May 3, 2011 (LBO) – Sri Lanka’s insurers who have been competing aggressively on price despite making underwriting losses, may be forced to re-think their strategy, if investment income falls amid lower interest rates, an industry official said. Sri Lanka’s general insurance businesses have been making underwriting losses, but bottom lines have been propped up with investment income from reserves.
“Achieving underwriting profitability in general insurance is one of the biggest challenges we are facing in the industry,” Manjula de Silva, chief executive of HNB Assurance, a unit of Sri Lanka’s Hatton National Bank said.
“There is so much of competition, which works to the benefit of the public. I don’t think the public is complaining. This is one market in which prices are coming down each year.”
With interest rates heading lower, investment income was starting drop.
“At one time large underwriting losses were cushioned by healthy investment yields,” de Silva said.
“But today interest rates are dropping and insurance companies are compelled to look at their underwriting results.”
HNB Assurance was taking measures to push up investment income by actively trading on its bond and equity portfolios. De Silva said next