Sri Lanka’s 2022 uprising rattles insurance sector amid economic turmoil

Mashrukh Khan: Popular uprising in Sri Lanka, fueled by a severe economic crisis, inflicted notable but manageable damage on the nation’s insurance industry, according to industry reports.

Triggered by soaring inflation, fuel shortages, and debt default, widespread protests escalated into riots, leading to property damage and arson. Insurers faced gross losses exceeding LKR 1 billion from these events, primarily covered under general insurance policies for fire and riot damages.  However, net losses remained limited due to extensive reinsurance arrangements, with the National Insurance Trust Fund (NITF) capping its exposure at LKR 1 billion.

Despite the unrest, the sector showed resilience. The Insurance Regulatory Commission of Sri Lanka (IRCSL) reported a 10.5% rise in gross written premiums (GWP) to LKR 258,100 million in 2022.  Long-term insurance GWP grew 9.4% to LKR 136,271 million, though hampered by reduced demand for new policies amid depleted household incomes.  General insurance, more directly impacted, increased 11.9% to LKR 121,829 million, driven by motor premiums but offset by higher claims.

Claims surged, with general insurance net claims up 24.7% to LKR 60,172 million, attributed to riot-related payouts, inflation-driven repair costs, and post-pandemic accident rises.