This is because of the low penetration of life insurance in Sri Lanka, the rating agency said in a report on the sector.
"That said, a continuous rise in interest rates coupled with increasing inflationary pressures could reduce the affordability of life-insurance products, thereby softening this growth," it said.
"On the other hand, competition is anticipated to remain intense in the general segment, thus exerting further pressure on underwriting performance, although the performance of the life segment is expected to compensate for this."
RAM Ratings Lanka the life-insurance segment was the primary driver of growth, but the general insurance segment also performed commendably.
The growth momentum of 2010 continued through to 2011, supported by the overall improvement in macro-economic conditions coupled with increased disposable income, which propelled demand for general and life-insurance products, it said.However, the rating agency said that despite the premium growth, most general insurers’ underwriting performance continued to be weak, affected by intense price competition within the industry as well as rising overheads in line with network expansion.
"In contrast, the life insurance segment recorded improving profitability indicators and continued to uphold the overall underwriting profitability of composite insurers."