Monday, 5 August 2013 00:00
The Sri Lankan insurance industry is working towards establishing a Risk-Based Capital model, which is currently undergoing a test run. Insurers are ready to embrace the model once it becomes fully operational in 2016, said speakers at the Seminar on Risk-Based Capital in Colombo.
Backed by the World Bank and First Initiative, the Insurance Board of Sri Lanka (IBSL) under the leadership of its Chairperson Indrani Sugathadasa, has been championing the RBC model to make the domestic insurance industry more transparent and competitive.
“IBSL has championed the cause of RBC as it wanted the market to move from a rules-based capital regime to an RBC regime,” said Sugathadasa. The insurance industry must efficiently allocate resources and promote economic development, she said.
The RBC regime will give capital credits to insurers that better manage their risks and will require for more capital from those that do not understand their risks well, said AIA Group CFO Garth Jones.
“I believe capital determined based on the RBC model better reflects the underlying risks in the business. From an evolutionary perspective, this is a very positive development which underpins a very strong financial base for the insurance industry in Sri Lanka,” he said.
Industry players have had a fruitful dialogue on the initiative with the regulator during the last 12 months, said Insurance Association of Sri Lanka President Prakash Schaffter. “I believe the timing of the seminar could not have been better.”
In his keynote speech, Dr. Sarath Amunugama, Senior Minister for International Monetary Cooperation and Sri Lanka’s Deputy Minister of Finance and Planning, spoke about the “peace dividends” the country is reaping as a result of the end of the three-decade civil war.
“We have been able to revise our insurance and reinsurance rates after the 30-year civil war ended, as earlier international players would refrain from offering support to the market, which had a negative perception worldwide,” said Dr. Amunugama.
He asked the private sector to play a more proactive role in developing the country’s economy.
Endorsed by IBSL, the two-day seminar has attracted 160 delegates from 13 countries and is sponsored by AIA.