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Insurance

Ceylinco Life reaches new heights with precision ‘auto-underwriting’

Underwriting, a key element in the process leading to insurance, will be entrusted to computers for the first time in Sri Lanka, following the development of auto-underwriting software by Ceylinco Life in collaboration with iOM Lanka (Pvt) Ltd., a leading software company in the Asian region.

The new software deployed by the life insurance leader eliminates human error and inconsistencies in analysis, leading to faster and uniform decision making on insurance proposals, with the underwriting component taking less than three minutes per policy, the company said.

Numerous factors considered for life risk assessment, including a prospective policyholder’s medical reports, habits, occupation, hobbies, area of residence, previous claims history and even Body Mass Index (BMI) can now be analysed in seconds, generating a decision whether to insure a person and at what rate.

“This results in a quantum leap in precision and consistency,” said Upamalika Ratnayake, Senior AGM Information Systems / Chief Information Officer at Ceylinco Life. “The software is 100 per cent parameterized and follows the underwriting guidelines of Swiss Re, our reinsurer. We simply key data into the core system, and the software does the rest. The saving in time is very significant.”

She said the potential for selling the software, which is jointly owned by Ceylinco Life and iOM, in the international market is being explored.

Commenting on this new development, Ceylinco Life Deputy Chairman R. Renganathan said: “For five years, Ceylinco Life has been the life insurance market leader in terms of premium income. Clearly, our leadership extends into other aspects of our business, from service delivery to process, adoption of best practices and research and development.”

In June last year Ceylinco Life became the first insurance company in Sri Lanka to deploy leading edge information and communications technology in field sales and customer servicing, with the launch of ‘e-assist’ a PDA-based mobile insurance sales office that revolutionised the way insurance sales people work.

Sophisticated GPRS-powered Personal Digital Assistants or PDAs with specialised software allow the company’s sales consultants to carry their office in their hands and into the homes of their policyholders and prospective clients, offering a new dimension in speed, accuracy and convenience.

Ceylinco Life which has more than 750,000 lives covered by active policies, ended 2008 with premium income of Rs 8.2 billion and a Life Fund of Rs 22 billion. The company’s solvency margin is five times that specified by statute.

Allianz Lanka expands provincial reach with a new branch in Galle

Allianz Lanka realised plans for reaching out to the people of the Southern Province with the opening of its first southern branch in Galle.

Galle is Allianz’s second venture into the provinces, the company having opened its first provincial branch in Kurunegala in December 2008. The Galle Branch is managed by Branch Manager Aruna Shantha and serviced by an experienced team of sales, front office and underwriting professionals trained to internationally benchmarked Allianz standards of customer service and underwriting.

In her welcome address, Allianz Lanka CEO, Surekha Alles affirmed, “Galle was our natural choice for venturing into the southern belt of Sri Lanka by virtue of its rich heritage and historical significance. We are proud to state that Allianz was once again accorded an ‘AA’ rating by international ratings agency Standard and Poor’s this year, which cofirms the financial strength and solid reputation that Allianz enjoys the world over, which we now bring to the people of the south.

“We are confident that we will forge a very cordial and mutually beneficial partnership with our customers in the south and are delighted to be able to offer them the same benefits, facilities and financial security enjoyed by our customers in Colombo.”

The Guest of Honour at the inaugural ceremony was the Mayor of Galle, Methsiri De Silva. He expressed his satisfaction that a multinational insurer of the stature of Allianz had chosen Galle to spearhead its southern operations. He said he would exercise every care to ensure that the people of his township and its environs benefitted from the presence of Allianz in southern Sri Lanka.

Allianz Lanka is backed by the global strength of Allianz SE, one of the world’ s largest financial services providers with experience since 1890 in providing innovative insurance, asset management and banking services to over 80 million customers in more than 70 countries. The Allianz Group is ranked 19th among Fortune 500’s listing of top global corporates, over half of whom insure with Allianz.

The local subsidiary successfully set up General insurance operations in Sri Lanka in 2005, and already has an impressive track record of achievements, with many ’firsts’ in performance in just three years and a fast growing customer base of large multinationals, local corporates, small traders and individuals.

The success of its General insurance business in Sri Lanka prompted parent company Allianz SE to set up Life operations in the country in October 2008, following the approval in July this year, of its application to commence Life operations in Sri Lanka by the insurance regulator, Insurance Board of Sri Lanka.

Weak insurance demand hurts ING

Dutch banking and insurance company ING has recorded a first-quarter loss of €793 million ($1.4 billion) as insurance activities plunged the firm into the red.

The insurance division reported an underlying loss before tax of €979 million ($1.8 billion), due to weak demand and falling investment returns. Gross written premium income slumped 17% to €8.9 billion ($16 billion).

Insurance operations in the Asia/Pacific region made a loss of €149 million ($269 million) compared to a €182 million ($328 million) profit in the same period last year.

The result is well down on the €1.54 billion ($2.8 billion) net profit ING reported in the opening quarter last year, but is a big improvement on the €3.7 billion ($6.7 billion) fourth-quarter loss.

CEO Jan Hommen says the company is making headway as it carries out cost-cutting initiatives and asset sales intended to simplify the business.

The Dutch Government last year injected €10 billion ($18 billion) into ING and provided state guarantees of its assets after the US unit’s disastrous foray into mortgage-backed securities.

Janashakthi re-assures policyholders and stake holders

Janashakthi Insurance PLC, the first insurer to acquire a state-owned insurance company and swiftly went on to become Sri Lanka’s third largest General insurer within only a decade of operation, announced that it is currently under a sudden and unexpected suspension of its registration by the Insurance Board of Sri Lanka (IBSL).

Managing Director JI PLC, Prakash Schaffter said that as a public quoted company, Janashakthi was totally transparent in its operations and has always fully complied with the regulations of the Colombo Stock Exchange and the IBSL. “On 12 May 2009 we received an unforeseen directive from the IBSL stating that certain assets we have used to compute solvency margin since year 2006 were not being accepted as admissible assets. As a result the JI PLC license to operate has been temporarily suspended. At this point in time we have appealed to the IBSL to revoke this sudden decision and are confident that it will respond positively to our request,” he said.

Schaffter added that during this current period of suspension, Janashakthi Insurance continues to honour all claims that arise. He reiterated that, as at date the company has met all due liabilities, obligations, taxes, direct and indirect and claim payments in a very timely manner and will continue to do so.

He also reassures existing policyholders that they will served with the same level of service that Janashakthi PLC has been providing in the past.

Impact of global financial crisis on insurance still unclear

The worldwide financial crisis will continue to churn up the banking sector through 2009, but its impact on the insurance industry remains unclear.

Sector giants such as American International Group and Swiss Re took a pounding as the crisis unfolded, but not in their core insurance and reinsurance operations. Rather, they suffered from over-extension into trading of derivatives and credit instruments.

Allianz, in its report on first-quarter results, stepped back and assessed the current financial landscape and its probable impact on insurers. There are dangers, but the German multiline insurance giant is cautiously optimistic.

The insurer, which saw a 97.5% drop in its first-quarter net income, said financial markets “will not be calm in 2009,” as “distortions from the boom years have not yet fully worked through,” especially in banking.

Operating profit in both its property/casualty and life/health segments fell more than 30% in the quarter.

Allianz expects a global contraction in economic activity this year, with industrialised countries shrinking by 2.9% after growing nearly 2% in 2008, and emerging markets will see a slowdown in growth, to 1% from last year’s 5.2% growth rate.

Asia will lead in regional growth, rising 2.7%, said Allianz. China will again lead that growth, though the country’s own growth rate will slow.

Eastern Europe, which had grown rapidly in recent years, will contract by 1.8%. Because the recent growth of many Eastern European economies had been fed by the rapid expansion of credit, “those countries have been hit so hard by the financial crisis that some of them have already turned to the International Monetary Fund and the European Union for support,” Allianz said.

Insurance outlook

According to Allianz, insurers will face dangers including the possible impairment on all types of securities and the loss of consumer confidence as the financial crisis unfolds. Insurers will have to work to restore customer faith in long-term relationships.

In the property/casualty segment, new business will likely slow. Some lines such as credit insurance are being hit directly by the crisis. For Euler Hermes, Allianz’s own credit insurance unit, a significant rise in the frequency of credit defaults and delayed payments represent nearly 50% of the segment’s deterioration in the first-quarter accident year loss ratio, which rose to 83.8 from 62.9 a year earlier.

On the plus side, problems in the capital markets, and low interest rates in particular, could enforce pricing discipline among nonlife insurers, according to Allianz.

The long-term fundamentals for the life-health insurance segment “remain intact,” Allianz said, though “they will be affected by how effectively mandatory health insurance systems are complemented by privately funded health insurance.”

As the populations of many developed countries continue to age, capital markets will have to play an increasing role in providing sustainable retirement and health care, according to Allianz. Those provisions “cannot be build solely on a pay-as-you-go basis,” the insurer said.

As to its own outlook, Allianz believes that because “the major part” of its business is in the property/casualty segment, that which is “least affected” by the financial crisis, it will be able to achieve sufficient operating results. In its life/health segment, the insurer expects “consistently positive” development in the traditional lines and a recovery “over time” for investment-oriented products

— Insurance Newsnet

Generali quarterly profits fall 89% 

Italy’s largest insurer Generali has reported its first-quarter profits sank 89% to €103.8 million ($187 million) compared with €910.3 million ($1.64 billion) in the corresponding period last year.

General insurance premiums were up 3% to €6.6 billion ($11.9 billion) while life premiums were down 1% to €11.9 billion ($21.5 billion).

The group also reported writedowns of €1.5 billion ($2.7 billion) on equities driven by declines in sharemarket, and a combined operating ratio of 96.3% – it was 93.1% in the first quarter last year – due to higher motor losses and storm damages.

Chairman Antoine Bernheim says he is pleased Generali has made a profit in a quarter “exposed to the full force of a deepening recession.”

New independent director for Ceylinco Insurance

Insurance leader Ceylinco Insurance PLC has announced the appointment of Don Herschel Jayaprithi Gunawardena F.C.M.A., as an independent director to the company’s board with effect from May 1.

A fellow member of the Chartered Institute of Management Accountants, UK and a former council member of the Institute’s Sri Lanka Branch, Gunawardena has over 35 years of experience in sectors such as shipping, aviation, mining, export and import trading.

“Although Herschel has not been involved in the insurance industry before, his knowledge and experience of a wide spectrum of industries would be of immense value to Ceylinco Insurance,” the company’s Joint Deputy Chairman, R. Renganathan said.

Gunawardena is also an Independent Director of Hunter & Company Ltd. and Lanka Canneries Ltd.  He has served C.W. Mackie & Company Ltd., SriLankan Airlines, Ceylon Shipping Corporation and Brooke Bond Ceylon Ltd. He has over five years of overseas experience in Zambia where he was employed in the country’s largest copper mining company, Zambia Consolidated Copper Mines Ltd.

Gunawardena’s work at United Motors Lanka PLC and other companies in which he has been employed encompassed budgetary control, corporate planning, performance monitoring, financial management and information systems.

Ceylinco Insurance’s consolidated Gross Written Premium Income increased by 14.3 per cent to Rs 20 billion in 2008, with the General Division accounting for Rs 11.8 billion, and the Life Division Rs 8.2 billion. These performances reinforced the company’s position as the leader in the local insurance industry for the fifth successive year on the basis of consolidated premium income.

NDB Group to offer wealth management solutions with Aviva

Eagle Insurance PLC’s second-largest shareholder NDB Bank, through its subsidiary Capital Development & Investment Company (CDIC) will acquire the controlling stake in Eagle Insurance’s fully owned subsidiary, Eagle NDB Fund Management Company (ENDB) subject to receiving relevant regulatory approvals. Aviva International Holdings through Aviva NDB Finance Lanka Private Limited (ANFL) will remain as ENDB’s indirect shareholding partner with a stake of 49%.

With this acquisition CDIC will own a direct and indirect shareholding representing 51% of the issued share capital of ENDB, on the basis that CDIC shall have the effective control of ENDB. CDIC, a subsidiary of NDB, is the NDB Group’s strategic investment arm.

The Eagle NDB Fund Management Company has been in existence since 1991 and is one of the largest licensed asset management companies in the country which manages insurance funds, provident funds, pension funds, endowment funds, and unit trusts with investments in equity and fixed income instruments.

Through this acquisition it is believed that the ENDB clientele will now be well positioned to benefit from the synergies of the NDB Group, one of the fastest growing financial conglomerates in Sri Lanka and Aviva’s expertise which draws on the best of products, technologies and capabilities globally.

“Prudent wealth management is the foundation of a healthy economy, may it be of a company or of an individual,” said Chief Executive, NDB Bank, Eran Wickramaratne. “Rather than encouraging the pursuit of short-term benefits, our wealth management solutions will offer a range of products that will encourage long-term benefits.”    

Managing Director, Eagle Insurance, Deepal Sooriyaarachchi stated “This arrangement shows the greater commitment of our principal shareholders towards infusing their expertise to further develop and provide greater impetus to the asset management business. This in turn, will benefit the valued clientele of ENDB and primarily the Eagle Insurance policyholders and provide the opportunity for the NDB Group to offer wealth management solutions to the Sri Lankan market.”

Aviva is the world’s fifth largest insurance group, serving over 50 million customers across Europe, North America and the Asia Pacific and has formidable expertise in the areas of asset management.

CIMA World President to address The Bankers Club

Cima World President, Glynn Lowth will speak to bankers at a breakfast meeting scheduled to be held on Tuesday, May 26 at the Ceylon Continental.

Organisations across the globe are facing uncertain and challenging times which bring with it numerous risks and opportunities at the same time. Of all the challenges, ‘Finance’ tends to take top priority.  

Glynn, with his immense practical experience gained in industry and finance whilst working at major multinational companies which have  seen many paradigm shifts in their markets, is well suited to speak on how businesses can deal with the challenges in a downturn, the importance of managing risk through the business cycle and identifying and capitalising on the opportunities that arise.  He will also address the vital skills required to deliver strategy and explain some of the tools CIMA has developed to help organisations drive successful strategies. 

CIMA, Regional Director of South Asia and Middle East, Bradley Emerson, commenting on the programme said “We are well aware of the current economic downturn has had on the performance of several banks worldwide, who were thought to be ‘too big to fail.’  No doubt banks in Sri Lanka too are faced with very challenging times to drive the local economy which is export dependent for its markets. In this background the topic ‘Leading in a Downturn’ is most appropriate”.

Vice President, The Bankers Club, R. Theagarajah, said “We are privileged to have a resource person in the caliber of Glynn Lowth speak to us on a topic that is extremely timely and no doubt we will be richer and wiser as a result.”

Stars of Union Assurance shine at Annual Awards

The Annual Awards, which is the most anticipated event in the Union Assurance calendar took place on May 16 at the Water’s Edge. The theme of the event was “Shining Above The Rest.” It was a celebration in honour of the best performing sales persons and an opportunity to share their success with their families and fellow colleagues.

General Manager - Marketing and Distribution, Rukman Weeraratne, welcoming the invitees congratulated the award winners who have worked extremely hard and fulfilled very high standards in terms of their business production and quality.

He noted that “Union Assurance with a solid foundation in terms  of shareholders, management and staff provide our life and general insurance customers first class security with a truly professional service.”

CEO Marina Tharmaratnam in elaborating on these thoughts stated that the continued commitment and support of the staff have brought UA to where it is today. “We are a professionally run insurance company. Our corporate governance, business ethics and transparency have been recognised both nationally and internationally. In addition, we have been recently conferred with the prestigious Super Brand status as well.”

UA Chairman, Ajit Gunewardene noted that despite the negative outlook for the global economy and the impacts of poor financial management, lack of transparency and good governance on the local financial services industry, UA is well positioned to capitalise on the current business environment. He elaborated that “These very aspects (financial management, transparency and good governance) are key strengths of UA, and the current financial services landscape, therefore, offers significant opportunities which I believe UA is well positioned to exploit.”

Chanaka Appuhamy of the Chilaw Branch secured the “Champion of Champions Life Award” by winning a Full Gold Award, the MDRT Award and the Best New Business Producer’s Award. Eric Upashantha received “The Most Outstanding Sales Person Award” for General Insurance. Over 130 awards were presented during the ceremony to the best performing life and general sales persons selected from a sales force in excess of 3,000 persons.

Marine insurers feel the pinch

A 45% slump in global shipping trade in the final quarter of last year had a resounding effect on all major shipping ports. The continued downturn has also placed further strain on marine insurers already coping with higher claims and eroding premium rates.

PSA International Group CEO Eddie Teh outlined an ominous forecast during an annual results briefing recently. The Singapore-based port operator handles 28 ports in 16 countries including China, the UK and India.

“I see an extremely tough and increasingly challenging year in 2009, with more and more economies falling prey to the collapse of financial systems, and global trade almost grinding to a halt,” he said.

For marine insurers, the downturn is set to have an obvious impact on written premium. Zurich Global Marine Practice Leader Lee Meyrick says a reduction in world trade means there has to be an impact on cargo premiums. “Our global competitors and our competitors have been making similar statements,” said Meyrick.

Meyrick, who joined Zurich in March from AIG where he was a Senior VP in its marine division, says continued rate erosion and rising claims have hardly helped marine insurers.

Meyrick says that’s a common international trend and given the gloomy trade environment, something has to give. “Prices have been subject to erosion for the past three to four years, especially on the cargo side which is where we write most of our business,” he said. “There’s been an absence of any real catastrophe loss out there and it is a competitive market. “I think most markets have now come to the conclusion that rates really should be increasing because while premium level per risk has reduced, the claim level per risk has not.”It’s an interesting irony that in recent years many of the highest exposures for marine insurers have occurred on dry land. “We see a lot of hijacking and poorly maintained vehicles, which I guess has some parallels with the rail situation in Australia, where we have seen some examples of infrastructure and rolling stock not being as well maintained as it should,” Meyrick said.While some sectors of the insurance industry are yet to see any evidence of an increase in premium rates, that’s not the case in marine insurance.  “We’re seeing a fair amount of levelling out in most places with an increase in rates if necessary,” he said. “All of the necessary signs that you would see in a normal hardening market are there and that’s further exacerbated by the global financial crisis.”In response, marine insurers have adopted a firm focus on core business activity as a rich vein of investment income begins to run dry. That’s putting more pressure on  them to improve their margins.“We’re at the place now where investment income is negligible, if there is any at all, so underwriting results really have to stand on their own two feet,” Meyrick said.

Good reputation is key to corporate health

Damage to brand and image is the number one risk to business, according to Aon’s 2008/09 Australasian Risk Management Benchmarking Survey.

It topped the list in the 2007/08 survey too, which is interesting when you consider how much the global business environment has changed over the past 12 months.

Of course the power of a good reputation, as expressed in brand and image, has long been acknowledged. It’s the stock-in-trade for corporate marketers, and billions of dollars are spent to raise brand profiles through advertising, promotion and sponsorship.

Resurrecting reputations after bad things happen is more problematic.

There have been some extreme examples of misguided image protection, like airlines being photographed painting over aircraft tail logos at crash sites.

As Aon Australia’s CEO Steve Nevett says, no one in business wants to experience the kind of brand fallout that has been suffered globally by failed banks. So the top ranking for reputation comes as no real surprise.

“Many risks were identified leading into the current financial crisis, but not adequately assessed or addressed due to the attractiveness of making short-term profits,” Nevett said.

“With the benefit of hindsight it would appear that the culture of risk management in organisations needs to improve.”

When observed in the rear-view mirror, it’s hard to imagine some businesses ever thought they’d get away with ‘cowboy’ antics. But is ‘spin’ the way forward? No, say the experts. Hopefully the world is learning that good reputations are gained and maintained when businesses genuinely strive to be good corporate citizens.

The US-based Sirota Survey Intelligence organisation says one of the most important lessons to emerge from the recent failure of several prominent financial institutions is that many businesses still don’t understand the true nature and power of corporate social responsibility (CSR).

It notes that one of the hallmarks of a strong CSR programme is the recognition that acting responsibly is in an organisation’s best interest, at least if the goal is long-term business sustainability.

It’s about sound business practice that does not disadvantage stakeholders or the business itself by taking unsustainable risks. It’s not about feel-good philanthropic acts that mask toxic business practices.If you look in the top 20 risks in the Aon chart there aren’t many that won’t potentially be affected by brand and image.For example, liquidity is up six points at No 7 and credit is up four points at No 19.Not surprisingly in the current climate, these concerns about business assurance-type risk factors play heavily on the minds of CEOs and shareholders.

Human resource is steady at No 4. It’s worth noting that businesses with bad reputations don’t attract or retain good staff.

AIG eyes spin-off of Asian life insurance unit

US insurance giant AIG is planning a spin-off of its Asian life insurance operation through an initial public offering (IPO) to repay part of its debt, Associated Press said on May 18.

AIG said in a statement that the shares of the Asian unit, American International Assurance Co (AIA), will be traded on an Asian exchange but did not specify on which one or what would be the size of the operation.

The American insurer unveiled plans in March to spin off or sell the AIA Group in a move to raise cash and repay its debt to the US government, which provided a USD85bn loan (EUR63bn) in September. Later, the government extended more funds -- now totalling USD180bn -- and took 80% in the troubled insurer in exchange.

Last week, AIG said it would sell its Japanese operations to local insurance firm Nippon Life Insurance for USD1.2bn in cash. The deal is seen to close in the second quarter of the year.

Ceylinco Life takes 2,400 Family Savari winners to Leisure World

A unique feat of communal amity on a large scale was achieved recently when some 2,400 people from all over Sri Lanka met for an overwhelming full-day outing at Leisure World theme park thanks to the Ceylinco Life Family Savari promotion conducted by the life insurance leader.

The second phase of the 2009 Family Savari brought together policyholders from 600 families for a once in a lifetime experience of novel water-based amusement activities.

All participants including those from the north and east enjoyed the day, clambering on to rides, slides and chutes or plunging into pools in a stimulating environment made possible by the Family Savari promotion. They were also able to interact with cricketing icon Muttiah Muralitharan, a Ceylinco Life Brand Ambassador, who accompanied them on the outing.

Addressing the families selected for the outing through a draw, Ceylinco Life’s Deputy Chairman R. Renganathan said: “Ceylinco Life has united people from the North, South, West and East at one exciting place. We are happy to share our success with our policyholders through this type of fun-filled event.”

He said that Ceylinco Life policyholders can look forward to more such life-long memories in the future as the company enhances its prizes to policyholders year by year.

“Providing an all expenses-paid full day outing for such a massive number of persons and arranging transport to and from the theme park was not a small task but the ability to execute this programme successfully demonstrates the company’s strength and capacity,” Renganathan added.

The first phase of this year’s Ceylinco Life Family Savari presented 20 lucky winners with a four-day tour of Singapore and Malaysia which included a cruise of the Malacca Straits on the opulent Star Virgo luxury liner.

Covering policyholders whose policies were active as at December 31, 2008, new policyholders who purchased life insurance between August 1 and December 31, 2008 and persons who had or who opened Ceylinco Retirement Accounts (CRA) during the four months of the promotion, the Family Savari programme was intended to generate greater awareness of and interest in life insurance in market segments as yet unprotected through insurance, reward existing policyholders for keeping their policies active and provide an incentive to others to revive and maintain their policies.

In previous Ceylinco Life Family Savari events, Ceylinco Life provided all-expenses paid holidays for 258 people in Singapore, and a day’s outing at Leisure World for 1,600 people.

Ceylinco Life which has more than 750,000 lives covered by active policies, retained its position as the life insurance market leader at the end of 2008 with premium income of Rs 8.2 billion. The company’s Life Fund exceeds Rs. 22 billion and its solvency margin is five times that required by statute.

HNB Assurance ready to undertake any risk

By Ashwin Hemmathagama

General insurance is a key ingredient in any development project. With the separatists led  30 year long terrorism coming to an end more insurance companies anticipate improved business activities. Top-line as well as bottom-line improvements are expected to change dramatically for the betterment of the country as well as the industry. Following are the excerpts of an interview held with HNB Assurance PLC General Manager - General Insurance, Gerry Gunadasa on 1Q 2009 developments and future plans.

Question (Q): How did the General Insurance sector perform during 1Q 2009?

Answer (A): We started 2009 amidst several challenges which include the global recession, internal fierce rate competition, and economic and development constraints added with the security concerns where construction and marine related sectors were badly affected.

However, due to our prudent operational measures we had good results with a net profit of Rs. 15.87 million in the 1Q 2009 which is a 12 per cent growth compared with Rs. 14.11 million reported in 1Q 2008. We are concerned on both the top line as well as the bottom line. During the period in focus we have honoured Rs. 115 million worth of General Insurance claims against Rs. 89 million in 1Q 2008.

Motor happens to be our major portfolio where we have paid Rs.100 million worth of claims in 1Q 2009 against Rs. 81 million in 1Q 2008. This is an increase of 23 per cent.

Q: Can you elaborate on FY 2008 results?

A: We are one of the fastest growing insurance companies in Sri Lanka. We always endeavour to cater to the requirements of our clients providing a satisfactory service. Our main concern is financial stability so that in the event of a claim the financial backing is maintained. If you look at our 2008 results you will notice a growth in turnover as well as in profits.

In FY 2008 we have achieved a growth in profit after taxation of 33 per cent followed by growth of 19 per cent in profit before tax compared to 2007. We also recorded a growth of 25 per cent in our combined turnover measured by the gross written premium. During FY 2008, the gross written premium from life insurance business increased by 19 per cent to reach Rs. 914 million while the gross written premium from the general insurance business increased by 31 per cent to reach Rs. 925 million.   The combined turn-over added up to Rs. 1,839mn.

Q: How do you rate the industry competition for General Insurance market?

A: HNB Assurance being a subsidiary of the banking giant HNB is at an advantage when it comes to reliability, acceptance, recognition, and presence in all parts in the country. We always get the support from the HNB branches in addition to our own 45 branches located strategically. The most recent branch was opened in Mannar.

Our motto is to settle claims promptly which is the shop window for any insurance company. If we delay or start omitting the payment of claims which falls within the scope of the policy, we will hinder the growth of this organisation. Adding more to this, we have a panel of international reinsurers who support our journey. So, we always welcome healthy competition. According to the Insurance Board of Sri Lanka, HNB Assurance General Insurance sector has been placed in sixth place taking gross written premium into consideration.

Q: Are you capable enough to handle the anticipated growth in General Insurance in the coming months?

A: We have proved ourselves by underwriting very large projects during the last financial year. One such project happens to be a power generation plant powered by fossil fuels. It is located in Chunnakam, Jaffna and disburses 36 mega watts to the national grid. This was underwritten recently. Another such large scale project is the hostel construction that took place in Manipay, Jaffna. Apart from these two projects HNB Assurance was involved in the Oluvil Port Project in the eastern coast. So, we believe that we are capable enough in handling any type or any size of development project.

Q: What are your plans for Northern Sri Lanka which needs urgent attention?

A: With the settlement of the war we envisage a lot of development to take place from the 4Q this year especially in the north and the east which is reawakening the economy. Therefore we anticipate an increase of imports, especially building material and underwriting in construction projects. We have plans to open more branches with the great support given by the already existing Hatton National Bank branches. We will help the government to meet its goals.

Insurers told to spread their risks to survive

Insurers have to deal with the realities of the disaster the banks have dumped on them, notes CEO of Lloyd’s, Richard Ward. He has been urging insurers dealing with liability not to put all their eggs in one basket.He says too much concentration in areas like D&O will lead to big claims and financial challenges. He is not discouraging insurers from providing D&O cover, but is warning them to have a diverse portfolio and not expose themselves to the one class.

“There’s a lot of D&O exposure out there that will come into the insurance sector,” he said. “Insurers need to have a diversified approach to risk, be very careful about risk selection, and about the price. The banking sector didn’t get the pricing of risk right.”Ward says Lloyd’s has learnt the hard way about overexposing itself to a particular class of insurance.

In 1996 the insurer nearly collapsed and had to change the way it did business after taking on toxic liabilities associated with asbestos in the US.“But we didn’t learn all our lessons there,” he said. “In 2001 we had enormous losses when the World Trade Centre collapsed. We ended up short of cash and had to completely restructure our business. We now have a very different business and focus – much more on risk management and much more conservative.”Ward says while Lloyd’s is happy to take on risk in the market it is careful to diversify its risks. For example, over the past few years Lloyd’s has scaled back its D&O cover to financial institutions to reduce risk. It was a wise move, with Ward saying D&O claims will continue to rise this year.He says a recent survey of company directors found boards spend 15% of their time discussing litigation, while every CEO said litigation was on the increase.

The case for saving AIG

Inside the corridors of power in Washington, a 21-page document has been getting a lot of attention. It is marked confidential and titled “AIG: Is the Risk Systemic?” The report, prepared for regulators by the American International Group, examines the economic apocalypse that would follow if AIG failed.

This document may help explain why the federal government just rescued the insurance giant for the fourth time in six months — and why the government was willing to spend $30 billion more of taxpayers’ money for very little return. The government, which owns nearly 80 percent of AIG, not only did not take more equity in AIG, but it also converted its preferred shares, which paid a 10 percent dividend, into shares that don’t pay a dividend at all.

“Systemic risk” is a phrase often used to describe the domino effect of one business’s failure on the rest of the economy. We saw the dangers of systemic risk in action when Lehman Brothers failed in September. And we’ve heard a lot from Detroit automobile executives about the systemic risk they say the nation would face should General Motors teeter.

But those failures look like summer thundershowers compared with the financial hurricane that a collapse of AIG would represent, according to the document, which was presented to Treasury Secretary Timothy F. Geithner and Lawrence H. Summers, head of the National Economic Council, in recent weeks.

One of the biggest worries, besides the considerable collateral damage to the banking system, is a risk that most people aren’t talking about, perhaps because it’s too scary. This one is probably easier to understand than any kind of financial chicanery: the dangers lurking below AIG’s seemingly stable, highly regulated life insurance business. AIG has more than 81 million life insurance policies with a face value of $1.9 trillion globally.

If policyholders lost faith in AIG and rushed to cash in their policies all at once, the entire life insurance industry could falter.

“A ‘run on the bank’ in the life and retirement business would have sweeping impacts across the economy in the US,” according to the AIG document. “In countries around the world with higher savings rates than in the US, the failure of insurance companies would be a catastrophe."