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.