Fitch Ratings has affirmed Sri Lanka-based Co-Operative Insurance Company Limited’s (CICL) National Insurer Financial Strength (IFS) Rating at ‘BBB+(lka)’. The Outlook is Stable.
The affirmation reflects the non-life insurer’s ‘Moderate’ business profile, consistently good financial performance, satisfactory capitalisation and a somewhat conservative investment policy.
Fitch assesses CICL’s business profile as ‘Moderate’ compared with other domestic non-life insurers due to its adequate business franchise, which is buoyed by its ownership by co-operative societies, ‘Moderate’ operating scale as well as a risk appetite on a par with the domestic non-life sector as a whole. CICL’s business profile also reflects its somewhat diversified distribution capabilities with access to service centres owned by co-operative societies, postal offices and a growing agency force. CICL benefits from its access to a sizeable potential customer base within the co-operative movement, where almost one-third of the insurer’s policyholders are currently from.
Offsetting some of these positives are the insurer’s modest presence in the urban regions of the country and a very limited exposure to non-motor insurance segments. The insurer generated 87% of its gross written premiums (GWP) from motor insurance policies and remained the 10th-largest non-life insurer in Sri Lanka based on GWP in 2018.
Fitch expects the non-life insurer’s capitalisation, as measured by its risk-based capital (RBC) ratio, to hover around 180% in the medium term, above the regulatory minimum of 120%. CICL’s RBC ratio was 174% at end-June 2019, a slight reduction from 178% at end-December 2018. We expect CICL’s capitalisation to remain somewhat constrained over the medium term because of its occasional appetite for higher-risk investments to boost yields as well as its expansion plans.