News
Fitch downgrades seven Sri Lankan Insurers’ National IFS Ratings;maintains Watch Negative
Fitch Ratings downgraded the National Insurer Financial Strength (IFS) Ratings of seven Sri Lankan insurers following the recent sovereign downgrade and recalibration of the agency’s Sri Lankan National Rating scale. The seven insurers’ ratings have been maintained on Rating Watch Negative (RWN).
The recalibration is to reflect changes in the relative creditworthiness among Sri Lankan issuers following Fitch’s downgrade of Sri Lanka’s Long-Term Local Currency Issuer Default Rating (IDR) to ‘CC’ from ‘CCC’ on 1 December 2022. Fitch typically does not assign Outlooks or apply modifiers to sovereigns with a rating of ‘CCC+’ or below.
National rating scales are a risk ranking of issuers in a particular market designed to help local investors differentiate risk. Sri Lanka’s national rating scale is denoted by the unique identifier ‘(lka)’.
Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale. National rating scales are not comparable with Fitch’s international rating scales or with other countries’ national rating scales. For details, see Fitch Ratings Recalibrates Sri Lanka’s National Rating Scale, dated 19 December 2022.
The National IFS Ratings of the Sri Lankan insurers take into consideration their creditworthiness relative to other issuers in the country. The recalibration of the Sri Lankan National Rating scale has resulted in downgrades of the National IFS Ratings of the following insurers:Sri Lanka Insurance Corporation Limited to ‘A(lka)’/RWN from ‘AA(lka)’/RWN; National Insurance Trust Fund Board to ‘A-(lka)’/RWN from ‘A+(lka)’/RWN;
People’s Insurance PLC to ‘A-(lka)’/RWN from ‘A+(lka)’/RWN; HNB Assurance PLC to ‘A-(lka)’/RWN from ‘A+(lka)’/RWN; HNB General Insurance Limited to ‘A-(lka)’/RWN from ‘A+(lka)’/RWN; Continental Insurance Lanka Limited to ‘A-(lka)’/RWN from ‘A+(lka)’/RWN; and Construction Guarantee Fund to ‘BB(lka)’/RWN from ‘BBB-(lka)’/RWN.
KEY RATING DRIVERS
The downgrades of the National IFS Ratings of the seven insurers are driven by the downgrade of the sovereign’s Long-Term Local-Currency IDR and the recalibration of the national rating scale while also reflecting the relative creditworthiness among Sri Lankan issuers.
We believe that the investment and liquidity risks of insurers have increased due to the weaker credit profile of the sovereign and the subsequent rating action on various financial institutions; see Fitch Downgrades 10 Sri Lankan Banks’ Ratings, dated 12 January 2023.
The rated insurers’ investment portfolios, similar to that of other insurers in the country, are dominated by fixed-income securities issued or guaranteed by the government, deposits and securities issued by local banks, non-bank financial institutions and corporations. Fitch maintains the ratings of all domestic Sri Lankan banks on RWN amid the likelihood of capital and funding stress as the default risk on domestic debt increases while access to foreign-currency funding remains constrained.
We have maintained the insurers’ ratings on RWN to reflect the potential for these insurers’ creditworthiness relative to other entities on the Sri Lankan National Rating scale to further deteriorate amid high investment and liquidity risks, pressure on regulatory capital positions and a weaker financial performance outlook. The heightened investment risks and earnings pressure amid the weak operating environment could affect insurers’ regulatory capital profiles.
Several ex-Cabinet ministers questioned; Ranil, Sajith, too likely to be summoned
The Commission to Investigate Allegations of Bribery or Corruption (CIABOC) has initiated an inquiry into the shifting of the Agriculture Ministry situated at Rajamalwatte, to a building belonging to the D. P. Jayasinghe Group of Companies, at Rajagiriya, during the Yahapalana government.
The building was rented for a five-year period at a cost of over Rs 1 bn by the yahapalana government within months after the then President Maithripala Sirisena declared opened the 10-storey building complex.
The CIABOC yesterday morning recorded former yahapalana minister Gayantha Karunatilleke’s statement in connection with the investigation. Later in the day, CIABOC recorded the statement of SJB General Secretary Ranjith Maddumabanadara. Earlier CIABOC summoned former ministers Thalatha Atukorale, Wajira Abeywardena and Lakshman Kiriella. At the time of the finalisation of the deal, KIriella was in the UNP.
Sources said that former PM and President Ranil Wickremesinghe, too, was likely to be questioned in this regard. Responding to The Island queries, sources pointed out even SJB leader Sajith Premadasa was expected to be questioned.
The then Speaker Karu Jayasuriya is on record as having said that the building was rented in keeping with a decision taken by the government and not Parliament.
The UNP-SLFP coalition shifted the Agriculture Ministry to accommodate 16 Sectoral Oversight Committees therein.
Although the government paid as much as Rs. 21.5 mn monthly rent to D.P.A. Jayasinghe Company, the Agriculture Ministry failed to move in for over a year. The then Agriculture Minister Duminda Dissanayake sought Cabinet approval on Dec 1, 2015 to rent the building.
According to inquiries conducted earlier by the Presidential Commission appointed to probe state sector corruption, the Agriculture Ministry sought Cabinet approval for a new building after the then Prime Minister Wickremesinghe submitted a cabinet proposal on 21 September, 2015, to use the Agriculture Ministry building for Parliament’s sectoral oversight committees.
PM Wickremesinghe’s Secretary Saman Ekanayake has told the Commission that public funds could have been saved if the several vacant floors of Suhurupaya belonging to the Defence Ministry had been made available to the Agriculture Ministry.
By Shamindra Ferdinando ✍️
Railway sources said that the damages caused to railway tracks could be more than USD 300 mn.
According to UNDP Rapid Crisis Assessment Sri Lanka’s railroad system, over 278 km of railways were exposed to cyclone-related flooding, including 35 railroad bridges nationwide. This figure reflects flooding only, but other hazards (such as localised debris, landslides, or damage to a single bridge) can also disrupt operations, meaning that even relatively small obstructions can render long stretches of railway non-operational. Like road exposure, railway exposure limits mobility and the capacity of affected populations to access key services and infrastructure.
At the level of divisional secretariats, Colombo and Thimbirigasyaya in Colombo District, Ja Ela in Gampaha District, as well as Mannar Town and Nanaddan in Mannar District all registered over 10 km of exposed railways each.
Commissioner-General of Essential Services B.K. Prabath Chandrakeerthi is on record as having said that only 478 kilometers of Sri Lanka’s 1,593-km railway network were currently usable following extensive damage caused by the recent cyclone.
Under Secretary of State for Political Affairs Allison Hooker arrived in Colombo yesterday (11) to underscore US interest in defence, trade and maritime security in line with their Indo-Pacific strategy.
The US embassy here issued the following statement: “Under Secretary Hooker will meet with Sri Lankan counterparts to discuss a wide range of bilateral issues, focused on deepening economic and commercial ties, strengthening defence cooperation, and supporting Sri Lanka’s economic and maritime sovereignty.
The United States and Sri Lanka share a strong and enduring partnership rooted in our mutual commitment to regional security, economic growth, and prosperity for our peoples. Through close cooperation on defence, trade, and maritime security, we are working together to advance a free, open, and resilient Indo-Pacific region.
As we continue to build on our strategic partnership, the United States also stands with the people of Sri Lanka as they respond to the devastating impacts of Cyclone Ditwah. We remain committed to working together to address both immediate challenges and long-term opportunities for our two nations, reflecting our ongoing commitment to the U.S.-Sri Lanka partnership.”
Showers or thundershowers will occur at times in the Northern, North-Central, Eastern and Uva provinces and in Puttalam, Matale and Kurunegala districts
Rs 1. 3 bn yahapalana building deal under investigation
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