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| Thursday, 27 January 2005 |
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Tsunami insurance claims could top Rs. 15 billion by Channa Kasturisinghe With gross insurance claims estimated between Rs.12 and 15 billion as a result of the tsunami the country's insurance companies are facing the challenge of minimizing the possible long term impact on the industry by way of depletion of capital and higher insurance premiums which would be demanded by re-insurers. Buddhika Piyasena of Fitch Ratings Lanka said yesterday that although the insurance losses due to the unexpected disaster is low compared to economic losses the industry will have to focus on good underwriting, a sound re-insurance program and increasing financial strength in order to face a future crisis. He was addressing a seminar on `Sri Lankan Insurance Market and the Impact of the Asian Tsunami on the Industry' in Colombo. The event was organised by CFA Sri Lanka, a member society of the CFA Institute, USA. Piyasena said that the net insurance claims would be about 10 percent of the gross claims and the actual amount will depend on factors such as the soundness of the re-insurance programs and level of retention. He said he ex-gratia payments are expected to be about one billion rupees. However, he said that the companies are not facing an immediate threat of insolvency. He said that the regulator, Insurance Board of Sri Lanka should address the need for risk and size-reflective capital requirements and focus on a mechanism to assess the financial strengths of the insurance companies in order to effectively face similar issues in the future. "The tsunami disaster has also taught a lesson to the general public that they should to assess the financial strengths of the insurance companies before going for policies," Piyasena said. Piyasena said that Sri Lanka's insurance losses are comparatively low due to low insurance penetration and less industrial and commercial activity in the country. Another reason is that our infrastructure including highways are not insured which would otherwise have increased the burden on the insurance industry. Non availability or exclusion of relevant perils and additional covers such as loss of profit too has reduced the impact on the industry," Piyasena said. |
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