State re-insurance fund to be made viable through foreign re-insurance protection
Sri Lanka’s sole re-insurance agency, the National Insurance Trust Fund (NITF) is to link up with a foreign re-insurer to get appropriate re-insurance protection with the aim of facing challenges of the increasing natural disasters, with minimum impact on its funds.
The state agency will be calling for international bids in accordance with the Finance Ministry’s procurement procedure to minimise the financial burden on the Government in the event of a major natural disaster like tsunami or earthquake when settling all claims of local insurance companies and policy holders.
Inside of the NITF office
This will be a major initiative of the NITF’s transformation process aimed at improving benefits for over 750,000 public sector employees and their dependents from the problems they face such as health, private, accident, death and unexpected property disaster, Manjula de Silva, the newly-appointed Chairman of the state agency revealed in an interview with the Business Times this week.
Mr. de Silva, FCMA (UK) and a Chartered Global Management Accountant (CGMA), prior to this appointment made by Prime Minister Ranil Wickremasinghe was the Managing Director of HNB Assurance PLC and HNB General Insurance Ltd. Previously, he has held the post of Director General of the Public Enterprises Reforms Commission (PERC) of Sri Lanka.
Mr. de Silva noted that he has accepted the challenge of making the national insurance entity a viable venture using his experience and knowledge giving up his lucrative private sector career mainly to serve the country as he foresees a rapid socio economic development in Sri Lanka under the government’s social market economic policy.
The NITF has to provide re-insurance facility of 30 per cent without delay to settle claims and it is going seek the balance 70 per cent after linking up with a foreign re-insurer.
All insurers are required to offer 30 per cent of all their re-insurance placements related to general insurance business with to NITF.
He pointed out that it is important for the NITF itself to take out some reinsurance cover as the threat of natural disasters cannot be ruled out due to changes in current weather patterns. He disclosed that a new tax called the Crop Insurance Levy is now being charged from banks, finance and insurance companies with a view to covering damages suffered by the farmers due to a series of natural disasters.
The levy amounting to one per cent of these institutions’ after-tax profit has been remitted to an account maintained and administered by the NITF.
Mr. de Silva said that an agricultural credit protection scheme has been proposed for farmers to provide relief for damages caused to their cultivations in natural disasters such as floods and droughts utilising this fund. This will benefit both lenders and borrowers resulting in an expansion of agricultural credit.
He revealed that up to the 2014 Yala season all insurance premia collected from farmers when purchasing subsidised fertiliser has been remitted to the NITF. However this has been changed by a circular issued in December 2014 by the then Secretary to the Treasury Dr. P.B. Jayasundera and this scheme has now been transferred to the Agrarian Insurance Board with effect from the 2014 Maha season.
During 2014, over 100,000 claims amounting to Rs. 1.1 billion have been paid under the Agrahara Health Insurance Scheme, he said adding that these claims were settled directly to the members bank accounts followed up with a SMS alert.
He noted that there is potential to enhance the portfolio of NITF fishermen and self employees as well as tea small holders with its entry into micro insurance to look after the needy whose needs are not adequately served by the commercial insurance markt. The micro insurance sector of the NITF will be further strengthened through properly designed schemes, he revealed.
However he noted that it has no intention to enter the private sector market although it is permitted to carry out all segments of insurance business as a direct insurer.
Mr. de Silva disclosed that although it is mandatory for all public sector institutions to place their insurance with NITF and Sri Lanka Insurance, up to now no action has been taken towards this end. It will penetrate the public sector market soon, he added.