General insurance firms to set up consortium

General insurance firms to set up consortium

Fitri Wulandari, The Jakarta Post, Jakarta

The government has urged the country's general insurance firms to
set up a consortium specializing in extraordinary risks, such as
terrorism, sabotage, earthquake and flood, which could result in
huge insurance claims.

Firdaus Djaelani, the insurance director at the Ministry of
Finance, said if all the country's general insurance companies
agreed to participate in the consortium, it would be strong
financially and would be capable of covering a large part of
claims resulting from the disasters.

Local insurance firms usually share their risks and premium
collected from customers with financially stronger foreign
reinsurance firms which cover customers' claims proportional to
their share in the premiums.

With a strong capital base, the consortium would be capable of
covering a large part of claims from customers. As such, it could
retain a large part of the premiums from the customers.

"Extraordinary risks should still be shared with reinsurance
firms abroad. But with the consortium, we will keep a large part
of the fund in the country," Firdaus told The Jakarta Post over
the weekend.

Based on data from the Ministry of Finance, insurance premiums
sent to overseas reinsurance firms reached Rp 3.4 trillion
(US$391 million) in 2002, up from Rp 3.2 billion in 1999.

Commission and claims received from the reinsurance firms
amounted to Rp 596 billion in 2000, down from Rp 630 billion in
1999.

At present, there are 105 general insurance companies in
Indonesia.

Kornelius Simanjuntak, the head of legal and claim affairs at
the Indonesian General Insurance Association (AAIU), said the
association had established a task force to set up the
consortium.