By Ashwin Hemmathagama
National Insurance Trust Fund (NITF) was created by an Act of Parliament in the year 2006. A subsequent amendment, No 28 of 2007 has empowered NITF to accept compulsory reinsurance cession from local insurance companies. NITF has fixed the compulsory cession at 20% of the general insurance programmes of all insurance companies transacting general insurance business in Sri Lanka. Following are the excerpts of an interview with NITF Chairman, Senaka D. Abeygoonasekera.
Question – Can you elaborate on the potential of the insurance industry in Sri Lanka?
Answer – Insurance industry is growing up fast. Unlike before the atmosphere for business is comfortable now. The problems we had for almost three decades is finished and the country has recovered. There are two factors taken to evaluate an economy; the banking sector and insurance sector. If you take the banking sector, we have a technically advanced system with necessary guidelines and regulations in place for effective and safe operations.
The insurance sector has also bounced back and we have 19 companies in Sri Lanka. So, companies are offering moderate products and services. Directors’ liability policy and all risk electronic equipment policy are some of the new products. In Sri Lanka there is some 70% of the population who are not insured yet. This is a big market, which is yet to be tapped.
Q – In a few days you will be completing the first year in office. What have you done to develop the NITF, which is the sole reinsurer in the country?
A – Our 10 year plan was the start. I have introduced this having discussed with the Board of Directors and after consultation with insurance industry experts. We are looking at establishing a special ward in all state hospitals for Agrahara policy holders and increase its benefits, to increase the gross written premium to Rs.65 billion by 2021, establish a natural disaster fund, put a stop to large amounts of money that leaves Sri Lanka for reinsurance, and establishing of an insurance training school. We have taken the General Insurance Company of India as the role model for all these developments.
Q – How would you retain the large amounts of money that leave Sri Lanka for reinsurance purposes?
A – We are all aware that risk of terrorism is no longer valid for Sri Lanka, civil riots and commotion (SRC) is also minimal as people are educated and they don’t go to the extent of destroying property whether it is state held or private. So, we advise the insurance companies to stop sending money abroad for covering these areas.
We advise them to retain these funds with us, which is backed by the Ministry of Finance and Planning and most importantly the Government of Sri Lanka. We can offer better packages for the insurance companies. End of the day foreign exchange is vital for Sri Lanka and we should not waste it for reinsurance with foreign companies for terrorism or SRC. Sri Lankan Rupee gets strengthened if we retain foreign exchange. Our capacity for reinsurance is increased over Rs.500 million. Please consider us for reinsurance purposes before going for foreign solutions.
Q – During the past how did NITF contribute to the economy of Sri Lanka?
A – Not only me but all past Chairmen have done a good job. When you walk into this office you would have noticed a difference compared to any other private sector insurer. We have minimised the costs. NITF is manned by a staff of 160. We are occupying a converted warehouse and have only three motor vehicles, which is adequate. So, for 2011 budget NITF provided Rs.2 billion as consolidated funds to the Government. In March 2011 we gave another Rs.1 billion.
Q – What are the key products you offer for the state sector?
A – Although NITF is a reinsurer we have a few captive covers for the general policy sector. It is mandatory for all government servants to be insured, which is the Agrahara policy. All migrant workers are insured with us, which is also mandatory. In addition to these some of the state projects as well as assets are insured with us. Agrahara comes to s standstill when you reach the age of 60. What I am looking at is to continue the benefits in the policyholder’s retirement with an additional payment.