Govt eases burden on insurance industry

By Lalin Fernandopulle

The burden on the insurance industry is less as the government has decided to pay compensation for loss and damage of property to the victims of the ammo dump fire at the Salawa army camp in Kosgama.

Insurance industry officials said there will not be an adverse impact on the insurance industry as the government has undertaken to provide relief to those affected.

Chairman, National Insurance Trust Fund Board (NITFB), Manjula de Silva said the destruction due to explosions is not covered by NITFB schemes. “As a result there will not be claims arising from the disaster.” However, he said there could be claims such as damage to property and assets which the insurers will look into and pay compensation after assessing the damage. The National Natural Disaster Insurance Scheme under which compensation is paid to flood victims is not applicable to the Kosgama incident which was not a natural disaster. “But if a house is damaged and its owner had obtained an explosion cover he or she could claim compensation from the insurer,” de Silva said.

He said the NITFB has yet not heard from insurance companies of claims being made due to the explosions following the Kosgama fire last week.

With regard to the ability of the insurance industry to cope with the double blow, de Silva said NITFB provides 30% of the re-insurance to the insurance industry and added that the introduction of retro-cession is a sound move which enables insurers to re-insure its liabilities in the reinsurance market.

The NITFB too has re-insured its liabilities in the re-insurance market and as a result the NITFB is able to limit its losses to around Rs. 1 billion from claims of around Rs. 2 billion from the natural disaster last month.

The government obtained an insurance policy through the Natural Disaster Insurance Scheme to cover its obligations in the event of a natural disaster.

The NITFB funds the compensation for repairing houses and micro enterprises with a turnover less than Rs. 10 million a year affected by natural disasters following assessment of damage. “Around 700 houses were fully damaged while around 5,000 were partially damaged by the recent floods. Only a small percentage of those affected were insured,” de Silva said.

The insurance scheme also pays a compensation of Rs.100,000 to the next of kin of the deceased in a natural disaster.

The NITFB set up in 2006 as a State entity takes care of the under-served segment in insurance.

The Principal Officer of Insurance Board of Sri Lanka and CEO, Union Assurance, Dirk Pereira said the Kosgama fire will not have a major impact on the insurance industry as the government has undertaken to re-build the houses and support the factories destroyed by the fire. Therefore, the insurance industry will have limited responsibility in meeting claims.

COO, Janashakthi General Insurance Ltd., Dayalanie Abeygunawardena said there were no intimations made so far from the Kosgama incident.

CEO, Asian Alliance, Ramal Jasinghe said as far as Asian Alliance was concerned there were no claims so far.

“We do not have a single claim as yet. There may be claims on property later on, but no property or life insurance claims at present,” he said.

Deputy Chairman, Senaratne Insurance Brokers (Pvt) Ltd., Ainsley Alles said the Kosgama armory explosion was another blow to the insurance industry but the Army and the Government went on record stating they would compensate the victims and the damage caused to their properties.

It would be great if the authorities stick to their word as many are uninsured, he said.