The rootage of Insurance in SL

The advent of insurance in Sri Lanka coincides with the British annexing The Maritime Provinces of the then Ceylon, to the British Empire in 1802 C.E. But it is impossible to say, specifically, when or by whom Insurance business began in Sri Lanka, because our research on the subject does not show that these have been properly documented. However, it is believed that from the time the British stepped into Ceylon, there had been some form of "insurance" which was carried on by the British themselves.

Specific evidence of the commencement of Insurance business in Ceylon (Sri Lanka) and that which is found documented is in the1820s C.E. , where representatives, agents and/or brokers of Insurance Companies set-up insurance business here.

There is also evidence to prove that in 1833 C.E. Fowly Richmond & Co., operated as Agents/Representatives of the Commercial Union Assurance Co. Other private companies too began emerging to represent and function as intermediaries to insurance companies. Companies that were well-known in that era were Messrs. Wilson Archer; J. Gibson Thomas & Co., C. Shand & Co., and A. Brown & John Black & Co.

The main classes of business handled were "Life Assurance" and in a not so large a scale, Fire Insurance and Marine Assurance. It should also be noted that all the representatives and agents of insurance companies were either English or Scottish.

There is evidence of "Ceylonese" being appointed as agents, representatives and/or managers of insurance companies, for the first time , from 1863 C.E. It is worthy of note that Mr. C.F. De Saram , a Ceylonese, was functioning as the Head of the "Church of England" Life Assurance Co., and Mr. F.J. De Saram as head of Colonial Life Assurance Co., and Standard Life Assurance Co.

It could be said that Messrs. Wilson & Archer, who commenced business in the 1830s were the fore-runners of the now existing Aitken, Spence & Co. Ltd., the Lloyd’s Agents in Sri Lanka, for over one-and-a- quarter Centuries. It is documented that Messrs Wilson & Archer, floated in 1830 was changed into Wilson, Archer & Co., in 1835. This company became Wilson Richie & Co., in 1839. In 1852, they established a branch in the southern coastal city of Galle under the name of Wilson and Co. In 1864, Wilson Richie & Co., came to be known as Wilson, Clark & Co.

Messrs. J. Gibson Thomson & Co., who were the Agents for Lloyds of London too were operating in Colombo City and Galle. When this company wound up in 1871, there are reports that this prestigious Lloyds Agency was taken over by two Scotsmen, Thomas Clark and Patrick Gordon Spence who were operating under the name of Clark Spence & Co.

The two brothers Edward and S.R. Aitken now, joined Thomas Clark and P. G. Spence to Form Aitken Spence & Company in Colombo while the business in Galle continued under the name of Clark Spence & Co. as it does to this day both in Galle and the Eastern Port city of Trincomalee, making it one of the oldest trading names in the country. The Company soon expanded. The expansion of Colombo Harbour, with provision for larger vessels to berth, brought in considerable coal bunkering business as well, with the company having obtained the British Admiralty contract.

Aitken Spence was soon established as a typical agency house for insurance companies, shipping lines and the fast - opening plantations in the hill country. The partnership of Edward Aitken and Patrick Gordon Spence, which was joined by other Britishers who later continued their work, was converted to a Private Limited Liability Company in 1952. It was the immediate post-independence period in the country and Ceylonisation was was being carried out. Gradually the British directors left, the last going home in 1968. By 1971, a hundred years after establishing business in Colombo, the ownership of Messrs. Aitken, Spence & Co. Ltd., had become wholly Sri Lankan.

Another very important enterprise which was one of the oldest companies dealing in insurance was James Finlay & Co; which has its roots in Glasgow, Scotland, being established in 1750. The Ceylon branch commenced business in 1893.

The first ever fully owned Ceylonese Public Company registered under the Company Ordinance of 1939 was the Ceylon Insurance Co. Ltd. The founder of this institution was Mr. Justin Kotelawala, a senator of the upper house of the Legislative Council of Ceylon.

Between the years 1953 and 1961, a few other Sri Lankan- owned companies were established, of which The Free Lanka Insurance Co., United Ceylon Assurance Co., Colombo Life Assurance Co., Emjay Assurance Co., and Agricultural and Commercial Insurance Co., are indeed worthy of note.

In addition, the other companies that were involved in insurance for over a half-a-century were Messrs Gordon Frazer & Co. Ltd; Carson, Cumberbatch & Co. Ltd; Whittall Bousted Ltd; Harrison & Crossfield Ltd; Delmege & Forsythe & Co. Ltd., Mackinnon Mackenzie, Mackwoods Ltd., and C.W. Mackie Ltd. Together with these institutions, there were many other local companies operating as insurance intermediaries and had taken over functions like, Agents, Brokers as well as Special claim Settling Agents, Survey Agents and the like.

Subsequently various legislative changes were brought about which resulted in varying systems of administration of the Insurance business in Sri Lanka. The formation of Insurance companies, intermediaries, etc., in existence today are a result of exhaustive changes in law.

Unlike other countries, in Sri Lanka the development in Insurance and the corresponding legislative changes have been tremendous - from an era of sudden total monopoly, which lasted nearly two decades from 1961, to a gradual liberalization of insurance over a period of 15 years. It will be observed that the changes in law are as a result of amendments/ alterations/ additions/ deletions/insertions to the original law. No Insurance Acts promulgated in 1961 and 1962 were totally repealed. Hence the legal enactments warrant a detailed exposition.

The legal/supervisory framework

Prior to 1911 C.E. there were no specific legislation governing insurance as a whole. However, in 1852 and 1866, there were 2 Legal Enactments - Legal Enactment No.5 of 1852 which ruled that all Marine and Commercial contracts and/or transactions should be subject to the provisions of the English Law, and Legal Enactment No. 22 of 1866 which indicated that Fire and Life Assurance business were subject to the legal framework and limitations of the English Law.

The first ever Insurance Act was the Insurance Ordinance No.11 of 1911. This was drafted in line with the Insurance Companies Act 1909 of England. The British - owned companies vehemently opposed the implementation of this Act as it put them on par with any local companies that may emerge subsequently. This Act, therefore, did not come into effect.

Most of the laws on insurance that were drafted and implemented in the then Ceylon were the same laws that were framed in Britain since 1774. In 1938, some attempts were made to adopt the Indian Insurance Laws. In 1948, when "INDEPENDENCE" was declared a special 5 - man committee was appointed to look into the legal system as applicable to the Banking and Insurance business. This committee, after careful deliberation submitted their report in 1950. These recommendations were opposed by all those engaged in the insurance business, in the same way they opposed the 1911 Insurance Ordinance.

Mention must be made of the political changes in the country after 1956 when socialist policies were introduced. This affected insurance too.

Upto 1961, no significant changes took place; but in that year far-reaching changes in Government policies occurred. By virtue of the Insurance Corporation Act No.2 of 1961, the Insurance Corporation of Ceylon was established, thereby nationalizing the life insurance business. The Life Insurance business became a state monopoly and the Insurance Corporation of Ceylon commenced underwriting this class of business as from January 01, 1962. This Act, however, allowed all existing insurance companies to carry on their general insurance business; but they were allowed to only service the life insurance policies that were already issued, until their maturity or expiry. The private insurance companies were, however, not allowed to underwrite new life business.

At this juncture an amendment to the Act cited as Act No. 2 of 1962 saw the birth of the establishment of a Controller of Insurance in office.

Act No. 11 of 1963 landed the final blow to the existing private insurance companies - "NON - LIFE Insurance was also nationalised. These laws came into effect on January 01, 1964. Thus the Insurance Corporation of Sri Lanka became the sole underwriter of all classes of Insurance business.

The Control of Insurance Act No.25 of 1962 as amended by Act No.9 of 1967, empowered the Controller of Insurance to examine the financial positions and regulate the administration of all the private insurance companies that were servicing their existing policyholders.

As a first step, to break the monopoly of the Insurance Corporation of Sri Lanka, the National Insurance Corporation was established under the Insurance (Special Provisions) Act No.22 of 1979. This new Corporation commenced business on 28th March 1980.

The insurance business still continued to be controlled by the state, however, a certain degree of private sector participation was allowed and the National Insurance Corporation appointed 8 private sector companies as Principal Agents. They were:

Aitken, Spence & Co. Ltd., Acland Finance & Investments Ltd., Carson Cumberbatch & Co. Ltd., Ceylinco Ltd., James Finlay & Co. Ltd., Mercantile Credit Ltd., Protection and Indemnity Co.Ltd., and Whittall Boustead Ltd.

These Principal Agents, however, did not carry any risks on the insurances accepted. They were in fact functioning like Branch offices of the National Insurance Corporation. The Principal Agents had limited underwriting and claims settling authority and were remunerated by way of substantial commisions on business introduced.

The Principal Agents too were given the freedom of appointing their own agents - individuals as well as institutional agents - to whom they in turn paid a commission.


In keeping with the progressive policies , the then Government decided to allow private sector Insurance Companies to operate once again on the recommendations of a 4 - Man special committee appointed by the Government in 1985. This was achieved by the amendment of certain sections of the Control of Insurance Act.No.25 of 1962 (hereinafter referred to as the Principal Enactment), and the Control of Insurance (Amendment) Act No.42 of 1986 came into being.

Wider powers were vested in the Controller of Insurance. It indicated that the Controller of Insurance will act as "Ombudsman" to ensure that the rules of the game are scrupulously observed. Amendments, deletions, replacements and insertions were made to this Principal Enactment and this important piece of legislation completely changed the phase of Insurance after 26 years of total Government control.

It is impossible to go into detail due to the restrictive nature of this article but to cut a long story short the current body which governs the Insurance Industry is the Insurance Board of Sri Lanka which regulates and supervises the insurance industry in terms of the provisions of the Regulation of Insurance Industry Act No. 43 of 2000 which was enacted by the Parliament in August 2000 and came into operation with effect from 1 March 2001. The Insurance Board of Sri Lanka was established under the Act and the Board

took over the regulatory function of the insurance industry from the Controller of Insurance of the Ministry of Finance who regulated the insurance industry in terms of the Control of Insurance Act No. 25 of 1962 which was repealed with the enforcement of the new legislation.

The provisions of the Regulation of Insurance Industry Act No.43 of 2000, and the subsequent amendments annexed by way of Government Gazettes to-date, specify the insurance rules, regulations and determinations relating to solvency margin, admitted assets for the purpose of calculating the solvency margin, admitted assets for the investment of long term insurance fund and technical reserve of general insurance business, minimum capital requirement, commissions payable to insurance brokers and insurance agents on long term insurance business and general insurance business are in the process of being drafted.

The Control of Insurance (Miscellaneous Provisions) Regulations-1987 enacted under the previous legislation continues to remain in operation to regulate the insurance industry until the new rules and regulations are enacted, in accordance with the powers vested in the Insurance Board of Sri Lanka.


1.Ceylon Almanacs from 1820 onwards.

2.Times Collection - Sri Lanka Archives.

3.Insurance Glossary - O.L. Dept & ICSL (CWE)

4.Insurance Corporation of Ceylon Act of 1961

5.Control of Insurance Act No.25 of 1962

6.Control of Insurance Act No.7 of 1967

7.Insurance (Special Provisions) Act No.22 of 1979.

8.Sessional Paper No. 11 of 1985

9.Control of Insurance (Amendment) Act No.42 of 1986

10. Control of Insurance (Amendment) Act No.43 of 1986

11. Insurance (Special Provisions) amendment Act No.44 of 1986

12. Insurance Board of Sri Lanka


(The writer counts over 40 years of experience in the Insurance Industry)

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