By Paneetha Ameresekere
National Insurance Trust Fund (NITF), successor to the Strike, Riot, Civil Commotion and Terrorism Fund (SRCC&T Fund) was set-up four years ago as a reinsurer to the local insurance industry.
An unregulated body (with the possible exception of being regulated by the Auditor General (AG), in the unlikelihood event his role transcends beyond the ambit of merely auditing government or agents of the government’s, such as the NITF’s accounts, to that of also monitoring their performances), NITF functions under the Finance Ministry.
Insurers are expected to cede 100% of their Strike, Riot, Civil Commotion and Terrorism reinsurance cover/s to the Fund. Additionally, under a ruling introduced two years ago, insurers are also expected to cede 50% of their other reinsurance covers, limited to 20% for the present, also with the NITF.
Unlike its predecessor (SRCC& T Fund), NITF is not managed by the industry. It’s solely managed or governed by the Finance Ministry, a ministry that comes under President Mahinda Rajapaksa. Therefore the industry is not privy to its accounts, what comes in and what goes out, which reinsurance claim is paid and which claim is not honoured, and so on.
However in the case of SRCC & T Fund, set up in the aftermath of the July 1983 riots, after foreign reinsurers refused to pay similar claims on the grounds that appropriate reinsurance covers had not been obtained by the industry, which then was a duopoly, comprising the state controlled Insurance Corporation of Sri Lanka, predecessor to Sri Lanka Insurance Corporation Ltd. and the then National Insurance Corporation, which was subsequently privatized in 2001; and consequent to the privatization of the industry in 1987, it was the industry which managed the state of affairs of the SRCC & T Fund, scrutinized claims, and honoured such claims which were considered bona fide, while not paying those that were considered mala fide.
This operation went on smoothly, without a hassle, until the advent of the NITF.
The industry has no hand in its operations, it does not know which claims are paid, though, individual members feel the pinch when their claims are not being honoured; it’s not run professionally, letters sent by the industry to the NITF go unanswered and no one knows where the portfolio of NITF’s funds are invested in, by and large causing an unsavoury situation to the industry.
On a rule of thumb, NITF’s portfolio is valued at between Rs. 10-20 billion.
There have also been reports that certain claims emanating from those considered opponents of the Government, whether they be individuals or institutions, are either being delayed or not being honoured at all by the NITF, where, even the nomenclatures of coverages already obtained and for which premia has been paid, but when claims against those are being made, the “covers” are being changed according to the whims and fancies of amateurs, but who wield enormous political and military clout in government, as a ruse to avoid honouring such claims, due to personal vendettas, and/or because they don’t toe the government line, or for that matter, construed as being opponents of the government, bringing to question that which is guaranteed by the Constitution, that all are equal before the law.
Additionally, in regard to “normal” reinsurance covers, ie those “covers” that fall outside the ambit of Strike, Riot, Civil Commotion and Terrorism cover/s, of which 20% of such covers are also needed to be ceded to the NITF by law, the industry is finding it difficult to get a response for such cash calls made to the NITF, particularly in relation to recent flood claims. Another example of NITF’s unprofessionalism is where the insuring public in the North and East (NE), who, only from last year began to enjoy the fruits of peace after 26 years of war, had been told by the NITF, that their claims could not be honoured, if such claims had been lodged six months after the incident.
However, saner counsel prevailed, and those aggrieved insurees claims had had been honoured directly by the NITF at a function held recently for them, but keeping the insurers, with whom they had originally insured with, virtually in the dark.
Not the proper way to go by any standards.
And, no one seems to know, of those insurees from the NE, as to whose reinsurance claims were honoured, and whose were not, thus going against the principle of financial transparency, an important ingredient to build confidence in the system, whether local or foreign, particularly so in the context of the latter, where the Government is in an all out drive to attract foreign investments, especially so in the tourism sector.
The disenchantment of the insuring public, when such just claims are not honoured, is directed at the insurance industry, and not at the NITF. It will therefore not be surprising, that if such acts of omission and commission, committed by the NITF continue to go unchecked, that the public would lose confidence in the insurance industry, a consequence that would be disastrous not only to the industry, but to the country itself.
And what about NITF creating a dubious world first by being both a reinsurer as well as an insurer, the latter mantle being added on to its portfolio of duties last year, but, unregulated by the insurance regulator, the Insurance Board of Sri Lanka? Space, regrettably doesn’t permit me to delve on that subject as well.
One reaps what one sows.