The National Insurance Trust Fund Board (NITF) in Sri Lanka is poised for a significant increase in gross premiums this year. This surge is attributed to a recent regulatory change mandating that primary insurers transfer 100% of motor strikes, riots, civil commotion, and terrorism (SRCCT) premiums to the NITF, a substantial rise from the previous 12% threshold.
Fitch Ratings recognizes NITF’s stable business profile, underpinned by its full state ownership and significant influence in government policy. However, the agency also highlights concerns regarding the insurer’s corporate governance, noting its weak structural framework and limited financial transparency.
A critical issue for NITF is its risk management. Since January 2023, the organization has encountered difficulties in renewing its reinsurance contracts for SRCCT coverage. This lapse in reinsurance exposes NITF to potential fluctuations in capital and earnings from unforeseen events.
SRCCT premiums are a major profitability driver for NITF, with claims remaining relatively low. Nevertheless, Fitch Ratings views the heavy reliance on SRCCT for profitability as a significant credit weakness. This is compounded by limited cash flow between SRCCT and other business segments.
Despite improvements in NITF’s consolidated combined ratio, which dropped to 72% in 2023—reflecting stronger underwriting performance in health and SRCCT sectors—non-SRCCT segments face combined ratios exceeding 100%.
Capital adequacy concerns persist, particularly in non-SRCCT lines such as reinsurance. Nonetheless, NITF’s consolidated regulatory risk-based capital ratio was a robust 613% at the end of 2023, supported by strong earnings.
Investment risks for NITF have been mitigated by its conservative portfolio strategy, predominantly focused on government securities. However, the fact that 97% of its sovereign assets are exposed to sovereign risk remains a point of concern.
