Bridging the protection gap
in Sri Lanka

The cost of disasters globally is huge, estimated at an average of over $300 billion every year (UNISDR, 2015). Although financial losses are concentrated in more economically developed countries, a disproportionate number of these events occur in developing countries where large populations live in high-risk areas. Climate change is intensifying the problem with increased frequency and severity of weather-related events already evident in many parts of the world. Added to this, those living in or near poverty are the most vulnerable and the least equipped to cope and recover.

We know that insurance, alongside risk reduction measures, builds resilience and enables communities to recover faster in the aftermath of events, yet insurance penetration globally remains low with emerging economies contributing around 96% of the total protection gap (Lloyd's, 2018). The G7 InsuResilience target of providing 400 million of the most vulnerable people in developing countries with access to insurance coverage by 2020 aims to start bridging this gap and private-public collaboration is key to meeting this goal.

One country where an innovative approach is being taken is Sri Lanka. In 2016, the government implemented the National Natural Disaster Insurance Scheme (NNDIS) through the state-owned National Insurance Trust Fund (NITF), providing cover for uninsured households and small businesses that are affected by a natural disaster. The scheme aims to provide relief to the uninsured population, without leaving the government burdened with the potentially large cost of claims. The government pays a premium to the NITF for cover, which in turn purchases reinsurance from the international reinsurance market.

The first couple of years have not been without challenges for the NNDIS – severe flood events each year have increased the cost of reinsurance and put pressure on the scheme. However, the scheme has proved beneficial to the government and uninsured Sri Lankans, with claims exceeding Rs. 5.5 billion paid out in the first two years (Daily FT, 2018). Sri Lanka is one of the most disaster-prone countries in the world and the NNDIS provides a crucial safety net to the most vulnerable populations.

There is international support for the NNDIS, with the Insurance Development Forum (IDF) and KfW Development Bank backing the initiative and continuing to provide support to improve it. However, to ensure the sustainability of the NNDIS, a better understanding of both the exposure and flood risk is needed. Flooding remains a key driver of natural disaster losses in Sri Lanka and the ability to quantify the risk and potential impact on communities covered by the scheme is essential. For that reason, JBA has been engaged as part of a supra-national project team, led by the IDF, to help provide specialist support in modelling the current flood risk exposure of the NNDIS within Sri Lanka.

The work follows on from previous insured flood risk support alongside JBA’s development of the first probabilistic flood model for Sri Lanka. Recent updates to this model have included the creation of specific low-income vulnerability functions developed to capture losses to low-income households and small businesses covered by the NNDIS. The JBA Sri Lanka River and Surface water probabilistic model has been extensively validated against notable flood events in the country, including the recent May 2016 and May 2017 floods. The model provides a robust view of flood risk that helps reinsurers participate more confidently in the scheme, facilitating its long-term continuity.

To find out more about JBA’s Sri Lanka Flood Model, get in touch or check out our Executive Briefing.


Daily FT, 2018. NITF presents National Natural Disaster Insurance Scheme during COP 24 in Poland. Daily FT, [online] 27 December. Available at: [11 January 2019].

Lloyd's, 2018. A world at risk: closing the insurance gap. [pdf] Lloyd's. Available at: [10 January 2019].

UNISDR, 2015. Making Development Sustainable: The Future of Disaster Risk Management. Global Assessment Report on Disaster Risk Reduction. [pdf] United Nations Office for Disaster Risk Reduction. Available at: [10 January 2019].

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