SL to Request Lloyds to Reduce Additional War Risk Premium Currently Charged by Global Insurance Industry

29th November 2009, www.dailymirror.lk

A delegation consisting of five members will be flying to London on Wednesday (December 2) to once again meet Lloyds of London to request a reduction of the additional war risk premium currently charged by the global insurance industry.

Sri Lanka still remains on the list of war risk countries classified by Lloyds of London and is liable for additional insurance premium as a result and Sri Lanka has been struggling unsuccessfully to be de-listed from the held cover status since it was imposed immediately after the attack on the Katunayake Airport on 24 July 2001.

Currently Sri Lanka's risk level is categorised by Exclusive Analysis in their web site (JCC Cargo Watchlist) as HIGH (2.9). The insurance claim as a consequence to the attack was US$ 576million which is the highest in the history of aviation insurance, equivalent to 16 years of total premium collected by the aviation insurance industry.

It is ironical that a member of the original delegation led by Ronnie De Mel, the then Minister of Shipping, which went to meet the Lloyds of London in 2001 is also a member of the delegation going again next month.

In between, many delegations of officials have gone for meetings with Lloyds of London and there was also regular contact with the High Commissioners Office in London, but all with little success. The held cover status continued during the ceasefire agreement and still continues more than six months after the leadership of the LTTE has been eliminated.

In 2001 as requested by Lloyds of London, the Government appointed a security company called Trident to carry out an external audit and after that the company was reportedly closed under a cloud before it could achieve the given task of removing Sri Lanka from the war risk list.

Subsequently a joint venture between Bagnold and Sathsindhu was appointed in 2004 and their work was inadvertently stalled by the Government, apparently without giving reasons.

According to the Chairman of the Insurance Board of Sri Lanka Udayasiri Kariyawasam, the war risk premium amounts to a huge extra payment of Rs. 20 billion per year. If this estimate is accurate then the true cost so far is a staggering Rs. 180 billion. Continuous delays in resolving this issue will result in costs further mounting, adding on to massive losses.

Analysts wonder when continued visits by officials for nine years failed, whether continuing such visits will deliver results now.

The Joint Apparel Association Forum (JAAF) report submitted to the committee which was appointed by the Secretary of Defense Ministry to resolve this matter states: "The Government of Sri Lanka should obtain the services of an independent security assessment company with international recognition to prepare a report on behalf of the GOSL. This is important to balance out and neutralise any submissions that would be made by the exclusive analysts of Lloyds. This would mitigate any biased submissions."

While the committee has not paid much attention to this proposal, analysts point out that the Joint War Committee of Lloyds of London go by the reports submitted to them by their Security Consultants such as Exclusive Analysis Ltd and Aegis Defense Services Ltd and it is critical to professionally counter such reports by qualified and a recognised security company, as recommended by JAAF.