Fitch warns of risks for Lankan insurers

Monday, 25 April 2022 13:21 - - {{hitsCtrl.values.hits}}

Fitch Ratings today warned that high investment and liquidity risks, pressure on regulatory capital positions and a likely worsening in financial performance have increased the near-term downside risks to Sri Lankan insurers' credit profiles.

The assessment follows Fitch last week placing the national ratings of all of its rated Sri Lankan insurers on Rating Watch Negative.

Fitch said the recent negative rating actions on the Sri Lanka sovereign and various financial institutions underscore the risks to domestic insurers, whose investment portfolios are dominated by fixed-income securities issued or guaranteed by the government, and deposits and securities issued by local banks, non-bank financial institutions and corporations.

Fitch downgraded Sri Lanka's sovereign rating to 'C', from 'CC' and had placed the ratings of several financial institutions on Rating Watch Negative. Some insurers also have foreign-currency exposure via investments in Sri Lanka development bonds and deposits with local banks.