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History and Development of Insurance Industry of Sri Lanka
Insurance business Sri Lanka commenced with the advent of coffee and tea industry during the period of British rule. The Insurance industry at that time comprised well known foreign companies such as Sun life Insurance Co., Royal Assurance Co., New India Assurance Co., who were with Edward Lumley underwriting business for Lloyds of London. After passing the Companies Act of 1938, the first Sri Lankan Insurance company the "Ceylon Insurance company Ltd" was established which was followed by many like Oriental Life Insurance Co., Pearl Assurance Co., etc.

The Insurance industry was nationalized in line with the prevailing economic policy of the Government in 1961.The Sri Lanka Insurance Corporation was set up as the sole authorized Insurer to transact Life insurance business initially and from 1964 both Life & General Insurance.

After about 18 years of monopoly of ICSL, the Government incorporated the National Insurance Corporation (NIC) in 1980 with the objective of creating competition. Whilst ICSL acquired business through its Island wide branch network, NIC acquired business through its private sector Principal Agents. Both organizations had its overall benefits by way of improved service and speedier settlement of claims. However, as the insurance penetration of the country was very low the need for private Insurance companies gathered momentum.

In 1986, the amendment of the Control of Insurance Act No.25 of 1962 opened the doors for the private sector to venture into the field of insurance. As a result initially three private Insurance companies were established namely

=Ceylinco Insurance Company Ltd

=CTC Eagle Insurance Co. Ltd ( currently known as Eagle Insurance Co )

=Union Assurance Ltd.

Simultaneously a new concept which was new to the industry was introduced vis-à-vis the introduction of the Broker intermediary. This move marked a new beginning for the Insurance industry.

In 1993, both government owned corporations ICSL and NIC were converted to limited liability companies. Thereafter, many more players came into the Insurance industry, namely Janashakthi Insurance Co., Asian Alliance Insurance Co., HNB Assurance Co., Co-operative Insurance Co., etc. As at date17 Insurance companies have been authorized to transact Insurance business which includes the international players like Allianze and Chartis Insurance Co., (previous AIG Insurance). Currently the private sector, control over 70% of the market share of Sri Lankan Insurance industry.

In order to offer a risk management services based on Islamic principles to meet the insurance needs of Muslim community of the country, Amana Takaful was incorporated in December 1998. Ceylinco Takaful Ltd too commenced to provide the same service later.

Specific Insurance needs
provided by the State

Sri Lanka Export Credit Insurance Corporation (SLECIC) was established in 1979 by Act No.15 of 1978 following the Government policy to create a conducive environment for export development; However SLECIC does not fall within the scope of Insurance legislation pertaining to General or Long term Insurance business. Also the risks covered by General Insurers are not normally covered by SLECIC.

Another significant development is the provision of Insurance for the agriculture sector too. The Agricultural and Agrarian Insurance Board was established in 1999 to undertake the business of agricultural insurance. The Agricultural and Agrarian Insurance Board currently offers comprehensive insurance schemes and social security benefit schemes for the benefit of agricultural, farming and fishing communities of Sri Lanka in order to stabilize their income and to promote the relevant production.

Regulators of the Insurance Industry.

Regulation of Insurance Industry Act No.43 of 2000 which came into effect in 2001 led to the creation of the Insurance Board of Sri Lanka as the regulator and supervisory body of the Insurance industry. The main objective of the Board is to ensure that insurance business in Sri Lanka is transacted with integrity and in a professional and prudent manner with a view of safeguarding the interest of the policyholders.

Education

The Sri Lanka Insurance Institute (SLII) was established in 1982 as a non-profit organization. Membership is open to those individuals who are engaged in the Insurance industry.

The general objective of the Institute is to provide and maintain a central organization for the promotion of efficiency, progress and general development amongst persons engaged/employed in insurance and to instill professionalism amongst its members and regulate their professional activities.

The Institute is affiliated to the Chartered Insurance Institute, London. SLII currently conducts classes/ lectures for persons engaged in insurance and award "Certificate of Insurance" and "Diplomas". It also provides library facilities to its members.

Further, SLII is the authorized body to conduct the qualifying examination for licensing the Life and General Insurance agents. It facilitates other international professional bodies to hold their professional examinations such as Chartered Insurance Institute London, Indian Insurance Institute, Actuarial Institute of India etc.

Based on the Book -

‘Insurance Industry & General Insurance
in Sri Lanka’

by Jeya Thangakone

published by the Sri Lanka Insurance Institute

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