AIA upbeat on prospects for insurance; welcomes SL’s shift towards risk-based capital regime
Tuesday, 30 July 2013 00:03
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By Shabiya Ali Ahlam
Asian insurance giant AIA yesterday sounded upbeat on industry’s growth prospects in Sri Lanka and welcomed the shift towards a Risk Based Capital (RBC) regime.
AIA Group Chief Financial Officer Garth Jones told journalists in Colombo that the penetration of insurance in Sri Lanka was certain to increase in the near future as tremendous opportunities prevail in the industry.
With the country having turned over a new leaf soon after the conclusion of the 30-year war, Jones said the insurance industry was faring well compared to other countries in the region.
Noting that penetration rates of insurance in the Philippines and Indonesia were 1.5% and 1.1%, Jones viewed Sri Lanka’s 0.5% penetration as commendable when looking at this figure in relation to GDP per capita.
“To my mind, in the next year or two, I see no reason why the insurance industry in Sri Lanka cannot grow at a rapid rate. The need for insurance will certainly increase and so will penetration,” said Jones, who is in Colombo to deliver the industry keynote at the two-day seminar organised by the Asian Insurance Review and endorsed by Insurance Board of Sri Lanka on Risk Based Capital (RBC) starting today.
Speaking on the benefits of the RBC method for the insurance industry of Sri Lanka, Jones stated that adapting this would help companies to have a secure capital framework as it would provide a better reflection of the underlying risks involved. According to him, the adoption of RBC will uplift the insurance industry since it will be complying with the standards recommended by the highly-recognised International Insurance Society (IIS).
While other countries have embraced this method before Sri Lanka, Jones opined that having RBC would enable the industry to move forward and help break down the risk taken by the companies. “The companies will be rewarded from a capital perspective for managing the risk more effectively,” he added.
The IBSL proposed this widely-accepted risk-based supervision to insurance companies last year to allow market participants to effectively manage their business risks. While the RBC is in a testing stage in Sri Lanka, the IBSL is in the midst of formulating guidelines in this regard.
AIA Sri Lanka CEO Shah Rouf said that earlier this year the entire industry was called upon to share experiences and expectations of the RBS model. “The dialogue we had with the IBSL and other stakeholders of the insurance industry was rather fruitful and I can say that we are almost there. Hopefully, by the end of this year the industry will have a set of guidelines for the RBC framework,” he added.
