Fear of unrest gives boost to insurance industry<\/p>\n
JAKARTA (JP): Many insurers cannot keep up with growing demand
\nfor extensive damage insurance coverage amid growing violence and
\nworries over continued social unrest, industry executives said on
\nThursday.<\/p>\n
The director of the reinsurance division of the Insurance
\nCouncil of Indonesia (DAI), Frank Sahusilawane, acknowledged the
\nincreased demand for insurance policies covering social unrest
\nsince the bloody May riots.<\/p>\n
\"Demand is higher than supply,\" Frans said.<\/p>\n
All applicants for the damage insurance policy -- known here
\nas the fire policy -- now request the option of the riots, strike
\nand malicious damage (RSMD) coverage, he asserted. Previously,
\nthere was little interest in the clause.<\/p>\n
Demands is so high that many insurers have been forced to
\nreject applicants from areas highly vulnerable to unrest.<\/p>\n
Frans cited an insurance company in the North Sumatra capital
\nof Medan -- rocked by a spate of disturbances in recent months --
\nwhich received from 20 to 30 applications daily for the policy,
\ninclusive of the unrest coverage.<\/p>\n
\"The applicants are shop owners in nearby small towns who are
\nconstantly worried about more riots. But we are concerned because
\na small disturbance can virtually wipe out an area.\"<\/p>\n
Many insurance companies are also limited by their reinsurers
\non the terms of risk coverage.<\/p>\n
Frans' deputy in DAI, Nana Sudiana, said local and
\ninternational reinsurance firms were exercising greater caution
\nover the damage they would cover in Indonesia.<\/p>\n
\"The coverage ability of an insurance company depends on its
\nprogram with its reinsurers.\"<\/p>\n
Some local firms are strapped for cashand could only retain 10
\npercent to 20 percent of the risk, reinsuring the rest.<\/p>\n
The May riots, which led to Soeharto's resignation from the
\npresidency, marked the beginning of a political clamor in the
\ncountry, with unrest sparked in various areas.<\/p>\n
Scheduled in June is general election, a cause for social
\nunrest in previous years.<\/p>\n
Following the May riots, local insurance firms and their
\nreinsurers were embroiled in a dispute over the nature of the
\nunrest. Initially, foreign reinsurers defined it as politically
\ninspired and refused to pay claims.<\/p>\n
In December, DAI revoked the existing RSMD clause, \"Clause
\n4.1\", and endorsed two new clauses known as 4.1A and 4.1B which
\ncategorized unrest on the scale of the event and destruction. The
\nclauses eliminated ambiguity and were effected to guard against
\nfuture disputes.<\/p>\n
The 4.1B coverage is much wider than 4.1A, including
\nterrorism, sabotage, civil commotion, popular uprising and
\nrevolution without the use of firearms.<\/p>\n
New tariffs<\/p>\n
DAI also announced on Thursday the new premium rates according
\nto the revised 4.1A and 4.1B clauses.<\/p>\n
The new system classifies the premium rates by type of
\nproperty and a location's vulnerability to riots.<\/p>\n
It divides Indonesia into three zones of X,Y and Z.<\/p>\n
X is for areas highly sensitive to unrest, covering all of
\nJava including Jakarta; North Sumatra; Aceh, and East Timor.<\/p>\n
The latter two have been under military command due to active
\nseparatist movements. The military status was removed for Aceh
\nlast year, but violence has flared up again in the past week.<\/p>\n
Y comprises Irian Jaya, West Kalimantan, South Kalimantan,
\nEast Kalimantan, Lampung, South Sulawesi and South Sumatra.<\/p>\n
Z covers the remainder of the country.<\/p>\n
The highest annual rate is 11 per mill (per thousand) for the
\n4.1B coverage located in X Zone.<\/p>\n
It applies to the first and highest risk category of
\ndepartment stores, supermarkets, shopping centers, staple food
\nshops and warehouses, car dealerships, night entertainment
\nestablishments, and service and fuel stations.<\/p>\n
The second category includes hotels, restaurants, office and
\nmultistory car parks, garment and shoe factories, non-staple food
\nshops and warehouses, chain stores, tobacco, cigar and cigarettes
\nmanufacturers, and beauty salons.<\/p>\n
Those belonging to the second category and located in the Y
\nzone must pay an annual rate of 6.60 per mill for the 4.1B
\ncoverage.<\/p>\n
The third category includes movie theaters, assembly rooms and
\nconcert halls, pharmacies, radio and television stations, textile
\nmills, laundry, bakeries and biscuit works, processed food
\nfactories and edible fats and oils producers.<\/p>\n
Under this category, those located in the X zone must pay 5
\nper mill annual rate for the 4.1B coverage. (das)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/fear-of-unrest-gives-boost-to-insurance-industry-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}