Insurers are making initial moves to analyze damage done and calculate payouts at three of the four hotels that were bombed on 21 April, Easter Sunday in Colombo. (Three churches were also bombed.) The fourth hotel is a guest house, and so far, there has been no mention of its insurance claims status.

Regarding the Shangri-La Hotel Colombo, The Sunday Times reported that Sri Lanka-based Ceylinco General Insurance, along with Chubb – the insurers who cover Shangri-La hotels in Sri Lanka and the Maldives – went to the hotel within a few hours of the initial attacks to begin the claims process. Then, on 22 April, adjusters visited the hotel for a more comprehensive site inspection. Later, on 25 April, Ceylinco paid a US $1 million advance to the Shangri La so it could begin cleanup, temporary repairs, and tend to related crisis response issues. The Sunday Times said a loss adjuster, appointed by the reinsurer and in consultation with Ceylinco, would be inspect the hotel’s damage soon.

Ceylinco is primarily a domestic insurer, but it does provide coverage in select, outside regions such as the Middle East. The company says it was the only insurer to honor all client claims during the 2004 tsunami, regardless of their liabilities. Ceylinco works with 10 re-insurers in 10 countries.

Regarding the Cinnamon Grand and Kingsbury hotels, the Daily Financial Times reported that the state’s insurance company, the National Insurance Trust Fund Board (NITF), is providing coverage. The NITF, said Reuters, provides health insurance to all government employees and their families, and it also covers damage from strikes, riots, civil commotion and terrorism (SRCC&T). The latter coverage is available to all Sri Lankan insurers “as an elective extension to basic insurance policies issued by its member companies,” said the Daily Financial Times. The NITF’s SRCC&T policies cover property damages and losses for Sri Lanka, only.

The NITF told the press that it appointed an Independent Loss Adjuster on 25 April, and that their property damage inspections on both hotels would be done in seven days.

Both hotels had policies that were capped at Rs. 250 million (USD $3,579,125.00), and the deductible is 10%. NITF Chairman Manjula de Silva told the press, “This means the client has to bear the balance cost of Rs. 25 million once the 10% is deducted.” De Silva does not think that damages will be more than Rs. 500 million (USD $7,158,250.00) at both properties, however.

The NITF has received a cascade of terrorism coverage requests from individuals and companies since the attacks, but it has pledged to maintain the rates declared prior to the 21 April attacks.

Asian Insurance Review said of the bombings, “The attacks came as a surprise as Sri Lanka was perceived to have a low terrorism risk after a violent civil war between the separatist Tamil Tigers and the government ended in 2009.” It further noted that Sri Lanka was rated low for terrorism risk by Willis Towers Watson. This is an interesting point, because Islamist jihadi incidents had been occurring in Sri Lanka with increasing frequency since 2017. What happened in Sri Lanka followed a distinct pattern of Islamist jihadist activism and political violence turned terrorism (or insurgency) in scores of countries such as Myanmar, Thailand, Egypt, Mali, and Burkina Faso, just to name five.

There are four takeaways here. First, Ceylinco’s quick action and initial payout is impressive and model for others to follow. In times of national tragedy, and especially when casualties are high, insurers are the typically the first responders concerning financial relief, which can ease the shock effect of terrorism and help get a company’s morale and efficiency back on track. There are cases where insurers do not respond well to their clients’ tragedies, as with the 2016 gangland active shooter attack at the Regency Hotel Dublin where the insurer was Aviva plc.

Second, the NITF demonstrates the potential effectiveness of government terrorism insurance pools and how they can help businesses and the countries in which they reside. Action to insure the Cinnamon Grand and Kingsbury appears swift and comprehensive so far. This is opposite what happened with TRIA/TRIPRA, the US government’s terrorism pool, during the Boston Marathon Bombings, which was not technically declared an act of terror by various government entities. Therefore, government terrorism insurance did not apply.

Third, while government terrorism insurance pools can be exceedingly helpful, one thing companies need to fully understand is caps and deductibles, which can be costly. Companies need to have enough funding to pay the deductibles and then some if damages exceed caps. Otherwise, they need to have stand-alone terrorism insurance that picks up where government insurance drops off.

Fourth, the preponderance of terrorism risk country listings published by global security and insurance companies can be helpful, but they can certainly be improved upon with an injection of irregular warfare analysis expertise that is lacking across the board. Improved threat analysis techniques that detect real world threats means, among other things, improved insurance risk analysis. That, in turn, means more effective insurance policies on the insurers’ side, and improved risk reduction on the insured’s side.

Sources and further reading

“Ceylinco General Insurance pays advance of $1 mn to Shangri-La Hotel Colombo,” The Sunday Times, 26 April 2019.

“NITF appoints Independent Loss Adjuster to quantify damage to two hotels,” Daily Financial Times, 26 April 2019.

“‘Low-risk’ Sri Lanka grapples with recent terror attacks,” Asian Insurance Review, 22 April 2019.

“Fitch Rates National Insurance Trust Fund ‘AA-(lka)’/Stable,” Reuters, 21 November 2016.

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