Sri Lanka’s National Natural Disaster Insurance Scheme Sanath C. de Silva CEO - NITF National Insurance Trust Fund Act No 28 of 2006 1. This Act may be cited as the National Insurance Trust Fund Act, No. 28 of 2006. 2. The provisions of this Act shall apply in relation to (a) public officers (b) persons retired from public office who are in receipt of a pension from the government (c) officers of the provincial public service Cont…. (g) persons receiving benefits under the Samurdhi Authority Act, No. 30 of 1995 (h) farmers, fishermen and persons engaged in self employment (i) needy persons or group of persons as may from time to time be identified by the Minister by Order published in the Gazette subject to any limitations contained herein; and (j) any property of the government which may be identified from time to time by the Minister by Order published in the Gazette. Key functions of NITF 1. To act as the National Reinsurer (a) To provide 30% compulsory RI (b) Management of National Health Insurance scheme (c) Management of SRCC & Terrorism pool (d) Managing National agricultural insurance scheme (e) Managing National Natural Disaster Scheme (f) To act as a general insurance company to provide insurance to government insurance requirements Nature of Nature • NATURE DOSEN’T NEED US • WE NEED THE NATURE National Insurance Trust Fund Natural Disaster - Definition A sudden event that causes widespread destruction, lots of collateral damages and/or life brought about by forces of such sudden event other than the forces created by the acts of human being National Insurance Trust Fund Ten worst Natural Disasters Death Toll Rank Event Location Date (Estimate) 1 1m to 4 m 1931 China floods China July, Aug, 1931 2 0.9m to 2 m 1887 Yellow River Flood China Sept,Oct, 1887 3 830000 1556 Shaanxi EQ China Jan 23, 1556 4 450000 1976 Tangshan EQ China July 28, 1976 5 375000 1970 Bhola cyclone Bangladesh Nov 13, 1970 6 300000 1839 India cyclone India Nov 25,1839 7 300000 1737 Calcutta cyclone India Oct 7, 1737 2004 Indian Ocean earthquake 8 280000 Indian Ocean December 26, 2004 and tsunami 9 273400 1920 Haiyuan earthquake China December 16, 1920 Byzantine 10 250,000 – 300,000 526 Antioch earthquake May, 526 Empire (Turkey) National Insurance Trust Fund Ten deadliest Natural Disasters since 1900 Death Toll Rank Event Location Date (Estimate) 1 1,000,000 – 4,000,000 1931 China floods China July, 1931 2 450,000 (242,000-655,000) 1976 Tangshan earthquake China July, 1976 East 3 375,000 (250,000-500,000) 1970 Bhola cyclone November, 1970 Pakistan(Bangladesh) 2004 Indian Ocean earthquake 4 280,000 Indian Ocean December 26, 2004 and tsunami 5 273,400 1920 Haiyuan earthquake China December, 1920 Typhone Nina – contributed to 6 229,000 China August 7,1975 Banqiao Dam failure 7 160,000 2010 Haiti earthquake Haiti January 12, 2010 8 145,000 1935 Yangtze river flood China 1935 9 143,000 1923 Great Kanto earthquake Japan September, 1923 10 138,866 1991 Bangladesh cyclone Bangladesh April, 1991 National Insurance Trust Fund Most Expensive Natural Disasters Nature of the Cost No Country Year disaster US $ 1 Earthquake & Tsunami Japan 2011 235 B 2 Kobe earthquake Japan 1995 100 B 3 Hurricane Katrina USA 2005 81 B 4 Northridge Earthquake California US 1994 42 B 5 Sichwan Earthquake China 2008 29 B National Insurance Trust Fund Recent Natural Disaster of Sri Lanka National Insurance Trust Fund Recent Natural Disaster of Sri Lanka National Insurance Trust Fund Recent Natural Disaster of Sri Lanka National Insurance Trust Fund National Natural Disaster Insurance Policy Natural Disaster Coverage Covers lives and properties, specifically all households and small business establishments Any household or business of which annual turnover does not exceed LKR 10 m covered up to 2.5 million rupees each in respect of damages (per event) caused to their property and contents due to cyclones, storm, tempest, flood, landslide, hurricane, earthquake, tsunami and any other similar natural perils up to the aggregate limit of Rs. 12.5 billion per annum excluding, ▪ Drought and ▪ Property damage for large businesses & those having insured with an insurance company. An accidental death cover for all victims of natural disasters will be paid LKR 100,000 each under the personal accident insurance policy. National Insurance Trust Fund National Natural Disaster Insurance Policy cont… Accidental Death Coverage of Fishermen All fishermen registered under Department of Fisheries Covered to the value of Rs.1 Million each in respect of accidental death whilst engaged in fishing. Compensation will be based on the Personal Accident Policy. Cost of rescue operation Any cost to be borne for search and rescue operation of fishermen in distress (whilst engaged in fishing) to be covered subject to annual limit of Rs. 10 Million. National Insurance Trust Fund Emergency relief measures for victims of natural disasters Annual limit for emergency relief expenses will be Rupees One Billion and five hundred million. (Rs. 2.5 billion) For different types and scales of occurrences, there will be sub limits as follows. a. Tsunami or Earthquake Rs.500 Mn b. Major flood/cyclone/similar incident affecting>1000 persons Rs.100 Mn c. Minor flood/cyclone/similar incident affecting <1000 persons Rs.50 Mn d. Landslide Rs.25 Mn National Insurance Trust Fund Accidental Death Coverage of Fishermen All fishermen registered under Department of Fisheries will be covered to the value of Rs.1 Million each in respect of accidental death whilst engaged in fishing. Compensation will be based on the Personal Accident Policy. Cost of rescue operation – any cost to be borne for search and rescue operation of fishermen in distress (whilst engaged in fishing) to be covered subject to annual limit of Rs. 10 Million. National Insurance Trust Fund Annual Limits of coverage Structural damages to property and content in respect of households and small business establishments (structural damages) Annual limit Rs. 12.5 Billion Cost of emergency relief measures Annual limit Rs. 2.5 Billion Total limit of liability in aggregate for the period is Rs. 15 Billion National Insurance Trust Fund NATIONAL NATURAL DISASTER INSURANCE SCHEME Deductible lkr 1Billion Cover available lkr14 Billion National Insurance Trust Fund CLAIMS PAID 2016 May Flood & Landslide Event – Rs. 3,550 Million 2017 May Flood & Landslide Event – Rs.1,700 Million 2017 November High Wind Situation – Rs. 600 Million 2018 May Flood Event – Rs. 300 Million 2018 Other Natural Disaster Events – Rs. 300 Million Financial Impact to NITF on recent Flood in Sri Lanka – 2016 & 2017 (NNDIS) Negative impact on P&L of NITF 2016 – LKR 1.2 2017 – LKR 2.3 National Insurance Trust Fund Impact of Natural Disasters on NNDIS 1. Wide spread damages will accumulate colossal claims to be managed 2. Hit on the reserves 3. Negative impact on cash flow management (liquidity) 4. Solvency margin issues & CAR 5. Increased cost of management & administration expenditure 6. Maintenance of confidence by the reinsured 7. Financial negative results 8. Government procedures & regulatory measures National Insurance Trust Fund Key solutions for NITF on Management of negative impact by Natural Disasters 1. Maintenance of adequate capital to meet unexpected claims 2. Create adequate reserves based on the risk exposure 3. Effective & efficient maximization of reinsurance 4. Maintenance of the balance between the risk exposure of the portfolio against the total capital and reserves 5. To have data on geographic distribution of houses 6. To obtain ART solutions (securitization) Ex – CAT bonds 7. Creation of data base on digital platform National Insurance Trust Fund The Way Forward… 1. To create integrated National Disaster Management Policy in support of Social Security 2. Creation of sound data base on a digital platform 3. To implement an integrated claims management system 4. Continuous monitoring of Financial viability of NNDIS & fine tuning 5. Establishment of Sri Lanka National Disaster Model 6. Risk contingent credit for an operating loan for NNDIS 7. To explore how to improve adaptation & increased resilience 8. Rationalization of Reinsurance on NNDIS National Insurance Trust Fund Any Questions ? National Insurance Trust Fund THANK YOU…. National Insurance Trust Fund.