Insurance & Reinsurance 2020 Comparisons

Last Updated January 20, 2020

Contributed By Nithya Partners

Law and Practice


Nithya Partners was established in 1997 with the goal of delivering a modern and responsive service in corporate and financial law from the firm's office in Central Colombo. The firm’s practice primarily focuses on corporate and financial law, and advises a broad range of local and foreign clients comprising several quoted and unquoted companies, multinationals, financial institutions, investment funds, multi-lateral organisations and statutory bodies. Areas of expertise include banking and finance, corporate and M&A, dispute resolution, project infrastructure and energy, real estate and construction and tax law. Nithya Partners' banking and insurance team comprises four attorneys and has recently advised a local insurer on the regulatory implications of a life quota share reinsurance agreement with a foreign insurer.

The Regulation of Insurance Industry Act No 43 of 2000 ("RII Act") (as amended), along with the regulations and rules made there under, are the principle sources of law governing insurance and reinsurance in Sri Lanka. The RII Act lays down the requirements for registration of insurers, insurance brokers, loss adjusters and insurance agents and general provisions applicable to them, special provisions relating to long term insurance business, matters relating to accounts, inspection, investigation, maintenance of solvency margins by insurers, reinsurance and submission of returns/documents amongst many other matters.

In addition to the RII Act there are several other Acts which impact the insurance industry in Sri Lanka such as Financial Transactions Reporting Act No 6 of 2006, Prevention of Money Laundering Act No 5 of 2006 (as amended) and Convention on the Suppression of Terrorist Financing Act No 25 of 2005 (as amended).

The Sri Lankan legal system is a distinct legal culture that is described as a mix of civil and common law system comprising of elements of Roman Dutch Law which was thereafter heavily influenced by English Law principles. When statutes and indigenous laws do not regulate the issue in question, both Roman Dutch Law principles and English Law principles are applied. In respect of insurance contracts, the general law of contract, ie, Roman Dutch Law would apply along with English Law. Common law or judicial precedent would be applicable when interpreting insurance contracts and other related issues. 

Under the RII Act both insurers and reinsurers are regulated by the Insurance Regulatory Commission of Sri Lanka (IRC) (previously known as the Insurance Board of Sri Lanka). IRC is responsible for the development, supervision and regulation of the insurance industry in Sri Lanka. The objective and responsibility of IRC is to ensure that the insurance business is carried out with integrity and in a professional and prudent manner with a view to safeguarding the interest of the policy holders and potential policy holders. RII Act provides for the establishment and constitution of the IRC.

Orders, determinations, directions and circulars issued by the IRC are important sources of rules and guidance on the registration, governance and regulation of the key players in the insurance industry, such as insurers, reinsurers, insurance agents, insurance brokers and loss adjusters.

There are licensing guidelines which have been issued by the IRC in relation to insurers such as the Insurance Regulatory Commission of Sri Lanka Rules of 2005 (as amended), Insurance Board of Sri Lanka Rules No 1 of 2013, Insurance Regulatory Commission Regulations 2005 and Terms And Conditions to be Complied with by Insurers Under Section 31(1) of The Regulation of Insurance Industry Act No 43 of 2000 relating to Reinsurance. The IRC also seems to be contemplating regulations to cover reinsurers as well.

No person can carry on insurance business in Sri Lanka unless such person is registered or deemed to be registered under the RII Act (Section 12(1) of the RII Act). Insurance business has been defined in the RII Act to include both long term insurance business (“life insurance”) and general insurance business. Life insurance business is the business of entering in to or maintaining contracts of assurance on human lives and general insurance business includes all insurances business which do not fall within the definition of life insurance business.

It should be noted that registration under the RII Act can either be to carry on general insurance business or life insurance business. Furthermore, a person registered under the RII Act cannot carry on any other form of business other than insurance business unless prior written approval of the IRC is obtained to carry on any financial services business which is ancillary or associated with the insurance business.

According to Section 13 of the RII Act, read together with regulations published thereunder, no person will be registered as an insurer unless such person:

  • is a public company incorporated in Sri Lanka and registered under the Companies Act No 7 of 2007;
  • has paid up share capital of not less than LKR500 million;
  • has in its Board of Directors persons who are not subject to any of the disqualifications specified in the second schedule to the RII Act;
  • has a permanent principal officer and a specified officer as mandated;
  • pay as deposit to the Treasury an amount of LKR50,000, in respect of long-term insurance business and LKR200,000, in respect of general insurance business;
  • pay the prescribed fee of LKR500,000 to the IRC; and
  • fulfil such other requirements as may be laid down by the IRC.

After obtaining the license, every insurer carrying out general insurance business is required to establish and maintain adequate technical reserves and the IRC has the power to require insurers to increase or enhance its technical reserve if it is of the view that this is inadequate (Section 24 of the RII Act). Insurance Board Regulations 2005 (as amended), published in Gazette No 1414/19 dated 12 October 2005, provides that an insurer is allowed to keep assets forming part of the technical reserve outside Sri Lanka upon the satisfaction of certain conditions.

Every insurer must also maintain solvency margin in respect of each of class of insurance business carried on by it (Section 26 of the RII Act) and the rules in respect of this has been set out in the Solvency Margin (Risk Based Capital) Rules 2015.

Section 38 of the RII Act provides that every insurer who carries on life insurance business needs to maintain a separate fund and keep their life insurance business assets separate from any other class of insurance business. Following an actuarial investigation any surplus in respect of participating policies shall be entitled to at least 90% of that surplus in the form of bonuses. Section 31 of the RII Act allows an insurer to reinsure with any other insurer in or outside Sri Lanka, any liability arising out of a contract or policy of insurance effected or issued by the first insurer, in order to ensure that the interests of policy holders/insurers are adequately safeguarded.

Insurers can place reinsurance with overseas reinsurance companies only if such entities have been authorised by a regulatory authority to carry on reinsurance business. IRC has set out the terms and conditions that needs to be complied with in relation to all transactions involving reinsurance placements. IRC may require any insurer carrying on reinsurance to furnish information it considers necessary in order to ascertain whether such insurer has the necessary funds to satisfy any claim that may be made on such insurer. IRC has the power to prohibit all insurers from reinsuring with any specified reinsurer in or outside Sri Lanka, risks upon policies or contracts of insurance issued or effected in respect of insurance business transacted in Sri Lanka, where any such arrangement with that reinsurer is detrimental to national interest.

As per government Gazette notification No 1791/4 of 31 December 2012, all primary insurers are now required to cede 30% of their total reinsurance premium arising out of every general reinsurance contract to the National Insurance Trust Fund, established under the National Insurance Trust Fund Act No 28 of 2006. At present, the National Insurance Trust Fund is the only Sri Lankan body which provides reinsurance cover to primary insurers.

In general, there are no differences between the requirements for writing consumer insurance, SME insurance and corporate insurance.

There is no specific taxation on insurance premiums, however, the general turnover based taxes, namely value added tax at 8% (wef, 1 December 2019,) would apply to general insurance premiums. Life insurance premiums are exempt from VAT. 

There is also an annual fee which is collected by the IRC from the gross return premium of the insurers and a cess based on the net return premium, the latter being credited to a Policy Holders Protection Fund.

As noted in 2.2 The Writing of Insurance and Reinsurance, registration under the RII Act would only be required if a person is carrying on insurance business in Sri Lanka and, therefore, a risk in Sri Lanka can be insured by a non-registered insurer if it can be established that the non-resident insurer is not carrying on business in Sri Lanka. However, Section 101(1) of the RII Act states that no person in Sri Lanka shall without the prior written approval of the IRC directly or indirectly place an insurance business with an insurer not registered under the RII Act except in relation to reinsurance business. Section 101(2) states that the prior written approval may take in to account government policy in respect of the insurance industry and national interest.

The IRC acting under Section 101(2) has permitted persons in Sri Lanka to place insurance health covers with foreign insurers subject to the condition that the foreign health insurance product is placed through an insurance broker in Sri Lanka. Furthermore, it would also be necessary to prove inter alia that the foreign insurer is licensed by a regulatory authority and that the insurance product is not available with any insurer registered under the RII Act. There are similar provisions with regard to professional indemnity covers relating to D&O liability policies.

There are no specific prohibitions on fronting. However, in view of the requirements which need to be fulfilled for reinsurance placement, it is likely that any fronting arrangement would not be feasible.

All transactions relating to any transfer and amalgamation of insurance business has to be approved by a District Court and when applying for such approval, a copy of the IRC’s observations on such transfer and amalgamation should be submitted to Court for perusal (Section 102).

When the IRC is making its observations, it will take in to consideration the effect of the transfer and amalgamation as indicated by an independent actuary and where necessary call for any further information and documents relating to the proposed transfer and amalgamation for the purpose of making observations. The IRC will make observations in accordance with the Takeovers and Mergers Code 1995 (as amended).

Direction No 7 dated 4 January 2016, issued by the IRC, provides that an insurer must notify the IRC in writing of a proposed change in the ownership or control of the insurer (either directly or indirectly or through nominees or by persons acting in concert, etc) immediately upon any of the directors or the company secretary of the insurer becoming aware of the same and obtain the written approval of the IRC prior to such change in ownership or control. A change of ownership or control could take place as a result of a new issue of shares to a person or a transfer of shares by an insurer, of its subsidiaries/associate insurance company(s) to a person(s). The IRC will look at whether the proposed shareholder(s) is fit and proper in terms of financial soundness and integrity, and will approve a change in ownership if it is of the opinion that it is not detrimental to the interest of policyholders and potential policyholders.

Most insurance companies in Sri Lanka were carrying on composite insurance business. The Regulation of the Insurance Industry Act No 3 of 2011 required any insurer who was carrying on such composite business to segregate the life insurance business and the general insurance business into two separate companies on or before 7 February 2015. Accordingly, as at present, all insurers carry only one line of insurance business with the exception of two institutions who have been given an extension in order to complete the segregation.

Subsequent to this segregation, there has been a reasonable amount of M&A activity relating to insurance companies, with some amalgamations and takeovers by certain non-resident insurers. There has also been considerable interest for acquiring minority stakes in local insurance companies by well recognised development financing institutions (DFIs). There are no foreign share ownership restrictions applicable to insurance companies in Sri Lanka.

Distribution of insurance and reinsurance products takes place through direct sales, agents, brokers and bancassurance. A predominantly large portion of insurance business in Sri Lanka is carried out through insurance agents. Insurance brokers are largely confined to corporate clientele in general insurance. Bancassurance, whilst growing, is relatively small.

A person cannot act or hold itself out as an insurance broker unless it is registered under the RII Act and is in possession of a certificate of registration. Furthermore, it is necessary for such a person to be a member of an Association of Insurance Brokers approved by the IRC (Section 79, RII Act).

In order to apply for registration as an insurance broker, the following conditions need to be satisfied:

  • that it is a company registered under the Companies Act No 7 of 2007 and having a paid-up share capital not less than such amount as shall be determined by the IRC by rules made in that behalf;
  • that it has, in its employment or on its directorate, persons with such qualifications and experience in insurance as acceptable to the IRC;
  • that it takes out policy or policies of insurance for professional indemnity with two or more insurers; and
  • that it fulfils such other requirements as may be laid down by the IRC by rules made in that behalf, for the purpose of ensuring the protection of the interest of the insured public.

Rules made by the IRC in relation to the registration of an insurance broker has been set out in Gazette Extraordinary No 1412/30, dated 29 September 2005, as amended by:

  • Gazette Extraordinary No 1642/16, dated 25 February 2010;
  • Gazette Extraordinary No 1711/25, dated 24 June 2011;
  • Gazette Extraordinary No 1809/7, dated 7 May 2013;
  • Gazette Extraordinary No 1969/40, dated 1 June 2016;
  • Gazette Extraordinary No 2069/7, dated 1 May 2018; and
  • Gazette Extraordinary No 2092/7, dated 8 October 2018.

Certificate of registration granted to an insurance broker is valid for a period of one year and should be renewed annually.

An insurer or broker is permitted under the RII Act to appoint an individual as an insurance agent and such agent shall be registered with the insurer or broker. Insurers and brokers who have insurance agents are required to maintain a register of all individuals who are registered with them as insurance agents (Section 78 of the RII Act). Insurance agents are required to be in compliance with the qualifications set out in Insurance Agent Qualifications Rules 2002, as amended by Gazette No 1674/4, dated 5 October 2010, Gazette No 1861/45, dated 10 May 2015, and Gazette No 1916/10, dated 27 May 2015. An insurance agent is not permitted to act as an agent for more than one insurer and/or broker in respect of each of the life insurance business and the general insurance business.

Bancassurance can be accommodated under Schedule II of the Banking Act No 30 of 1988 (as amended) which enumerates the types of activities which amount to “banking business”. Item (r) of the Schedule enables Banks to do all such other things as are incidental or conducive to the promotion or advancement of the business of the bank and the IRC has hitherto not considered a bank which is carrying out bancassurance business as a broker or an insurer and, accordingly, has not required a bank to register as such. The IRC has, however, has issued guidelines to insurers and brokers who obtain leads from financial institutions under a referral model. A bank which intends to carry out bancassurance activities would need to seek approval from the Central Bank of Sri Lanka.

Since the insured knows all the facts relating to the property/life to be insured, that person would be considered to be the one proposing the insurance and, therefore, it is their duty to divulge the relevant facts. The principle to be observed would be that of “utmost good faith” or “uberrimae fide”. All facts material to the proposed insurance must be disclosed voluntarily, whether asked for or not. The test to be applied in this scenario would be whether a reasonable individual would have considered the fact material. A material fact would influence the judgement of a prudent insurer in fixing the premium or determine whether he would accept the risk or not.

Facts which must be disclosed includes facts relating to and descriptions of the subject matter of insurance, previous losses and claims under other policies, external factors that makes the risk greater than normal, etc.

In terms of Section 34 of the RII Act, no insurer shall accept any insurance business except from a person who has an insurable interest in the subject matter of insurance.

Furthermore, in terms of the guidelines issued by the IRC in 2018, there is an obligation on the insurer to develop and market products in ways that pay due regard to the interests of the customers; customers should be provided with clear information before and during the point of sale and customers should be provided with suitable advice.

If a party fails to comply with its obligation to provide information during the negotiation of an insurance contract, then it would amount to a breach of utmost good faith. Such a breach could arise due to a misrepresentation, either innocent or fraudulent, or a non-disclosure of material facts, either innocent omissions or fraudulent or intentional suppression (concealment).

If there is such a breach, the insured or the aggrieved party could avoid the insurance contract by treating the contract as null and void from its inception, by choosing to sue for damages if non-disclosure is fraudulent or there is fraudulent misrepresentation, or to waive its rights and allow the contract to carry on un-hindered. The insurer could even avoid liability for an individual claim.

If there is a failure by the insured to comply with its obligations specified in 6.1 Obligations of the Insured and Insurer, it is likely that it could be an offence under Section 93 of the RII Act and be liable to a fine of not less than LKR50,000 and, in the case of a continuing offence, a further fine of not less than LKR2,000 for each day on which the offence is continued.

Intermediaries in the present market are brokers and agents. Brokers in general act as agents for the policy holders whereas agents would be taken to be acting on behalf of the insurer. Brokers are independent in their operations and, therefore, free to place business with any insurer.

Insurance brokers are required, in terms of Section 85 of the RII Act, to take out insurance policies with two or more insurers for a total sum of LKR1.5 million, or three times the brokerage of the business for the last accounting period — whichever is higher, against losses arising from claims in respect of any description of civil liability arising in connection with their business. There is, however, a limit of LKR10 million on such insurance policies.

An insurance contract can be defined as a contract whereby one person (the insurer or an underwriter undertakes) is required, in return for the agreed consideration called the premium, to pay to another person (the insured or assured) a sum of money or its equivalent on the happening of a specified event. Based on the principles of English Law, for an insurance contract to be considered as a valid contract the following elements need to be present:

  • offer and acceptance;
  • consideration;
  • intention to create legal relationship;
  • capacity; and
  • genuine consent or certainty of terms.

The insurance should also identify the subject matter which would either be a physical object or property, a person or a liability imposed.

Insurable interest can be described as the legal right to insure and the legally recognised relationship to the subject matter of the insurance. Section 34 of the RII Act specifically provides that no person can accept insurance from a person who does not have an insurable interest in the subject matter of insurance. It should be noted that an insurance policy is operative not in respect of the subject matter itself but in respect of the interest of the insured in the subject matter.

The aforesaid position would not differ if there are multiple insureds, however, there may be differences depending on whether beneficiaries are assignees or loss payees under a policy.

An assignment of an insurance policy whereby there is a transfer of rights and obligations of the insured person to another would not be possible in personal contract unless such assignment is done with prior consent of the insurer. A personal contract in this context means the insured has control whether or not a loss would occur, and the extent of that loss if it happens, through policies covering property, liability and pecuniary interest.

An assignment of the proceeds of the policy is possible whereby the policyholder directs the insurer to pay any claim money due under the policy to another person other than the insured, eg, assignment to a bank as security for any loan or overdraft facility obtained by the insured.

Section 39 of the RII Act provides for the manner in which a life insurance policy could be transferred or assigned.

There are no differences in this position with regard to consumer contracts or reinsurance contracts. The Unfair Contract Terms Act No 26 of 1997 (which is substantially similar to the UK enactment) specifically excludes insurance contracts from its application.

ART transactions are a relatively new phenomena in the Sri Lankan market. However, there is increased interest in this area in view of the possibility of improving the capital adequacy position of insurers by using such risk transfer programs. There has been a guideline issued, in 2017, with regard to reinsurance, which uses the words “reinsurance” and “alternative risk transfer mechanisms” distinctively and, accordingly, it is likely that the regulator may treat them differently.

As mentioned, ART transactions are relatively new and, therefore, subject to the general observations set out in 7.1 ART Transactions. There is no certainty as to whether they would be treated as reinsurance contracts in Sri Lanka.

A contract of insurance is governed by the general law relating to contracts. Therefore, recourse must be had to the law of the contract in order to define the rights and liabilities of the parties to a contract of insurance. Certain incidents peculiar to the contract of insurance have developed, and these incidents are based upon mercantile usage and custom and are collected from decisions, legal principles and analogies, supplementing the provisions of the general law of contract.

The traditional contract law distinction between warranties and conditions is reversed in an insurance contract and warranties are considered as fundamental terms which require strict compliance. The terminology describing a term as a “condition” or a “warranty” may not be conclusive. In view of the “contra proferentem” rule, it is likely that unless a term is described as a warranty it may not be considered as such. In the event of there being a breach of a warranty by the insured, it may discharge the insurer from any liability.

The application of the “contra proferentem” rule is likely to necessitate a condition precedent to an insurer’s liability to be expressly described as such in the contract. There is a judgement of the Court of Appeal which is indicative that a breach of a condition precedent by the insured for making a claim may discharge the insurer from liability. There is also, however, a different line of reasoning, based on a commercial high court decision, that the provisions of the Prescription Ordinance (which provides a statutory period of six years in which to sue for a breach) could not be whittled down by a clause in an insurance policy in which the insured was obliged to file an action within three months of the claim being repudiated. 

The IRC has published guidelines with regard to the manner of conducting investigations on insurance claims, and a further guideline on principles of fair treatment of customers, which includes fair handling of claims. These guidelines will not be applicable to reinsurance contracts.

There is also an Insurance Ombudsman, to whom a complaint could be made with regard to a dispute on an insurance contract with an insurer. The Insurance Ombudsman currently functions independently of the RII Act. However, the IRC is contemplating a more formal role for the Insurance Ombudsman within the scope of the RII Act.

Section 98 of the RII Act provides that, where a dispute arises relating to the settlement of a claim on a policy of long term insurance business or general insurance business by which the sum assured does not exceed such sum as may be determined by the IRC and which was transacted by the insurer, the dispute may, at the option of the claimant, be referred to the IRC. The IRC, after giving an opportunity for the parties to be heard and making further enquiries, will make a decision on the dispute.

In terms of Section 6 of the Prescription Ordinance No 22 of 1871 (as amended), no action will be maintainable upon any contract or agreement, unless such action shall be brought within six years from the date of breach of such contract or agreement.

Sri Lankan courts have long since treated English case law as persuasive authority, especially in respect of commercial matters. Therefore, as stated by Lord Neuberger in Arnold v Britton and others [2015] UKSC 36: 

“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focusing on the meaning of the relevant words. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions”. 

Furthermore, while it is acknowledged that the law governing contracts in Sri Lanka is Roman Dutch Law, it is noted that – as clarified by Sir J.W. Wessels, in his book, the Law of Contracts in South Africa:

“We have seen what rules of evidence must be followed in order to prove to the court what actual terms of the contract are, and we have seen that these rules are taken from the laws of England. Although we know what the terms of the contract are, we may not know the exact meaning of these terms. To ascertain their true meaning, we must have recourse to certain rules of construction as laid down by the Roman-Dutch Law. It is only with regard to the proof of the contract that we invoke the laws of England; in order to ascertain the meaning of the contract when proved – the interpretation of the contract-we must go primarily to the Civil Law for guidance. As, however, the rules of construction which prevail in the English courts are largely based upon the principles of the Civil Law, the difference between the two systems of law with regard to the interpretation of contracts is not great”.

Lord Wright, in Vita Food Products Inc V Unus Shipping Company Ltd, stated the following:

“… where there is an express statement by the parties of their intention to select the law of the contract, it is difficult to see what qualifications are possible, provided the intention expressed is bona fide and legal, and provided there is no reason for avoiding the choice on the ground of public policy”.

Accordingly, if the parties have expressly agreed to the jurisdiction and choice of law then the courts will uphold the wishes of such parties.

However, it should be noted that the application of foreign law may be excluded on the ground of public policy, ie, if the application of foreign law would be in breach of fundamental rights and freedom as enshrined in the Constitution of Sri Lanka and recognised International Conventions and the fundamental domestic legal principles, which represent the policy of law of Sri Lanka.

Civil litigation in Sri Lanka is adversarial in nature. The first stage in typical court proceedings is the issuance of a plaint which contains the names of the parties, details of the claim and its value. The plaintiff then serves the form on the defendant and must also prepare and serve the particulars of the claim, stating the facts on which it relies, the remedy sought and any other relevant information. Legal argument will usually be reserved for the actual trial.

The defendant can choose to defend against the claim by serving an answer. The plaintiff can reply to the defence. If the defence includes a counterclaim, the plaintiff’s reply must also include a defence.

Once the pleadings are filed, at the pre-trial stage, the plaintiff and the defendant must settle the issues pertaining to the case and produce a list of witnesses and documents to be produced in court in support of their respective cases. The case will then proceed to trial. Trials principally involve each party’s counsel making oral submissions and drawing the judge’s attention to the relevant evidence and law, including calling on the evidence of witnesses and experts that they seek to rely on and cross-examining opposing witnesses and experts. There is no statutory time limit for cases to be heard.

If an unsuccessful party does not voluntarily comply with the judgement of the court, various enforcement procedures are available, including the seizure and sale of that party’s assets or the imposition of a charge over certain assets.

In terms of the Reciprocal Enforcement of Judgments Ordinance No 41 of 1921, a final and conclusive judgment properly obtained in the superior courts of England would be recognised and enforced in the courts of Sri Lanka without re-trial or re-examination of the issues. For this, an application should be made to the registering courts within 12 months after the date of the judgement, or such longer date as the court may allow. On any such application, the court may order that the judgment be registered if, in all the circumstances of the case, the judge is of the view that it is just and convenient that the judgment should be enforced in Sri Lanka.

An application for reciprocal enforcement of a foreign judgement could be challenged in the following eventualities:

  • the original court acted without jurisdiction;
  • the judgment debtor, being a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court, did not voluntarily appear or otherwise submit or agree to submit to the jurisdiction of that court;
  • the judgement debtor, being the defendant in the proceedings, was not duly served with the process of the original court and did not appear notwithstanding that they:
    1. were ordinarily resident;
    2. were carrying on business within that jurisdiction of that court;
    3. agreed to submit to the jurisdiction of that court; or
  • the judgement was obtained by fraud;
  • the judgement-debtor satisfies the registering court either that an appeal is pending, or that he is entitled and intends to appeal against the judgement; or
  • the judgement was in respect of a cause of action which for reasons of public policy or for some other similar reason could not have been entertained by the registering court.

The applicability of the aforesaid Reciprocal Enforcement of Judgments Ordinance has been extended by subsequent Gazette notification to include Hong Kong, Mauritius, New South Wales, Straits Settlements; Tanganyika (Tanzania), Uganda, Victoria, Federation of Malaya (Malaysia), Australian Capital Territory, Northern Territory of Australia, New Zealand (including the Cook and Nicue Islands) and the Trust Territory of Western Samoa, Queensland, Western Australia, South Australia and Tasmania.

Arbitration Act No 11 of 1995 (“Arbitration Act”), provides that any dispute which the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration unless the matter in respect of which the arbitration agreement is entered into is contrary to public policy or, is not capable of determination by arbitration. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. Such agreement should be in writing and signed by the parties.

Arbitration awards in connection with the insurance contract against the defaulting party will be recognised and enforced by the courts in Sri Lanka without re-examination or re-litigation of the matters thereby adjudicated or retrial or further review of the merits of the case in accordance with the Arbitration Act.

Section 31 of the Arbitration Act provides that once a party receives an arbitration award such party must, within one year after the expiry of 14 days of the making of the award, apply to the High Court for the enforcement of the award. An application to enforce the award should be accompanied by the original award or a duly certified copy of such award and the original arbitration agreement under which the award purports to have been made (or a duly certified copy). However, an arbitral award made in an arbitration held in Sri Lanka may, on application, be set aside by the High Court within 60 days of the receipt of the award where the party making the application furnishes proof of any circumstances which are referred to in Section 32 of the Arbitration Act.

In relation to enforcement of arbitration awards made in other jurisdictions, Section 33 of the Arbitration Act sets out that such an award shall be recognised as binding and shall be enforced upon an application made to the High Court of Sri Lanka, under Section 31 thereof, subject to the provisions of Section 34 of the Arbitration Act, which sets out the specific grounds for refusing the recognition or enforcement of such foreign arbitral award.

The Mediation Boards Act No 72 of 1988 provides that, where the value of a claim is not more than LKR500,000, it is mandatory that mediation is the initial step in any claim. Court action is permitted only in the event of failure at mediation. The non-settlement certificate issued by the Mediation Board is required if court action is subsequently chosen by one of the parties to the dispute.

In view of reinsurers being generally non-resident, dispute resolution mechanisms are determined by the particular terms of the re-insurance contract and not by any domestic law considerations.

There are no legal provisions in Sri Lanka whereby insurers can face penalties or punitive damages for late payment or improper delay in settling claims. However, there is an obligation for an insurer to make payment of claims within 14 days.

There have been no significant developments in this regard.

This is not applicable in view of the response to 10.1 Insurtech Developments. However, there are a limited amount of mobile telephony-based insurance products which are available.

There have been increasing occurrences of natural disasters such as droughts, floods and earth slips in recent years. In response to these events, the Government of Sri Lanka has formulated a National Natural Disaster Scheme, under which persons who are uninsured are entitled to make claims for property damage up to a sum LKR2.5 million and claims for the death of fishermen up to a sum of LKR1 million. These payments are made by the National Insurance Trust Fund.

There are no new products or solutions that the authors are aware of.

This is not relevant in this jurisdiction.

This is not relevant in this jurisdiction.

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Law and Practice in Sri Lanka


Nithya Partners was established in 1997 with the goal of delivering a modern and responsive service in corporate and financial law from the firm's office in Central Colombo. The firm’s practice primarily focuses on corporate and financial law, and advises a broad range of local and foreign clients comprising several quoted and unquoted companies, multinationals, financial institutions, investment funds, multi-lateral organisations and statutory bodies. Areas of expertise include banking and finance, corporate and M&A, dispute resolution, project infrastructure and energy, real estate and construction and tax law. Nithya Partners' banking and insurance team comprises four attorneys and has recently advised a local insurer on the regulatory implications of a life quota share reinsurance agreement with a foreign insurer.