Though the immediate healthcare costs of the COVID-19 crisis were borne by the government in a difficult economic environment there were considerable expenses incurred due to business closure.
These expenses put much strain on business entities and as such the need for the provision of business interruption insurance was discussed at a webinar organized by the Ceylon Chamber of Commerce and Fairfirst Insurance on August 11.
Chief Technical Officer Ceylinco Insurance Dr. Jagath Alwis said that business continuity insurance was commonplace in more developed markets.
Through such insurance schemes, companies can pay a proportionately small premium and protect their income streams during instances when their normal business operations are impacted. Dr. Alwis noted that insurance could be obtained to protect operational revenue, rental income, supplier failure, and customer failure.
During the recent floods in Thailand, there was damage to manufacturers of components for electronics that had an impact on supply chains across national boundaries. Large multinational corporations were able to mitigate the impact through the purchasing of business continuity insurance.
Dr. Alwis said that there are insurance schemes available in foreign markets that would have covered salaries and bank interest due to closures caused by the pandemic. The structuring of such schemes can be through the government with for instance mandatory unemployment contributions or through private players. Dr. Alwis noted that few businesses in Sri Lanka had coverage for the perishability of their stocks. Dr. Alwis noted that there was little appetite by the insurance sector for coverage and the premiums were quite high.
General Manager Underwriting Fairfirst Insurance Priyantha Perera noted that though the General Insurance Corporation of India which is highly involved in reinsurance schemes in Sri Lanka was downgraded, they had assurances that the business would remain operational. Chief Technical Officer Softlogic Life Pranama Perera said that the COVID crisis was difficult to insure as there weren’t long term statistics on the impact. The industry requires long-run data to be able to accurately price their products. Panelists noted that Life Insurance penetration in Sri Lanka was very low.
Panelists thanked the government for recognizing insurance as an essential service during the pandemic helping both clients and businesses in the industry. CEO Ceylon Chamber of Commerce Manjula De Silva noted that the industry as they did during the 2004 tsunami has gone beyond their legal obligation and covered policyholders for the COVID crisis.
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