the sunday morning businessSunday, January 6, 2019

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INSIGHT/NEWS

Sri Lanka’s National Natural Disaster Insurance Scheme (NNDIS) was one of the main topics taken up at this year’s 2nd lnsuResilience Global Partnership Forum which took place in Katowice, Poland, during the UN Climate Conference (COP24) last month.

On 10 December, the National Insurance Trust Fund (NITF) participated at this forum held on the theme “Paving the way to effective risk financing solutions”. The forum is the annual meeting of the lnsuResilience Global Partnership for Climate and Disaster Risk Finance and Insurance Solutions (IGP). The two co-chairs of the lnsuResilience Global Partnership High-Level Consultative Group, namely Republic of the Marshall Islands Minister of Finance Brenson Wase and Parliamentary State Secretary to the German Federal Minister for Economic Cooperation and Development (BMZ) Dr. Maria Flachsbarth, graced the occasion which was well attended by over 200 representatives of lnsuResilience member institutions, including the European Union.

Approaches to promote climate and disaster risk finance and insurance solutions in Pakistan, Colombia, Sri Lanka, Zambia, and West Africa were discussed in five different sessions and in the Sri Lanka session Barbara Schnell (KfW Sector Policy Director) invited representatives of the National Insurance Trust Fund of Sri Lanka and representatives of the insurance sector to discuss innovative solutions to better protect the most vulnerable segment of the population of Sri Lanka against the consequences of climate change through the national insurance scheme.

It is now globally recognised that Sri Lanka is one of the five countries most heavily affected by natural disasters. In 2016, the Government of Sri Lanka established the National Natural Disaster Insurance Scheme (NNDIS) to protect its uninsured population against natural disasters. Since its inception, the NNDIS has faced major sustainability challenges.

At the Sri Lanka session, NITF CEO Sanath de Silva explained in detail the major challenges the NITF faced since the implementation of the NNDIS in 2016 and expressed the wish to improve the scheme. The NNDIS was established to provide relief to the uninsured public affected by natural disasters without being a burden to the General Treasury, offering cover for damages to houses, business premises of micro and small enterprises (with an annual turnover of less than Rs. 10 million), loss of lives and emergency relief expenses to take care of the displaced persons

attributable to all types of natural catastrophes.

During the two years ending 31 March, 2018, claims exceeding Rs. 5.5 billion were paid by NITF under this scheme with the Treasury paying insurance premiums of Rs. 800 million to NITF for this period. While the Government and the uninsured public have greatly benefitted by this scheme, it has exerted pressure on the NITF due to the mismatch between the premium paid by the Government and the cost of reinsurance cover needed to protect its balance sheet.

CEO of Global Business Counselling and advisor to NITF, engaged by KfW, Chandri Gunawardhana presented the vulnerabilities of Sri Lanka to natural disasters and the overall measures in place to meet such challenges, whilst Insurance Development Forum (IDF) Pilot Programmes Working Group Chair and Head of Munich Re’s Public Sector Business Development (PSBD) Initiatives Michael Roth, reacting to the presented case and its challenges, proposed the “Public

Private Partnership” solution approach of the working group for the Sri Lanka pilot and recourse to the expertise of the private sector.

After the Sri Lanka session, Sanath de Silva stated: “It was a great opportunity for NITF and Sri Lanka to showcase the National Natural Disaster Insurance Scheme (NNDIS) as a pioneering initiative to use an insurance-based disaster risk financing solution at the country level at a global forum of this level of importance. It is the first-ever model in the world where the Government has obtained an insurance blanket cover against natural disasters to protect uninsured houses and small businesses in the entire country.”

NITF Chairman Manjula de Silva added: “The continuity of NNDIS is of critical importance to the disaster prone public and the Government of Sri Lanka which is called upon to support the uninsured public, typically the most affected by natural disasters which are increasingly more frequent and intense. NITF greatly appreciates the role played by KfW as implementer of the InsuResilience Solutions Fund (ISF) and the Insurance Development Forum (IDF) for not only providing this opportunity to NITF but also for offering to extend their continued support to strengthen NNDIS to become a more sustainable and resilient programme.”

Launched at the 2017 UN Climate Conference in Bonn (COP23), the InsuResilience Global Partnership aims to strengthen the resilience of developing countries and to protect the lives and livelihoods of poor and vulnerable people against the impacts of disasters. The central objective of the Partnership is to enable timely and reliable post-disaster response and to better prepare for climate and disaster risks. Through the use of climate and disaster risk finance and insurance solutions the Partnership aims to reduce humanitarian impacts, help poor and vulnerable people recover faster, increase local adaptive capacity and strengthen local resilience. This complements ongoing efforts in countries to avert, minimise, and address climate and disaster risks, and the multi-stakeholder initiative brings together representatives from governments, civil society, international organisations, the private sector, and the academic world. KfW’s InsuResilience Solutions Fund (ISF) finances the development of innovative and sustainable climate risk insurance products in developing countries and emerging economies contributing to the overall goal of the IGP. The ISF is implemented by KfW on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ).

NITF presents National Natural Disaster Insurance Scheme at COP24 in Poland

NITF CEO Sanath de Silva

ICT is considered as one of the key pillars of future growth for the Sri Lankan economy. Over the past five years, until 2017, the sector has grown by an impressive 120%, and is recognised as one of the highest growth areas in the national economy.

Total earnings from the ICT sector amounted to $ 920 million in 2017, demonstrating an 8% growth from 2016. The sector is the fifth largest export segment and is expected to rise in the rankings to settle amongst the top three segments by 2022. The national vision for the IT/business process management sector is to rise to revenue of $ 5 billion by 2022, providing direct jobs to

200,000 people and stimulating enterprise through 1,000 start-ups.

Sri Lanka’s IT industry comprises of an array of service providers who demonstrate global skill sets and competencies. According to SLASSCOM (Sri Lanka Association of Software and Service Companies), the industry consists of approximately 130 registered companies, composed of a range of large, medium, and small enterprises. However, it is estimated that the industry in fact comprises of over 300 operators and employs over 60,000 people.

International recognitionLong overshadowed by the success of

neighbouring India’s IT industry, Sri Lanka’s IT industry has been progressing below the radar, with the growth of a significant knowledge-based service industry that has been catering to global blue-chip clients of the likes of the London Stock Exchange, Google, Microsoft, JPMorgan, Santander Bank, Nokia, Lenovo, and Emirates Airlines, amongst many others.

Importantly, the industry extends well beyond the traditional software development to large-scale call centres and business/transaction processing centres including the offer of analytics, offshore legal services, medical diagnostics, telecommunications, banking, financial services and insurance (BFSI), and software testing.

The consulting giant A.T. Kerney’s Global

Services Location Index (GSLI) identifies the top 50 countries for outsourcing globally. The GSLI, first established in 2004, analyses and ranks the top 50 countries worldwide as the best destinations for providing outsourcing services, including IT services and support, contact centres, and back-office support.

Each country’s score is composed of a weighted combination of relative scores on 43 measurements, which are grouped into three categories: financial attractiveness, people skills and ability, and business environment. In 2017, Sri Lanka was ranked 11th among the top 50 global outsourcing destinations by A.T. Kearney, moving up three slots from 2016, and is emerging as a global IT Business Process Outsourcing (BPO) destination of choice in a number of key areas.

Scoring on the areas of agility, high value to cost, a niche talent base, strong ethics, cultural adaptability, and superior quality of life as a destination for doing business, Sri Lanka is viewed as a strong contender. According to the World Bank, Sri Lanka’s relatively low labour costs but high skill sets compared to other BPO destinations are primarily key attractions of the destination in attracting operations of companies such as HSBC, RR Donnelley, Sysco Labs, Astron, 3SG, Hellocorp, Innodata, and WNS Global Services, all of whom have set up call centres or BPO operations in Sri Lanka.

Additionally, many global companies

look towards Sri Lanka as a feasible and sustainable destination for the development of software. Local ICT companies export software products and services to several regions, largely to North America, the EU, Australia, East Asia, the Middle East, Africa, and the Nordic region. Moreover, Sri Lanka acts as an offshore development centre for Fortune 500 companies in the US, Ireland, the UK, Australasia, and Sweden, and joint ventures based in Sweden, Norway, the US, and Japan among others.

Treaties and conventionsEnhancing the nation’s competitive

advantage in the eye of the global market, Sri Lanka was the first South Asian nation to become a state party to the Budapest Convention on Cybercrime – a process led and facilitated by the Information and Communication Technology Agency (ICTA) of Sri Lanka.

The Electronic Transaction Act was amended to fall in line with the UN Electronic Communications Convention – another first for South Asia, which provides a major boost to commerce, business, and trade in the digital era. These moves have not only strengthened the role of the IT industry in bilateral trade but have also fostered confidence in cross-border transactions with the alignment of the national legislation on par with global markets.

Challenges for growthDespite the positive outlook, the

challenges that confront the local ICT industry cannot be ignored. Retaining talent in the face of the growing appeal of migration coupled with concerns about capacity are notable among the issues that persist.

Ensuring that sufficient skilled resources are entering the market to fuel industry growth requires investment in the youth and creating awareness about opportunities in ICT, and amongst their influencers, about the potential of the industry. This requires the industry to address areas such as diversity and inclusion, to ensure a healthy and sustainable pipeline of talent.

There are also deficiencies in the form of “specific skill gaps” which have spurred an ongoing discussion among all relevant stakeholders on the possibility of addressing these skills gaps through bilateral trade agreements with necessary safeguards to ensure that the local skill base is unaffected.

With less than 5% of the annual intake at national universities opting for ICT, each year, there is an urgent requirement for more numbers to join the industry. Industry leaders are also exponents of the belief that ICT could lend itself to a more women-friendly working environment with flexible hours coupled with a global drive to encourage more females to be at the decision-making level of the industry. The possibility of improving the gender balance in the industry would create considerable capacity and facilitate organic growth.

ICT trending as a top earning industry

Central Depository Systems (Pvt.) Ltd. (CDS), a fully owned subsidiary of the Colombo Stock Exchange (CSE), has bolstered its client portfolio in corporate action services and registrar services with the addition of Distilleries Company of Sri Lanka PLC (DCSL) and Melstacorp PLC (Melsta).

CDS launched these services in mid-2018 and is presently offering services to 18 clients represented in eight industries. As part of the agreements, CDS will now provide registrar service coverage for DSCL and Melsta; in the areas of maintaining the share ledger, cash/script dividend, right issues, share sub-divisions, capitalisation

of reserves, and other corporate actions.

The move by CDS to introduce new services comes as a number of depositaries around the world are expanding on their traditional role to be more customer-facing, by offering new services and leveraging on technology.

Commenting on the agreements, CDS Head Nalin Fonseka stated: “Marking a new era in our journey, CDS announced the launch of corporate action services and registrar services to develop into a more customer-centric and customer-focused organisation. We welcome Distilleries and Melstacorp to our portfolio, and look forward to honouring the

trust placed in CDS with service excellence. We are confident that engaging CDS will allow the companies to significantly improve their efficiencies when dealing with the capital market, as well as pave the way to enhance investor relations.”

“The fact that CDS has been at the heart of the Sri Lankan stock market offers us vital differentiation and uniquely positions CDS to effectively deliver these services. Considering that these services are linked to our core services, we also have the ability to offer cost efficiencies and considerable convenience to listed companies and their investors,” he added.

CDS to provide corporate action services to DCSL, Melsta

From left: CDS Assistant Manager Nadeera Athukorala, CSE Head of Legal Renu Ranathunga, CDS Head Nalin Fonseka, CSE CEO Rajeeva Bandaranaike, Melsta and DCSL Director Niyomal Balasooriya, Melsta Managing Director Amitha Gunarathne, DCSL and Melsta Group Financial Controller Cleetus Mallawaarchchi, CDS Assistant Manager Customer Relations Management Hemal Weerasinghe, and DCSL and Melsta Legal Officer Nuwanthi Gunawardena

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The inauguration of Sri Lanka Insurance’s business operations for 2019 took place on 1 January, 2019 at the Sri Lanka Insurance head office with the participation of the corporate management and the staff of SLIC.

The event comprised religious observations performed by religious leaders of all four religions.

Speaking at the gathering, Chairman Dr. K.A.S. Keeragala noted: “As the pioneering insurance company in Sri Lanka, SLIC is armed with knowledge, skills, human recourses and new technology and we strive to continue providing

the best protection for Sri Lankans.”

In his speech, the Chief Executive Officer noted that “2018 witnessed a challenging year and SLIC has been able to conquer challenges through modernisation and teamwork. Heading into 2019, SLIC should further strengthen internal capabilities and grow as a powerful force united by the goal to provide exceptional service levels to our valuable customers.”

Established in 1962 as a state-owned corporation, Sri Lanka’s insurance giant Sri Lanka Insurance commemorated its 57th anniversary on the same day as well.

Sri Lanka Insurance commences operations for 2019

Chairman Doctor Dr. K.A.S. Keeragala