'Blast to deal heavy blow to insurers'
'Blast to deal heavy blow to insurers'
Fitri Wulandari, The Jakarta Post, Jakarta
The deadly Bali bombing will deal a heavy blow to the
country's general insurance firms as the incident will make it
more difficult for them to secure international reinsurance for
their clients.
"International reinsurance companies will think twice before
sealing agreements with Indonesian insurance firms because of the
Bali bombing," Kornelius Simanjuntak, a senior executive of the
Indonesian Insurance Council (DAI), told The Jakarta Post on
Wednesday.
He noted that after the Sept. 11 terrorist attacks on the
U.S., international reinsurance companies had been reluctant to
cover high risks such as natural calamity, fire and public
unrest.
They even stopped covering terrorism risks as many of them
went bankrupt due to high insurance claims after the Sept. 11
attacks.
A reinsurance company shares premiums received by and risks
shouldered by insurance companies.
An insurance company needs to reinsure its clients to minimize
losses in case of incidents which result in claims.
The Bali bombing over the weekend, which killed more than 180
people, mostly foreign tourists, has already impacted on
insurance firms providing coverage for vessels heading for
Indonesia.
The London-based Joint Hull Committee has designated Indonesia
a war-risks zone, and called on insurance and reinsurance
companies to cancel or amend all contracts with vessels sailing
to Indonesia.
According to Kornelius, even before the Bali bombing,
international reinsurance companies had refused to cover high
risk insurance for conflict-torn areas in Indonesia such as
Nanggroe Aceh Darussalam and Maluku.
Following the Bali bombing, he said, international reinsurance
firms might apply similar treatment to the whole country.
"They might refuse to cover high-risk insurance or they might
only provide high-risk coverage up to a very limited value," he
said.
As a consequence, he warned, it would be difficult for local
consumers to insure their property or facilities against high
risks because few insurance companies would be ready to do so and
the premiums would be expensive.
Premiums for high risk insurance went up by between 50 percent
and 75 percent after Sept. 11, Kornelius explained.
On the other hand, high risk policies are needed by people who
live in big cities such as Jakarta where threats of natural
disasters and public unrest are real.
Kornelius said that because of the high premiums, local
companies would rather insure some parts of their properties than
the whole properties. This would, in turn, affect the growth of
the local insurance industry.
Kornelius said that a number of international reinsurance
firms had asked to renegotiate their contracts with Indonesian
general insurance firms for high-risk coverage. The meeting was
scheduled for the end of this month.
Local insurance companies should be able to convince the
reinsurers that the situation in Indonesia was still safe enough
for them to continue providing backup for the country's insurance
firms.
However, he stressed that the international reinsurance firms
would not be convinced unless the government took real action to
fight against terrorism.