Sri Lanka to make representations against negative risk assessment
[August 11, 2001 - 10:45 GMT]

A delegation from Sri Lanka is due to make representations to the War Risks Rating Committee and Joint War Committee for a reversal of the increased risk assessment made effective from August 6 2001.

Parakrama Dissanayake, Vice Chairman of the Ceylon Association of Ships’ Agents revealed this in an exclusive interview with the PRIU.

“The Minister of Port Development will lead a delegation to meet with the War Risk Rating Committee and the Joint War Committee. Shipping Agents have requested their Principals to inform the Underwriters that the additional premium sought is totally unjustifiable, as the Port is safe for commercial activities. An incident that took place at the airport, which is approximately 22 miles away from the Port of Colombo, should not have a bearing on the Port,” Dissanayake said.

He also said that the Minister of Port Development had appointed an eight-member committee to advise the Minister regarding the action to be taken.

Dissanayake said that the actions of the WRRC could result in an additional war risk surcharge being payable by exporters/importers; Reduction in vessels’ arrival at the port of Colombo and increase in freight rates; Reduction in transhipment containers and that exports would become uncompetitive. “In short, if it continues it will affect the entire economy and would seriously affect unemployment and inflation in this country,” he added.

Full Interview

Question : Recent news reports have indicated that action by the War
Risks Rating Committee to declare the entirety of Sri Lanka as a war risk zone has relegated the country to the ranks of Sierra Leone, Macedonia and Chechnya.  Is this true?

Answer :   There are two Committees that regulate war risk in the London Insurance market and they are the Joint War Committee (JWC) and the War Risk Rating Committee (WRRC). Whilst the JWC regulates the hull market (ships), the WRRC looks after the interest of cargo.  It is correct that the WRRC by their circular dated 6th August 2001 has agreed that for sailings or flights on or after 1600 hrs GMT on Tuesday, 7^th August 2001, the entire country (Sri Lanka) be brought under “held cover”.  The meaning of “held cover” is that underwriters (Insurers) are free to levy an additional premium as war risk.  This directive applies in regard to cargo.

As for ships (hull insurance), Sri Lanka has appeared in the London Market War Risk Trading Warranties for quite some time.  Sri Lanka is featured among the following excluded War Risk Trading Warranties and they are – Iraq, Angola, Israel, Lebanon, Libya, Eritrea, Somalia, Congo, Liberia, Sri Lanka, Sierra Leone, Yugoslavia.

Question : What has caused such a drastic step to be taken?

Answer:    The   recent   attack   on   the Bandaranaike International Airport and the misconception of a web-based report.  The depressed insurance market has compounded the problem.

Question : Can you tell us how this War Risk Rating Committee is constituted?

Answer:    It   constitutes of Underwriters  (Insurers) operating out of London.

Question : What was the classification for Sri Lanka before this declaration was made?

Answer:   In regard to cargo only the North of Sri Lanka (latitude 7 degrees) was under “held cover”.  However, from Tuesday, 7^th August the entirety of Sri Lanka was brought under “held cover”, but this is in regard to cargo, war and strikes risks (marine & air).

More importantly, with hull insurance, Sri Lanka has appeared as a war risk trading area for a considerable period of time.  However, the Underwriters did not consider it necessary to impose an additional premia.  Following the recent incident at the airport, individual hull Underwriters have been charging an additional premium of between 0.10% to 0.25% per port call at the Port of Colombo.

Question : What are the implications of this action by the WRRC?

Answer:    (i) Could result in an additional war risk surcharge being payable by exporters/importers.
                 (ii) Reduction in vessels’ arrival at the port of Colombo and increase in freight rates.
                (iii) Reduction in transhipment containers.
                (iv) Exports would become uncompetitive.
                 (v) In short, if it continues it will affect the entire economy and would seriously affect unemployment and inflation in this country.

Question : Have the effects been already felt in Sri Lanka?

Answer:    Beginning to feel.

Question : How does the WRRC assess the risk normally?

Answer:    Based on information.  It is all about perception. Obviously the country being at war with no signs of peace is not helping our cause.

Question : Is there some action being taken to have this reversed?

Answer:  Yes, the Minister of Port Development will lead a delegation to meet with the War Risk Rating Committee and the Joint War Committee. Shipping Agents have requested their Principals to inform the Underwriters that the additional premium sought is totally unjustifiable, as the Port is safe for commercial activities. An incident that took place at the airport, which is approximately 22 miles away from the Port of Colombo, should not have a bearing on the Port.

Question : What action is being taken and by whom?

Answer:   The Minister has appointed a Crisis Committee comprising of the following to advise the Minister of Ports Development in regard to the action that should be taken.

1. Secretary, Ministry of Ports Development.

2. Admiral Mohan Samarasekara, Chairman, Sri Lanka Ports Authority.

3. Commander, Sri Lanka Navy.

4. Mr. Parakrama Dissanayake, Vice Chairman, Ceylon Association of Ships’ Agents.

5. Mr. Arjuna Hettiarachchi, Chairman, Sri Lanka Association of Vessel Operators.

6. Mr. Upali Wickramaratne, Managing Director, Industrial & Commercial Insurance Brokers.

7. Mr. A. Louis, Assistant General Manager, Sri Lanka Insurance Corporation.

8. Mrs. Nimmie Gunaratne, Managing Director, Aitken Spence Insurance (Agents for Lloyds).

Question : Sri Lanka has to function as a normal country inspite of the war in the North.  What would you recommend to the policy makers as being essential to ensure that the Sri Lankan economy is not adversely affected by such actions by agencies over whom the Sri Lankan people have no control?

Answer:   At times I wonder whether all these actions are being orchestrated by the Western Lobby to put pressure on the Government to start negotiations with the LTTE.  All parties irrespective of their political differences should come together in finding a lasting solution to our ethnic problem. What we are trying to do at this moment is to treat the symptoms, which would only give temporary relief. We must try to eliminate/address the cause of the problem.


 

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Last Updated Date: December 16, 2003 - 1.10 GMT.