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Reinsurance premia is unlikely to rise immediately following Easter Sunday terror attacks in Sri Lanka though the industry is assessing the situation, a top official said yesterday.
“The Easter Sunday terror attacks were just one unfortunate incident after almost 10 years of peace, therefore it’s unlikely that the reinsurance premium will go up immediately, unless it happens over a period of time because of gradual increase of security threats,” National Insurance Trust Fund (NITF) Chairman Manjula de Silva told the Daily FT.
Although no assessment has been done yet on the total damage from the blasts on Easter Sunday, the NITF has decided yesterday to provide Rs. 25 million each in advance insurance claims to The Kingsbury and Cinnamon Grand hotels.
“This is just an initial advance insurance claim that would help the two hotels to commence renovation work. The actual claim for both hotels would be much higher,” de Silva added.
He pointed out that major claims that had been informed to the NITF so far included only the two hotels as Shangri-La Colombo was part of an international chain and was directly covered under a global insurance policy.
The NITF however expects additional claims, albeit for smaller amounts, particularly for vehicles that may have been damaged in the explosions that killed nearly 360 and injured over 500 people in eight locations of the country.
He believes over 90% of total claims will be from the two hotels and said they hoped to provide a comprehensive outlook on the impact within next couple of weeks, as it was too early to assess the magnitude of the damages.
Originally established in 1987; the Strike, Riot, Civil Commotion and Terrorism (SRCC&T) cover was absorbed by the NITF in 2006. SRCC&T cover of the NITF provides reinsurance for strikes, riot, civil commotion and terrorism activities as an elective extension to basic insurance policies issued by its member companies. It provides coverage for all property loss or damage caused by strikes, riots, civil commotion and terrorism acts within the geographical limits of Sri Lanka. It currently holds 17 members, all of whom are Sri Lankan insurers.
“We are having a (scheduled) meeting tomorrow [25] on SRCC&T with the insurance industry and hope to discuss further details regarding the latest development,” de Silva said.
A leading general insurer also reiterated it was highly unlikely that the reinsurance premia would increase immediately as NITF signed up for a cover for a period of one year.
When asked if there was a need to reintroduce general insurance terrorism cover, the industry expert pointed out that the product was always available, but saw a natural death post-war as there were no terrorist activities in the country, up until Easter Sunday.
“General insurance terrorism cover was optional for any person or a company to purchase, but many didn’t as there were no terrorist activities in the country during the past 10 years.”
However since Sunday insurance companies have been flooded with inquiries from both corporates and individuals to include general insurance terrorism cover for their existing policies.
Accordingly, 70% of the total market premia of the insurance industry are automobiles and of that around 90% of them are leased or financed.
The industry is confident that it has the capacity and resources to take up the possible risks that could emerge in future.
According to the Willis Towers Watson’s 2018/2019 terrorism pool index Sri Lanka was rated ‘low’ in terms of terrorism risk. (CdeS)
