Indonesian Insurers Need To be Prepared To Handle Claims from Urban Quakes
Insurance companies in Indonesia should be ready to handle massive claims should a major quake strike a more densely populated city than Padang which has a population of 900,000 and which was hit by a 7.6 magnitude tremor in September, reports the Jakarta Globe citing Mr Alberto Hanani, an insurance specialist at the University of Indonesia. He says that insurers "need to be very careful as a quake like the one in Padang would leave them highly exposed". He warned: "They could end up defaulting on their obligations if they don't have enough capital and too many earthquake-related damage claims come in at the same time. "However, Mr Frans Sahusilawane, President of PT Asuransi Maipark Indonesia, the country's earthquake risk reinsurer argues that insurers are experienced at calculating earthquake risks in different parts of the country. He says that it is highly unlikely that calculations would be wrong "as we avail of the services of experts to assess the likelihood of earthquakes in the country's major centres". Referring to the series of quakes which hit Padang and Jambi recently, he said: "We are confident we are capable of coping with up to four times what we will have to pay out in claims to policyholders in Padang and Jambi," he said. He adds that claims from the quakes are expected to total Rp200 billion (US$21 million). Following the Padang earthquake, insurance firms immediately slapped a moratorium on issuing new policies and renewing existing ones until properties in the area are inspected for damage. Premiums in Padang and Jambi have also soared by between 50% and 60% since.
e-Weekly Asia Insurance Review, Volume IX Issue 44, 02 November 2009

Insurers' Must Raise Cat Rates in Indonesia
The recent natural catastrophes in the Philippines and in Padang, Indonesia, have raised much consumer awareness about insurance. Insurers' must raise prices, said the Indonesian insurance regulator to more than 400 delegates at the 16th Indonesia Rendezvous, organized by the Asosiasi Asuransi Umum Indonesia (AAUI) held in Bali, last week. "The insurance market has not reached equilibrium for the cost to the industry. Insurers' must raise rates and better manage catastrophe risks and reduce concentration of exposures," said Mr Isa Rachmatarwata, Chief of Insurance Bureau, Indonesia. Adding: "the crisis will encourage insurers to be more prudent with their management controls. "The Indonesian market has been buoyed with challenges and a competitive insurance industry with penetration still low at 1.3%, according to sigma 2009. Gross premium increased to Rp21,909 billion (US$2.3 billion) in 2008, an increase of 24.77% from Rp17,560 billion y-o-y. The loss ratio increase 5.44% from Rp8,489 billion in 2007 to Rp8,957 billion, last year. As for the Government's third amendment to the regulation concerning minimum capital for insurance business conduct, at the end of 2007, 36 companies had equity below Rp40 billion, and in 2008, 24 companies had less than the minimum required. The AAUI Chairman, Mr Kornelius Simanjuntak, encouraged the companies to comply with the regulation and thanked the regulator for giving them more time to raise the equity until the end of 2010. Speaking at the conference about the impact of the global recession on the insurance industry, Mr Bijan Khosrowshahi, President and CEO of Fairfax International, said that it has raised more awareness on enterprise risk management, in addition to alternative risk transfer mechanisms such as captives, and self-insurance.
e-Weekly Asia Insurance Review, Volume IX Issue 44, 02 November 2009

Insurance Market Recovers
Indonesia: The insurance market in the second quarter of 2009 improved after in the previous two quarters premium revenues had been stagnant and had even nearly been corrected. Data by the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) showed insurance premium in the second quarter of 2009 nearly jumped 10% to IDR20.95 trillion from IDR19.16 trillion in the previous quarter. The premium growth was supported by an increase of 12.83% in life insurance premium to IDR15.12 trillion from the previous IDR13.40 trillion. In the meantime, the general insurance sector only grew 1.21% from IDR5.76 trillion in the first quarter of 2009 to IDR5.83 trillion in the second quarter of 2009. Industrial claim surged 16.75% from IDR11.04 trillion in the first quarter of 2009 to IDR12.89 trillion in the second quarter. Claim in the life insurance industry also soared 16.6% from IDR8.25 trillion to IDR9.62 trillion, while claim in the loss insurance industry rose by 17.2% from IDR2.79 trillion to IDR3.27 trillion. Head of Insurance Bureau at Bapepam-LK Isa Rachmatarwata revealed premium increase followed by a surge in claims, although had yet reached an alarming rate, should be monitored by the industry's players. Chairperson of the Indonesian General Life Insurances Association (AAUI) Kornelius Simanjuntak was optimistic the positive performances in the second and fourth quarter would be able to patch up the potential risk of high claim.
Bisnis Indonesia, 25 August 2009