Nearly seven months after Cyclone Ditwah devastated Sri Lanka in November 2025, almost half of the Rs.57 billion in insurance claims lodged by affected policyholders remained unpaid, exposing serious questions about the insurance industry’s capacity to deliver timely financial protection when disaster strikes.
Data compiled by the Insurance Regulatory Commission of Sri Lanka (IRCSL) and published by the Central Bank showed that, as at end-June 2026, insurers had paid only 44.5 percent of the Rs.57 billion in claims arising from the cyclone. Approximately Rs.25.4 billion had been settled, while a staggering Rs.28.2 billion remained outstanding.
The scale of the backlog is particularly concerning because Ditwah was described by IRCSL Chairman Ajith Raveendra De Mel in March as the largest insurance claim event in the country’s history. The claims were equivalent to 152.9 percent of the entire general insurance sector’s claims outgo during the first half of 2026, estimated at around Rs.37.3 billion.
The outstanding burden falls overwhelmingly on non-motor insurance policyholders. These claims accounted for 97.2 percent of the unpaid value, amounting to approximately Rs.27.4 billion. While motor insurance claims have progressed towards settlement, businesses, property owners and other policyholders covered by non-motor policies continue to face delays in receiving compensation.
IRCSL figures released in June showed that 79 percent of motor claims had been settled by May 25, compared with only 44 percent of non-motor claims. The disparity raises questions about whether the assessment and settlement of complex property and business-loss claims are adequately equipped to handle a catastrophe of this magnitude.
For affected businesses, prolonged delays can obstruct reconstruction, disrupt operations and weaken cash flow. Households and property owners may also face mounting expenses while waiting for compensation intended to help restore damaged assets. The longer settlements take, the greater the risk that financially vulnerable policyholders will struggle to recover.
The Central Bank has warned that the claims could place pressure on general insurers’ underwriting performance, liquidity and capital positions. Insurers may have to draw down cash and bank deposits to meet immediate obligations while waiting for recoveries from reinsurers.
Although deposits held by the insurance sector rose 23.4 percent year-on-year to Rs.171.2 billion, the Central Bank observed that catastrophe-related financial demands and higher reinsurance receivables were affecting the composition of insurers’ assets.
The implications are already visible in profitability indicators. General insurers’ return on equity declined to 17.4 percent in the first half of 2026 from 20.2 percent a year earlier, while return on assets fell from 8.6 percent to 7.1 percent.
These figures do not establish that insurers are unable to pay legitimate claims, but they underline the financial pressures created by a major disaster.
The central issue now is accountability and transparency. Policyholders need clearer information about outstanding claims, assessment disputes, reinsurance delays and expected settlement timelines. The regulator must also ensure that legitimate claims are processed fairly and without unnecessary administrative obstacles.
When insurance premiums are collected in anticipation of future emergencies, timely compensation is fundamental to public confidence. Ditwah has tested that promise on an unprecedented scale. Unless the backlog is addressed transparently, the industry risks undermining the very protection policyholders believed they had purchased.
