Insurance sector posts 16% premium growth in 2Q with mixed profitability

• Life insurance premiums up by 22%, general insurance  premiums up by 8.8% 
• Premium retention ratio for life insurance stood at a high 95.94%, while the general insurance sector maintained a solid 80.42% retention rate
• Investment Yield Ratio declined across all sectors

By Nishel Fernando

Sri Lanka’s insurance industry demonstrated robust top-line growth in the second quarter of 2025, with a significant 16 percent year-on-year increase in overall premiums, underscoring the sector’s resilience and strong growth trajectory.

The expansion was driven by a notable 22 percent surge in life insurance premiums, while the general insurance segment also recorded a healthy 8.6 percent rise.

However, the industry’s bottom line presented a more complex picture, with profitability diverging significantly across segments.

The industry’s expansion was mirrored in the growth of its total assets. Life Insurance assets grew by 16 percent, primarily driven by substantial increases in investments in Equities (50 percent), Deposits (33 percent), and Corporate Debt (25 percent). Capital levels for the life sector also improved by 10 percent compared to the previous year.

General Insurance assets increased by 10 percent, supported by strong growth in investments in Unit Trusts (94 percent), Investments in Associates (78 percent), and Equities (59 percent). The sector’s capital base saw a healthy 12 percent increase.

The reinsurance business recorded a 9 percent increase in assets. In contrast to other segments, it faced a significant 50 percent decline in its capital levels compared to Q2 2024.

Policyholder retention, a key indicator of customer trust, remained strong. The premium retention ratio for the life insurance sector stood at a high 95.94 percent, while the general insurance sector maintained a solid 80.42 percent retention rate, indicating high levels of policyholder loyalty.

Despite the strong premium growth, profitability was a mixed bag. The general insurance business was a standout performer, reporting a substantial increase in pre-tax profits of Rs. 2.03 billion. Conversely, the life insurance and reinsurance sectors faced headwinds, experiencing declines in pre-tax profits of Rs. 2.61 billion and Rs. 1.36 billion, respectively.

On the claims front, the life insurance sector saw a 22 percent increase in claims paid out. The general insurance sector, however, managed to reduce its claims marginally by 1 percent.

A closer look at investment performance reveals challenges despite the growing asset base. The total investment income for the life insurance sector saw a slight dip of 0.4 percent, falling to Rs. 49.65 billion from Rs. 49.86 billion in the previous year. More notably, investment income for general insurance companies decreased by 14.5 percent to Rs. 9.59 billion. Only the reinsurance business posted an increase in absolute investment income, which grew by 7.1 percent to Rs. 342 million.

The Investment Yield Ratio, which declined across all sectors, further highlights the pressure on returns: Life Insurance saw a yield drop from 14.04 percent in 2Q 2024 to 12.05 percent in 2Q 2025; General Insurance experienced a significant fall from 15.02 percent to 10.20 percent; and Reinsurance decreased from 13.71 percent to 8.86 percent.