prompts insurance re-rating
Sri Lanka faces the prospect of its insurance risk being re-rated
by international insurers to cover earthquakes resulting in higher
came as the business community called for a moratorium on political
activity, the apparel industry appealed for duty free access to
key markets and the government began talks with the US on long term
support for the rebuilding effort.
a billion dollars worth of aid has already been pledged to help
with immediate relief work as well as reconstruction of damaged
infrastructure. Damage has been limited to infrastructure, tourism
and fisheries with other sectors, especially the crucial agriculture
sector, being spared.
loss adjusters now in the island on behalf of re-insurers to evaluate
insurance claims resulting from the damage caused by the tsunami
will also re-rate the country taking into consideration the new
risk of earthquakes. Until now Sri Lanka was not considered to be
within an earthquake prone region but analysts said this may change
Jayaratne, managing director, Eagle Insurance told journalists last
week that re-insurers are re-assessing the country risk for earthquakes
and studying the situation with scientists.
said a re-rating will swell insurance premiums up to 30 to 40 percent.
"After the island's main airport was attacked in 2001 there
was an increase of 20 percent on ships and aircraft premiums and
it will be the same scenario for earthquakes," an analyst said.
Abeyesekera, CEO, Asha Phillip Securities Ltd., said if the country
is re-rated for earthquakes and other possible disaster covers,
the premiums would go up considerably.
Piyasena, Assistant Vice President, Fitch Rating Lanka said though
the premium cost will inflate, it is still uncertain whether it
will be added on to policies this year, because the reinsurance
renewal contracts have been prepared.
insurance plans for 2005 have already been drafted by the insurers
with their re-insurers," he said, adding the higher premiums
will kick in by next year. Presidential advisor and chairman of
the Task Force to Rebuild the Nation (TAFREN) Mano Tittawella said
the government was holding talks with lenders on debt relief and
that aid funds pledged by donors amount to over a billion dollars.
is an opportunity for Sri Lanka to now put in place new infrastructure
and systems that will meet international standards and attract significant
long term investments, both locally and internationally," Tittawella
told a news conference.
about the growing US military role in helping Sri Lanka recover
from the disaster, Tittawella said the US was playing a significant
role in disaster relief and that talks had begun on long-term US
support for the reconstruction effort.
US has made available to Sri Lanka equipment and logistical support.
The US taking a very active role in clearing debris and the immediate
repair of roads and some 30 bridges. This type of assistance is
crucial for the rest of the relief work to take place."
US official said talks had begun on long-term support. Preliminary
estimates of the damage caused by the tsunami has indicated that
the cost of relief, rehabilitation and reconstruction this year
alone will amount to $1.3-1.5 billion, Central Bank governor Sunil
Mendis said last week.
the cost for 2005 but more funds would be needed in the next two
years," he told a news conference. "This means not only
for repairs but improvement to infrastructure as well."
said the reconstruction effort will kick off by January 15 and while
most of the damage, such as to houses, could be repaired within
six months, infrastructure that was destroyed like the southern
railway line would take longer to rebuild.
to latest figures, 93,507 houses were totally wrecked while 21,700
were partially damaged in the tsunamis. Central Bank governor Sunil
Mendis said the cost of housing and township reconstruction alone
will amount to about $900 million.
was set up to help co-ordinate the reconstruction work with donors,
line ministries and other organisations and would help implement
the government's draft action plan.
its composition was criticised by Surath Wickremesinghe, president
of the Chamber of Construction Industries Sri Lanka. "It is
not a properly formulated one because it consists mostly of corporate
sector personalities. If it is to be a forward-oriented task force
they must work along with a multi-disciplinary professional group."
draft bill would be presented to parliament soon to convert the
task force into the Authority for Rebuilding the Nation. Meanwhile,
the government has called on America and Europe to remove punitive
tariffs imposed on apparel exports in order to help the country
rebuild after the tsunami disaster.
exports to the US, the biggest market, face a 20 percent import
tariff while in the EU the duty is 12 percent. The industry is seeking
duty free access to compete with cheaper exports from China, which
is expected to increase its share of the world's clothing market
to 50 percent with the phasing out of textile quotas on December
Joint Business Forum has called for a "united concerted effort"
from all citizens and more importantly, the political leadership,
to ensure that the country is brought back to normal as soon as
President should endeavour to form a Government of National Reconciliation
and Reconstruction," J-Biz chairman Kingsley Bernard said in
a statement. "All political parties (must) voluntarily agree
to place a moratorium on all political activities during the first
half of 2005."
the damage caused by the tsunami will affect economic growth in
the first two quarters of 2005, the huge amount of aid pledge by
donors and the reconstruction effort will give a fillip to the economy,
ease pressure on the rupee and help improve the balance of payments.
situation is much better," Central Bank governor Sunil Mendis
said. "There's a huge amount of aid pledged by donors which
has already had an impact on the exchange rate. So the rupee has
appreciated in the last few days and we expect it to appreciate
said exporters need not fear their competitiveness will be eroded
as the effective exchange rate is down by about three percent while
competing currencies have appreciated against the dollar.
is ready to grant an emergency loan of around $150 million which
will be available in four weeks or so and defer current loan repayments
which was $350 million this year, Mendis said. "This will help
the balance of payments. It will have a big impact by the year's
outflow in the first half of the year on account of petroleum imports
will substantially be reduced because of lower oil prices and more
availability of hydropower. "We see an improvement in oil prices
which have declined in recent times. The CPC import price for September
was $42.83 per barrel, in November $38.33 and it should be down
in December too."
hydro-reservoir capacity which was 33.5 percent at end-2003 has
gone up to 61.5 percent which again should help the economy. "About
60 percent of the oil imported is used for thermal power generation,"
Mendis said. "So we need to import less oil this year."
fisheries and tourism sectors are expected to bounce back relatively
quickly but rebuilding infrastructure, which was badly affected,
will take longer, at least 1-2 years, Mendis said. "It is important
to remember that other sectors like tea, rubber and apparels were
not affected. So there's very minimal impact on export revenue,"
Minister Chandrasena Wijesinghe said according to a rough estimate
the fishing industry had suffered a loss of Rs 49 billion in terms
of destroyed boats and damage to harbours.
closely involved with farmers said the tsunami does not appear to
have inflicted much damage on agriculture in the east since the
'rice belt' is about 5-6 km inland. "Initial reports were a
little worrying but the impact on agriculture appears to be very
marginal," said Hayleys director Rizvi Zaheed. "Even in
the south the effect on agriculture is not that great."
from company officials who visited affected areas and from dealers
indicate that most of the agricultural land was not affected and
the damage confined to only coastal areas. Floods caused by recent
heavy rains had inundated significant areas of paddy land in Amparai
which accounts for about 10 percent of the current Maha season but
with the crop fairly mature no lasting damage is anticipated if
the waters recede now.