AIA Sri Lanka’s Chief Actuary Samath Perera reflects on the unfolding economic challenges, the outlook for the future and how AIA is influencing the region.
What’s your view on the Sri Lankan economy, and how can life insurance play a role in the economic recovery?
Last year, the Sri Lankan economy faced significant challenges, including a deep recession. Despite these hurdles, there are signs of growth and positive development, fuelled by critical reforms in cost recovery of energy resources, fiscal management, taxation and a political landscape supportive of progress to meet IMF loan commitments. The government’s adherence to the IMF’s guidelines to increase revenue and decrease the fiscal deficit marks a pivotal step, further seen in its approach to opening the fuel retailing sector, privatizing state-owned enterprises and embracing market
reforms.
The real strength of Sri Lanka’s economy lies in its human capital: a young, well-educated, and healthy population, complemented by the island’s tourism and agricultural potential. Unlike some countries, Sri Lanka is not presently burdened by internal conflict, lack of literacy, lack of access to essentials (electricity, water) or an aged population.
The resilience of the transport, education and healthcare systems throughout the numerous crises has also been an asset – this resilience in the system is commendable to the strength of the populace. These aspects offer support to the economy, though challenges remain. The next 12 months are very important to both recovery and growth.
Life insurance has a key role to play in economic recovery as hyperinflation has increased the protection gap – the financial gap required to indemnify a household against sudden death, illness or disability. With the economic crisis the protection gap has increased and coupled with less reliance on the State, the need for citizens to seek insurance to indemnify against financial loss is more important. Insurance is the safety net and an essential part of ‘wealth management’ as it protects one’s “wealth” from unforeseen events.
Can you tell us about AIA and its role in the market?
AIA Sri Lanka is part of AIA Group which is a leading life insurer in the world by market capitalization with a presence in 18 markets across the Asia-Pacific region. While providing protection to customers at every stage of their lives, AIA offers a wide range of retirement, health, life insurance and savings solutions for all Sri Lankans. The product suite is designed and enriched by not only an in-depth understanding of the needs of the local customer but also expertise acquired in over a hundred years of experience in Asia. The health space is yet another important area for AIA and the company is very active through not just products, but rather an ecosystem of propositions that support the customers’ overall well-being and this is a key differentiator for AIA. Our commitment is reflected in our significant investments in our people, technology, sales, and product innovation, all under the guiding purpose of “Healthier, Longer, Better Lives”.
In Sri Lanka, we have heavily invested in our people and technology to bring the best practices from abroad into the market. More recently, to underscore our long-term commitment in the market we announced another long-term partnership with the largest private bank in the country. We believe in Sri Lanka’s potential and long-term growth.
Tell us about what an actuary does and what the role requires.
An actuary is essentially a financial mathematician, skilled in applying finance, mathematics, statistics, and economics to tackle complex business challenges. They are problem solvers at their core. Actuarial science demands rigorous formal training, including a series of exams, after which individuals can be admitted as members of an actuarial society. Actuaries are vital in the financial services sector, working in insurance, pensions, banking, and investments. Their role involves providing key advisory services to decision-makers\boards on a range of commercial topics and where required, on certain regulatory requirements where actuarial advice is prescribed. To do so one has to be a continuous learner willing to go beyond the training and to develop a rounded knowledge across the business. The rigorous initial training and the ongoing professionalism support one’s development.
How do you see the talent in the market and the future of the actuarial profession?
The recent South Asia Actuarial Conference in Sri Lanka of which AIA was a sponsor showcased the local talent. Sri Lanka’s abundance of graduates in mathematics, science, and IT highlights a strong and skilled talent pool gaining international recognition. The migration trend witnessed not only affirms the high calibre of Sri Lankan professionals but also indicates the country’s potential.
The emerging generation’s intelligence, capability and curiosity, as seen in my team, are key for a nation to progress. The actuarial profession is growing both locally and globally due to the increasing demands from businesses. The qualification process with international actuarial societies ensures that one’s qualification is globally recognized, and skills are transferable from market to market. This enables mobility and promising opportunities which are not often seen in other professions.
How do you see Sri Lanka overcoming the current economic challenges?
In the past 18 months, Sri Lanka has had several market-based reforms starting with the currency exchange rate and moving into the energy sector and then followed by a combination of fiscal reforms and legislative changes. Our primary aim should be to stimulate economic growth by addressing our initial problem: a shortage of foreign currency and an inability to meet foreign currency demands for imports and debt repayment.
Our approach should be focused on boosting exports, foreign currency generation, liberalization of the market and foreign investment. Sri Lanka’s growth potential lies in drawing foreign investment and leveraging our human capital. If we look back at the Asian Financial Crisis of the 1990s, it was this event that spurred the direction of many Southeast Asian nations to focus on export-oriented industrialization. This long-term strategy, aligned with integrating global supply chains and reduced barriers to foreign investment, would ensure sustained investment for many years to come. The challenge is to maintain the path to recovery without being distracted by short-term variables with a focus on attaining the longer-term plan and vision.