NITF Chairman responds

Thursday, 15 June 2017 00:00 - - {{hitsCtrl.values.hits}}

I wish to clarify a couple of statements made in the article titled ‘Recent Disasters expose Government’s true capabilities’ authored by Tudor Wijenayake (Guest Column) in yesterday’s FT.

It claims that Rs. 15 billion is needed to pay for rebuilding damaged houses which is a highly exaggerated amount. After 2016 floods, the total estimated payout for damages to houses stood at Rs. 3.5 billion. When damages to small business premises and emergency relief expenses are added, it comes to a total payout of Rs. 3.8 billion under the scheme. Of this, Rs. 3 billion has been already paid.

This time, the number of houses damaged stands at about 24,000 according to latest available figures compared to 64,000 recorded last year. Hence, the total estimated cost of claims under the scheme is unlikely to exceed Rs. 1.6 b (Rs. 1,600 m).

It is implied in the article that the increase in reinsurance premium is attributed to the delay in obtaining cover. This is not correct as the tender was awarded based on quotes received long before the floods took place. The reasons for the increase are the adverse claims experience in 2016 and the increase in cover from Rs. 10 b in 2016 to Rs. 15 b in 2017.

It is accepted that the renewal could not be completed before the floods were experienced as already reported in Daily FT. The procurement of reinsurance was carried out by a Cabinet Appointed Procurement Committee which acted in conformity with Government procurement guidelines and it was not within the control of NITF. The process commenced nine weeks prior to the renewal date, but unfortunately, it could not be completed in time.

We have realised that the existing Government procurement guidelines are not suitable for the procurement of reinsurance which has to be done in a speedy manner. Hence, a new procurement process dedicated to reinsurance is being formulated and it is hoped to implement it soon after obtaining Cabinet approval.