rs.20,729 million (2006: Rs.17,104 million), which indicates that insurance brokers’ main activity is centered more towards engaging in the procurement of general insurance business.

Nineteen insurance brokers whose gross written premium was more than Rs.100 million is given in Table 13 below, and they account for 92 % of total gross written premium of Rs.7,551 million collected by them in respect of both classes of insurance business. Ref: Table 13

Table 13