NITF gets retrocession cover for 2016

The National Insurance Trust Fund (NITF) has successfully concluded the placement of its retrocession cover for 2016.

Several reinsurers of global repute such as Munich Re. Scor and Lloyds Syndicates - Cathedral and Amlin - have accepted shares of this program placed by Lockton Companies LLP, the world's largest privately owned insurance brokerage firm.

The lead reinsurer will be Cathedral - Lloyds Syndicate while all reinsurers on the panel have ratings of 'A' - (A.M. Best) and above, meeting the requirements stipulated in the Request for Proposals (RFP). Retrocession refers to the purchase of reinsurance by a reinsurer to manage its risk exposure.

Since NITF accepts 30% of all reinsurance placements made by general insurance companies operating in Sri Lanka, it is exposed to a significant risk in the event of a major natural catastrophe or even a very large single loss arising from a very large risk.

Hence, it was imperative that NITF obtains a reinsurance cover (retrocession) to deal with such exceptional losses that exceed a certain value.

Under the retrocession program placed for 2016, NITF has obtained a cover of Rs. 5 billion subject to a deductible of Rs. 1 billion. Therefore, in the event of an exceptionally large claim, NITF will bear up to Rs. 1 billion of losses while reinsurers on the panel will bear up to Rs. 4 billion.

Since NITF's share of Reinsured claims is 30%, it has been estimated that this cover is sufficient to meet its share of claims arising from a disaster that could cause losses of up to about Rs. 16.6 billion.