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)