The increase in taxes on imported vehicles in Sri Lanka is likely to cause the growth in motor insurance policy premiums to slow in the near term, says Fitch Ratings.
The government’s 2019 budget presented in March increased excise duties on imports of fuel-powered and hybrid passenger-motor vehicles based on their engine capacities.
The government also introduced a luxury tax on vehicles with a cost, insurance and freight value exceeding Rs 3.5 million, Rs 4 million and Rs 6 million for fuel, hybrid and electric vehicles, respectively.
Fitch expects these measures to further reduce new vehicle registrations and cause a slowdown in the new business growth of the motor insurance segment, which accounted for around 60% of the overall gross written premiums (GWP) of non-life insurers in the past three years.
The government has in recent years increased taxes on vehicle imports, mainly to curtail the outflow of foreign exchange and reduce motor traffic congestion in the cities.
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