The Sri Lankan government’s debt restructuring plan is likely to reduce the investment and liquidity risk of local insurers, says Fitch Ratings International.
The agency expects the pressure on the investment and capital profile of insurers to ease as the proposed plan will not have a direct impact on local currency, public debt holdings of insurers, banks and non-banking financial institutions.
However, the agency says the proposal is only one component of the sovereign’s (Long-Term Local-Currency Issuer Rating: C) debt sustainability plan.
Sri Lanka’s insurers’ ratings remain on Rating Watch Negative (RWN) amid heightened investment and liquidity risks, pressure on regulatory capital positions and a weak financial performance outlook, which could hurt insurers’ credit relative to other institutions on the national rating scale.
Fitch continues to maintain all ratings of domestic banks and banking and non-banking financial institutions on RWN due to rising risks, and timely downsides to their credit from risks in the capital, funding and operating environment.
Fitch Ratings Inc. is an American credit rating agency and one of the three largest credit rating agencies in the world. The other two institutions are Moody’s and Standard & Poor’s.
