Father of the Sri Lanka's insurance industry, Janashakthi Insurance PLC founder Managing Director/CEO, Chandra Thomas Adolphus Schaffter, on the eve of turning 83, urged consolidation of the country's highly competitive insurance sector. In an exclusive interview with Ceylon FT, Schaffer advised against the splitting of Life insurance segment from General insurance and also reproached the mandatory listing of companies.
"... I don't think it is a good thing for the industry since there are far too many companies.
There are nearly 20 companies, and of that, about six companies have about 85% of the business, others have only about 15% of the business. This obviously has huge drawbacks. The companies have to try much harder to lower their rates in order to get business; so that is not a good thing for the industry," Schaffter said hinting at consolidation.
He also added that the mandatory listing of insurance companies in the Colombo Stock Exchange (CSE) by 2016 might not prove to be favourable for the overall sustainability of the industry.
"I don't think that it's a favourable decision... All insurance companies should be listed by 2014. When the companies are split, those companies will have to seek listings again. You need to have the capital requirements, split the infrastructure and facilities, have two managing directors, two accountants etc. This will not help the businesses."
Mandatory listing would on the long term impact on the industry, he added.
"I think within the next two years all companies will have to do either one or the other, only General or Life. It is a government decision, whether it is a wise one we don't know — we're not happy with it — but unfortunately we have to comply with it. We have still not been given the ground rules as to how they want us to split and what we would be permitted to do in terms of common services whether we can have a common legal department or whether we could outsource, but at the end of the day, until they give us a final basic root we can't start planning."
When discussing about the future of insurance he opined that the outlook was challenging.
"The insurance industry within the next three to four years would go through a very challenging time. There are lots of regulatory changes yet to be made. I fear all those changes will not be able to withstand the buffeting which would be subjected during this period. It's left to be seen how many would survive. It would be difficult even for the big ones to confirm for all these requirements."