The National Insurance Trust Fund (NITF) of Sri Lanka’s failure to sign reinsurance arrangements that lapsed around two months ago means the organisation will have to use its own funds to pay compensation for property damage from recent flooding and landslides in the country.
Reports from the Disaster Management Centre (DMC) claim that recent floods and landslides in Sri Lanka fully-damaged 2,788 homes, with a further 18,413 being partially damaged. The adverse weather conditions impacted 14 districts across the country, and a total 683,831 people, of which 213 were killed and 147 injured.
Under the National Natural Disaster and Emergency Relief Insurance scheme, introduced in April 2016, the Sri Lanka government announced compensation of up to Rs 2.5 million (roughly US$16,361) for a fully-damaged or partially damaged house.
However, failure to sign the reinsurance agreement renewal until a day after the flooding took place, which expired on April 1st, 2017, means the National Insurance Trust Fund (NITF) will have to utilise its own funds to pay compensation.
Speaking to Daily FT, NITF Chief Executive Officer (CEO) Sanath De Silva, said; “We will be paying from the funds available as the reinsurance scheme will not cover these claims.”
Reinsurance News reported that Renaissance Reinsurance Singapore, a division of global reinsurer Renaissance Re, was the lead reinsurer on the 15 billion rupee (roughly US$100 million) renewal of the Sri Lanka governments natural disaster program, which was completed only on May 26th just one day after the recent disaster struck, after the procurement process was delayed.
While it’s clear any delay surrounding the procurement process isn’t anything to do with reinsurer RenRe, according to De Silva the delay isn’t the fault of the NITF as it follows government procedure, which takes three months and which commenced in January, 2017.
“There are clauses that say you have to wait for 45 days after the procedure commences. And the reinsurer needs nine months of data. There are practical limitations within the process. So there is a technical problem in the regulations in the country. From the NITF point of view we have no control over the matter. Those periods should be allowed whether you like it or not,” explained De Silva.
Despite this, De Silva told Daily FT that NITF funds alone are sufficient to meet the claims.
“We have enough money. There will be a dip in the profit but it will not affect profitability in the future. Even last year we paid out Rs. 9 billion. We had a net charge of about Rs. 3.2 billion. But we made a profit and contributed Rs. 3.2 billion to the Treasury,” he said.