Sri Lanka Insurance Corp upgraded by Fitch on taxpayer support

Aug 15, 2009 (LBO) – Fitch Ratings said it has upgraded the rating of Sri Lanka’s largest insurer following its nationalisation on a court order, saying it implied state support if required. Fitch said in a statement that Sri Lanka Insurance Corp’s (SLIC) National Long-term Issuer Default Rating (IDR) has been upgraded to ‘AA-(lka)’ from ‘A+(lka)’.

At the same time, Fitch confirmed SLIC’s National Insurer Financial Strength (IFS) rating at ‘AA-(lka)’, a company statement said.

The outlooks on both the National IDR and the National IFS rating are stable.

“The upgrade of SLIC’s National IDR reflects the company’s recent nationalisation, which, in Fitch’s view, indicates potential for government support, should this be required,” it said.

On 4 June 2009, the Supreme Court ordered that SLIC’s privatisation in 2003 be annulled on the grounds that the transaction was not properly structured and executed.

SLIC is now back under government control and its board of directors has been replaced.

Critics say any state owned enterprise can be propped by the government using money taxed from the people, borrowed (perhaps to be repaid by another generation) or printed at