Sri Lanka marks milestone with first International Insurance Summit

• Central Bank Governor Dr. Nandalal Weerasinghe declares insurance industry as key enabler of business expansion and fostering economic growth

By Michelle Therese Alles

Central Bank Governor Dr. Nandalal Weerasinghe last night declared that the insurance industry can significantly contribute to creating a conducive business environment by reducing uncertainties and as a key enabler of business expansion in the economy.

“As the economy progresses on its recovery path, the insurance sector will need to play a vital role in fostering economic growth,” said Dr. Weerasinghe speaking at the inauguration of the first ever three-day Sri Lanka International Insurance Summit.

Dr. Weerasinghe said that as Sri Lanka continues its recovery, the insurance industry will be crucial in supporting economic growth and development. The sector’s role in fostering a favourable business environment, mobilising investment, and driving innovation will be key to the nation’s economic resurgence.

“The insurance industry is poised to benefit from the ongoing recovery in economic activity. Improved business conditions, low inflation and low interest rates in conventional financial products are likely to boost demand for insurance services, on an overall basis,” stated Dr. Weerasinghe. “However, the high exposure of the insurance sector on Government securities could have resulted in lowered returns for the sector due to current low yield rates, compared to the rates that were seen during the crisis period,” CBSL Governor said. 

He said that in 2023, the insurance 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 insurance penetration rates exceeding 10%, highlighting substantial room for growth in Sri Lanka.

Recognised as one of the most highly anticipated events in the industry, the first International Insurance Summit aims to bridge Sri Lanka with the global insurance industry, highlighting the region's abundant business opportunities and fostering international investment.

It brings together local and international delegates, offering a unique platform for knowledge exchange, networking, and collaboration. Among the topics that will be discussed over the course of the two days are: The Insurer's Role in Challenging Economic Dynamics; The Future of Medical Insurance with the Emerging Regional Trends and Digital Adoption; The Impact of Climate Change and the Role of Stakeholders; Navigating the Evolving Landscape of Cyber Insurance; EV – Fully Charged; Understanding the Modern Consumer; Microinsurance: Bridging the Protection Gap for Vulnerable Populations and Intermediaries Role in the Light of Technology Development.

In his address Dr. Weerasinghe also stressed the importance of insurance companies as long-term investors, particularly in filling financing gaps for SMEs and large-scale projects. He added that the industry supports innovation by managing risks associated with start-ups and new technologies and enhances the lending process by providing coverage, which encourages more financing of projects.

 Addressing broader issues, Dr. Weerasinghe spoke on the insurance sector's role in climate change and social protection. He emphasised that insurers are crucial in managing risks from natural disasters and climate change, with their expertise in extreme risk pooling helping to accelerate recovery and mitigate economic impacts. Additionally, he highlighted the need for insurance products that provide social benefits, particularly for the significant portion of the workforce engaged in the informal sector.

 Dr. Weerasinghe concluded by emphasising the critical role the insurance industry will play in Sri Lanka's ongoing recovery and economic resurgence. He highlighted the sector's importance in fostering a favourable business environment, mobilising investment, and driving innovation, all of which are essential for supporting the country’s growth and development. The summit, he noted, underscored the substantial potential for the insurance industry to be a leading force in shaping Sri Lanka's economic success.

Insurance Association of Sri Lanka (IASL) President Chandana L. Aluthgama, delivered a warm welcome to the gathering of distinguished guests and delegates at the Summit. He highlighted the summit’s theme, “Insurance’s Role in Challenging Economic Dynamics,” noting that Sri Lanka stands at a critical juncture following a period of significant economic challenges.

While acknowledging the daunting nature of the current economic horizon, he expressed optimism about the opportunities that lie ahead. He emphasised that the recovery process should not be seen merely as a goal but as a chance to innovate, reinvent industry practices, and strengthen ties with regional and international partners.

 “The insurance sector has a pivotal role in this recovery,” Aluthgama stated. He underscored that insurers are not just protectors against risks but also catalysts for growth, providing the financial foundation that enables individuals and businesses to pursue their aspirations with confidence. He called on the industry to uphold the highest standards of professionalism, transparency, and accessibility, urging the adoption of best practices, new technologies, and an understanding of evolving customer needs to build a more vibrant and impactful insurance industry.

During the summit, Aluthgama encouraged meaningful discussions that transcend borders and barriers, focusing on collaboration with regional partners to address common challenges, share innovative solutions, and work towards a sustainable future. He also urged delegates to forge lasting relationships that extend beyond the summit, emphasising the value of the learning and networking opportunities provided by the event.

In closing, Aluthgama expressed his sincere gratitude to all who contributed to the success of the summit, including sponsors, speakers, organisers, and all members of the IASL, as well as the Sri Lanka Insurance Institute, the broking community, stakeholders, media, and service providers. He thanked them for their unwavering support and dedication, encouraging all participants to embrace the challenges ahead with optimism and innovation.

Insurance Regulatory Commission of Sri Lanka (IRCSL) Chairman Razik Zarook also took the stage to deliver a compelling speech that underlined the challenges and triumphs of Sri Lanka's insurance sector, while laying out a vision for its future.

 Zarook began by congratulating the organisers for their timely initiative, expressing hope that the event would mark the beginning of an annual tradition. He emphasised Sri Lanka's historical significance, not just as a beautiful destination, but as a nation that has overcome immense challenges, including over 450 years of colonial rule and the economic struggles that followed independence in 1948.

Reflecting on Sri Lanka's past, Zarook recalled a time when the country's per capita income was among the highest in Asia, even surpassing that of Singapore. However, he noted that internal and external challenges, such as political unrest and economic mismanagement, had hampered the nation's progress. He particularly highlighted the nationalisation of the insurance industry and other key sectors as pivotal moments that shaped the trajectory of the country's economy.

Despite these setbacks, Zarook commended the liberalisation of the insurance industry in the 1980s, which sparked significant growth. By 2009-2010, the industry had expanded to nearly 30 companies. However, recent economic challenges, exacerbated by the COVID-19 pandemic, once again tested the resilience of the industry. Zarook acknowledged that while tax reductions were intended to boost the economy, the anticipated recovery did not materialise as expected.

 In light of the country's financial crisis, Zarook praised the efforts of Dr. Nandalal Weerasinghe and his team of economists, who played a crucial role in stabilising the economy. He pointed to the current economic indicators, such as single-digit inflation and a stabilised currency, as signs of recovery.

Zarook lauded the insurance industry's adaptability during these turbulent times, noting its innovative responses to natural disasters, economic volatility, and the pandemic. However, he cautioned against complacency, urging the industry to remain vigilant against external forces such as volatility, uncertainty, complexity, and ambiguity.

Looking ahead, Zarook stressed the importance of embracing new technologies, discarding outdated legacy systems, and maintaining a customer-centric approach. He emphasised that the future of Sri Lanka's insurance industry depends on its ability to adapt, innovate, and prioritise the needs of the community over profit.

In closing, Zarook called for a collective effort to ensure the sustainability and integrity of the industry, affirming that insurance is a vital service where “each stands for all, and all stand for each.”

The inaugural International Insurance Summit in Sri Lanka has set a promising precedent, showcasing the country's potential to become a hub for insurance innovation and investment in the region. The insights shared by industry leaders have underscored the pivotal role that the insurance sector will play in the nation's economic recovery and growth. As Sri Lanka navigates the complexities of a rapidly changing global landscape, the summit's focus on collaboration, innovation, and resilience offers a clear path forward. The connections forged at this event are expected to drive meaningful progress, not only within the insurance sector but also across the broader economy, setting the stage for a more prosperous future for Sri Lanka and its people.

Pix by Lasantha Kumara