NITF estimates Rs. 825 m initial insurance bill for flood disaster

• Officials estimate initial cost of insurance payments for houses, businesses and deaths 
• Final toll expected to be higher, awaits Ministry clearance to commence payments
• Compilation of damages time-consuming, flood-affected can get forms from GS 
• 2016 compensation from NITF Rs. 3.9 b, with Rs.5 b to private insurers   

By Uditha Jayasinghe 

The National Insurance Trust Fund (NITF) Board estimates that the damage to houses and small businesses inflicted by the floods could add up to Rs. 825 million, with officials expecting payments to be rolled out in the next few weeks. 

NITF Chief Executive Officer Sarath de Silva confirmed to Daily FT they are awaiting instructions from the Disaster Management Relief Centre to release funds to affected households. 

The Disaster Management Centre (DMC), which is tasked with calculating the number of houses damaged, had counted 2,313 houses as fully damaged while another 12,529 have been partially damaged. 

As many as 717,622 people had been affected from 184,265 families, according to the statistics available on the DMC website.   The number of dead stood at 212 with 79 missing and 131 injured.

“All affected families have to meet the Grama Sevaka of their area to get a claim form. Once the form has been submitted it will be checked by the Divisional Secretaries and others and a full list will be formulated by the Disaster Management Ministry. We will commence payment once the Ministry gives us the go ahead,” de Silva said. 

Other officials engaged in providing relief acknowledged that compiling the lists and checking them would take more time as people are still trickling back to their villages and homes. “Many of them are traumatised and getting the system organised will take time,” admitted a public official speaking on condition of anonymity. 

The initial bill of Rs. 825 million is likely to increase, as estimates indicate the damage could be higher than the 2016 tragedy, which resulted in the NITF paying out over Rs. 3.9 billion to thousands of households and small businesses. In addition, about Rs. 5 billion was paid off by the NITF to claims made by insurance companies, which NITF had reinsured.    

In April 2016 the Government decided to insure the entire country against natural disasters, which included floods, earthquakes and landslides. Under this measure the Government obtained a Rs. 10 billion coverage, which was increased to Rs. 15 billion in 2017. All uninsured houses, small businesses with less than Rs. 10 million turnover per annum and funds for emergency relief measures are included in the scheme. For each death the insurance pays Rs. 100,000 and the blanket cover also includes Rs. 10,000 per each acre of paddy affected in a flood or drought. 

The insurance coverage was taken out by the Treasury and NITF has reinsured this scheme on behalf of the Government. The NITF is also responsible for 30% of reinsurance by private insurance companies. Sri Lanka is considered to be one of the first countries in Asia to have such comprehensive coverage and it is expected to reduce the burden on the Government’s consolidated fund.    

Last week the Government picked global catastrophe reinsurance specialist Renaissance Re, with a total cover of Rs. 15 billion, to be the lead reinsurer of its State-run National Insurance Trust Fund (NITF), which provides reinsurance cover for Sri Lanka. 

The ‘A’-rated Renaissance Re of Singapore submitted the lead terms in the winning bid accepted by the Government from Strategic Insurance Brokers Ltd, backed by Crescent Global South Asia Ltd, at a cost of Rs. 816,750,000 as annual premium payable. Cabinet green lighted the selection this week after it was presented by acting National Policies and Economic Affairs Minister Niroshan Perera.