Terror-risk insurance still costly<\/p>\n
Dadan Wijaksana, The Jakarta Post\/Jakarta<\/p>\n
The recent bombing in front of the Australian Embassy should
\nhighlight the fact that Indonesia has become a high-risk place
\nwhen it comes to terrorism -- a reality that may increase the
\ndemand from businesses for specialized insurance protection.<\/p>\n
However, with the relatively high premiums, coupled with the
\nabsence of reinsurance companies as a backup, the estimated rise
\nin insurance demand for terrorism-inflicted risks would not be
\nthat great, said chairman of Indonesia's Insurance Council (DAI)
\nHotbonar Sinaga.<\/p>\n
\"With the current bombing incident, the demand should indeed
\nincrease, as businesses are finding it more and more important to
\ncontain the risk of terrorism. Insurance companies should also
\nsee this as an opportunity,\" Hotbonar said.<\/p>\n
He was quick to add, however, that such insurance would
\nrequire additional costs. The relatively expensive premiums to
\ncover the risk of terrorist attacks has been seen as the main
\nfactor discouraging businesses here from joining such insurance
\npackages particularly at a time when many companies are still
\nstruggling to repay debts inherited from the late 1990s financial
\ncrisis.<\/p>\n
Hotbonar was replying to questions on how the latest bomb
\nattack, which has so far killed nine people and injured more than
\n180 others, would affect the prospects of the insurance industry
\nin the country.<\/p>\n
Most of the ravaged buildings surrounding the bombing site,
\nwere not covered by terrorism risk insurance, chairman of
\nIndonesia's General Insurance Association Frans Sahusilawane said
\nearlier emphasizing the reluctance of businesses to take out such
\ninsurance.<\/p>\n
In Indonesia, there are currently around 40 insurance firms
\noffering coverage for damage due to terrorist attacks. They are
\ngrouped under the Consortium for Development of Indonesia's
\nInsurance Industry (KPIAI), which was set up in 2002.<\/p>\n
The combined coverage capacity of the consortium stands at a
\nmere than US$5 million, and has so far collected some Rp 3.5
\nbillion ($380.43 million) from a handful of companies.<\/p>\n
Hotbonar said that the low capacity highlighted the necessity
\nfor the consortium to be supported by a reinsurance company,
\nespecially from overseas, with a sound equity. This would provide
\nmore confidence to insurers here to offer more varied coverage
\nrelated to terrorism.<\/p>\n
However, that should also pose a problem.<\/p>\n
\"There is a paradox. Knowing that Indonesia is vulnerable to
\nterrorist attacks, they (foreign reinsurance companies) would
\nthink twice about providing the back up for insurers here,\"
\nHotbonar said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/terror-risk-insurance-still-costly-1447893297",
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