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1Copy right of MAIPARK 2005
Global Conference on Insurance and Reinsurance for Natural Catastrophe Risk: Istanbul, December 8th - 9th, 2005
Natural Catastrophe Risk Management Policy in Indonesia
Presented by Werner Bugl, President DirectorPT. Asuransi MAIPARK Indonesia
2Copy right of MAIPARK 2005
CONTENTS Potential Catastrophe Risks in Indonesia: Earthquake,
Tsunami & Volcanic Eruption Role of the Government & Insurance Industry in Dealing
with Catastrophe Risks: Establishment of Special Risks Insurance Company, PT. Asuransi MAIPARK Indonesia (MAIPARK)
Funding of MAIPARK Indonesian Standard Earthquake Insurance Policy:
Scope of Cover, Tariff Market Penetration of Catastrophe Risk Insurance Future Challenges New Initiatives
3Copy right of MAIPARK 2005
Catastrophe Risks in Indonesia
Devastating Earthquake and Tsunami in Aceh in December 2004 killed 170.000 and displaced 550.000 people
Earthquake in Nias in March 2005 killed 1,300 people and displaced 22,000
3rd Strongest Earthquake Since Beginning of Instrumental Records Largest Tsunami in Documented History in Terms of Casualties
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One of the World’s Most Seismically Active Regions
Where to put your foot ?Not a place for the faint – hearted.
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Earthquake Record Subsequent to 26.12.2004
Since 26.12.2004 : 3,500 Recorded Earthquakes 183 Earthquakes > IV Richter Scale
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Home of 13% of World’s Active Volcanoes Indonesia is a country with more than 122 active volcanoes Eighty of these 122 active volcanoes have been classified “A” type
according to their recorded eruption since year 1600
One of the most beautiful regions in the worldOne of the most complex geological settings too
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Indonesian Volcanoes
Region Type A Type B Type C Total
Sumatra 12 12 6 30
Java 21 9 5 35
Bali 2 0 0 2
Nusa Tenggara 20 0 0 20
Sulawesi 11 2 5 18
Maluku 5 3 0 8
Banda Sea 9 0 0 9
Total 80 26 16 122
Beauty comes at a price
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Role of Government & Industry Establishment of a National Earthquake Pool in 2003 which
became PT. Asuransi MAIPARK Indonesia (MAIPARK) as from 23rd December 2003
All Non-Life Insurance and Reinsurance Companies operating in Indonesia are shareholders of the company; MAIPARK is owned by the Insurance Industry itself
Promote discipline and proper handling of Earthquake Insurance
Set a benchmark for Earthquake Insurance Pricing Collate national Statistics and Data Bases Build strong local Capacity for Earthquake Shareholders must cede a “Shareholder Cession” of each
earthquake risk underwritten to MAIPARK. At present they cede 5% to 25% of sum insured with a max. of USD 2,500,000 any one risk to MAIPARK depending on the location of the risks
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Funding of MAIPARK Registered Share Capital is IDR 50 billion Paid-up Capital is some IDR 45 billion received from 91 Non-Life
Insurance and Reinsurance Companies i.e. shareholders Shareholding of each company is determined by the Directorate of
Insurance, Ministry of Finance by a fixed percentage of Investment Funds of each company as of 31.12. 2002
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Indonesian Standard Earthquake Insurance Policy: Scope of Cover
The Indonesian Standard Earthquake Insurance Policy covers property loss or damage and business interruption as a consequence of earthquake shock, fire following earthquake, volcanic eruption and tsunami
Insurance Companies must issue a separate Earthquake Policy in addition to the Fire Insurance Policy
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Earthquake Tariff
The Indonesian Insurance Association has released a “Reference Earthquake Insurance Tariff”
Rate ranges between 0.104% to a maximum of 0.33% of the sum insured
Rate is priced depending on risk Zone / Location, Type of Occupation and Building Constructions
At present the average rate is approx. 0.12%
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Premium Computation
Premium rate for first loss policies is subject to short period premium scale of tariff
Premium is on annual basis or 12 calendar months. If period of cover is less than 12 months, premium is computed by using short-period premium scale
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Market Penetration of Catastrophe Insurance
Non-Life Insurance penetration rate in general is very low, despite growing from 0.69% in 2004 to 0.72% (Gross Premium in % of GDP) in 2004.
Increasing awareness for Catastrophe Cover after the Aceh Tsunami and Nias Earthquake. However, demand remains on the low side.
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Future Challenges
Gradual increase of “Shareholders Cession” to MAIPARK More Insurance Education of the Society is needed
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Future Challenges (continued)
Implementation of Building Code to improve Vulnerability of Building Stock and Insurance Underwriting Practices
Establishment of the Natural Disaster Law
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New Initiatives
Residential Earthquake Insurance Scheme Insurance / Reinsurance of Donor Funds for the
Rehabilitation and Reconstruction of Aceh and Nias Urgent Installation of Tsunami Early Warning System Flood Risks & Terrorism Cover to be administered by
MAIPARK in the coming years
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New Initiatives (continued)
Voluntarily Earthquake Risk Cession to MAIPARK in addition to the “Shareholders Cession”
Study on Sub-Soil Conditions
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Thank youTerima kasih