Foreign reinsurers firms reluctant to pay riot claims
Foreign reinsurers firms reluctant to pay riot claims
JAKARTA (JP): Several foreign reinsurers are reportedly
balking at honoring policy contracts with local insurance firms,
now snowed under by a mountain of claims from victims of the May
riots.
Indonesian Insurance Council (DAI) chairman Munir Sjamsoeddin
said yesterday 16 firms under the Singapore Reinsurance
Association (SRA) had insisted since June that damage incurred in
the riots was not covered by their reinsurance contracts with
Indonesian associates.
"We regret this response because it is not helping us resolve
the matter immediately," Munir told reporters at his office.
The Singapore association categorized the unrest in Jakarta
and another hard-hit area, Surakarta, Central Java, as "civil
commotion".
It defined the latter as a politically motivated outbreak
greater than a riot "whether measured in numbers involved, scale
of damage, area affected and/or the period in which the
disturbances occurred".
Culprits in the disturbance deliberately "displace or show
their dissatisfaction of the government", it said, adding that
the firms were not liable to cover such widespread losses.
The four-day orgy of looting and arson claimed more than 1,200
lives and caused at least Rp 2.5 trillion (US$192.31 million) in
losses in the greater Jakarta area. Allegations persist that the
unrest was fomented by organized groups.
DAI announced in June that insurance holders whose policies
contained the riots, strikes and malicious damages (RSMD) clause
were entitled to payments for their losses.
SRA said in its report that all negotiations with insurance
companies would be resolved on a case-by-case basis, depending on
the area where the loss occurred, circumstances and the exclusion
clause used in the policy wordings.
Negotiations will be held under conditions that new and
renovated businesses would apply new RSMD wording to be
introduced by Sept. 1.
The revision will include "clear exclusion of civil commotion
risks from proportional treaties effective from Dec. 31, 1998",
SRA said.
Aggrieved parties may take their case to court or seek
arbitration or mediation through a third party.
But the contracts -- based on the wording of the Association
of British Insurance and the Industry All Risk -- are unlikely
to be covered, SRA warned in its report.
Munir said SRA's resistance had influenced other reinsurers
which earlier pledged to compensate policy holders.
Most international reinsurance firms with exposure in
Indonesia initially concurred with DAI's decision, he said,
including the 16 foreign joint venture insurance firms in the
country.
"But now, there are several companies in London which are
waffling after seeing SRA's resistance."
He said DAI would meet again with SRA for further negotiations
over the dispute.
Munir said most local companies retain only 10 percent of the
risk claims and reinsure the remaining 90 percent to foreign
firms.
He said there was no definitive data on total losses claimed
by insured property owners.
As of last month, there were 10,958 holders of fire policies
in the country with RSMD coverage, amounting to Rp 20 trillion in
insurance value, he said. (das)