Insurance industry readies for extreme weather | Sunday Observer

Insurance industry readies for extreme weather

Insurance companies said they are geared to deal with any natural disasters that may trigger particularly from the current onset of the South West monsoon that is expected to intensify in the coming days.

The country had been battered by flash floods for three consecutive years from 2014 to 2017 (and drought in between) that devastated paddy and a number of other commercial crops in addition to wreaking havoc on a large number of homes and the livelihoods of people.

National Insurance Trust Fund (NITF) Chairman Manjula de Silva said the NITF has the National Natural Disaster Insurance Scheme (NNDIS) to deal with any damages caused by adverse weather related natural disasters. All uninsured houses and business premises of micro and small enterprises (with an annual turnover of less than Rs. 10 million) are covered under this scheme. There will be compensation for loss of lives too. Cost of providing food and shelter to displaced people is also covered. Total Insurance cover available amounts to Rs. 15 billion and the premium is paid by the Government to NITF which manages the scheme. Director Institutional Business, Fairfirst Insurance, Ramal Jasinghe said the insurance industry as well as the insuring public has been made aware of the disasters that follow the monsoon seasons, ever since the tsunami hit in 2004. Therefore, most business and commercial enterprises, and some dwelling houses have taken insurance protection against what the industry refers to as, ‘Natural Perils’, since that time. What the industry did see was, however, was that due to a decade of peace in the country it was unprepared for terrorism - hence most business and commercial enterprises didn’t have this protection due to the prevailing peaceful situation that existed prior to April 21.

It is fair to comment that, since the tsunami of 2004, the insurance industry and many State and non government agencies and organizations have developed and have since expanded their role in creating awareness and built the required infrastructure to warn of and mitigate the disasters that follow a Natural Peril (such as flooding, inundation of roads, damage to property due to floods and lightning).

He said since 2010, the insurance industry has seen a drop in claims arising from natural disasters. This is due to Urban Councils and the role of Government and Local Government bodies in ensuring environmental protection and addressing the risk of environmental pollution by introducing new laws, faster and more efficient litigation against offenders, constant inspection and vigilance on households particularly with regard to garbage disposal, on business enterprises and factories, combined with the repair and development of the drainage and sewage systems along with the development of the Urban and Rural infrastructure.

The Disaster Management Center (DMC) have been effective in mobilising people away from disaster prone areas and most importantly through its State of the Art early warning systems (and with the help of the rescue teams of the three forces and the police), have managed to effectively avert many a human disaster, hence saving lives and property.

“I feel that the role of the municipal and building authorities is vital in ensuring that tenvironmental protection conditions are met before approving plans and Certificates of Conformity (COCs) for new buildings, as Sri Lanka has been identified by seismologists as being in the Red Zone for earthquakes and seismic activity. It is in this backdrop that the existing rules and regulations be exercised strictly and that proper enforcement is carried out at all times, to ensure the mitigation of risks thus enabling equitable Insurance Premium rating for such risks resulting from a natural disaster,” Jasinghe said.

He said the insurance industry including the National Insurance Trust Fund (NITF) which acts as a reinsurer to the local insurance industry, is also, through a mechanism of Retrocession, reinsured, as a measure of protection and security to ensure the capacity of these insurance companies to disburse claims in the event of a Natural Peril or a similar disaster.

It is against this backdrop that the Insurance Industry along with the Disaster Management Center (DMC), the construction industry, the State and Local Government bodies, Pradeshiya Sabhas, the environmental agencies need to work together to enable the industry to provide adequate and affordable insurance protection to minimise risks, and in the case of a peril, to provide adequate protection for recovery.

“It is important to note that the international reinsurance market could tighten up on its premium rates, for such perils, if adequate preventive steps are not taken by the aforementioned actors, thereby rendering insurance cover too expensive to most households and business enterprises. It would also cause a further strain on the Government to rebuild damaged properties and infrastructure and also cost human lives,” Jasinghe said. 

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