Sinar Mas already paid 40% of May riot victims' claims

JAKARTA (JP): Insurance firm PT Asuransi Sinar Mas announced on Thursday it had paid 40 percent of the Rp 92.65 billion (US$8.3 million) it received in claims from owners of properties and motor vehicles damaged during the May riots.

Sinar Mas president Kornelius Simanjuntak said the company extended Rp 37.65 billion (about US$3.4 million) to 201 policyholders out of the 282 claims from the three-day orgy of looting and vandalism.

"We will pay all the claims of our clients affected by the riots in mid May," Kornelius told reporters.

Of the total amount repaid, Rp 35 billion was for claims for damaged properties and buildings. The remaining 2.65 billion was paid to all of the 109 claimants for motor vehicles damaged during the riots.

He said the company had only paid out on 92 policies of the 173 claims for damaged properties because the others were jointly underwritten with other insurance firms.

Sinar Mas was the lead underwriter of the 92 insurance contracts but acted only as counderwriter in the remaining 80 contracts, which were all worth Rp 55 billion.

The settlement of these unpaid claims was awaiting the decision of the lead underwriter, as well as the results of the loss adjusters' studies, he said.

Some claims had not been paid yet because they either did not have complete data or were currently in the process of payment, he said.

Sinar Mas is the first company to publicly announce it has paid insurance claims to riot victims after four months of uncertainty.

Earlier this month, the Association of Indonesian Retailers (Aprindo) said only about Rp 5 billion of the Rp 661.5 billion of its members' claims arising from the riots had been paid.

Aprindo threatened then to publish the names of the insurance firms if they did not honor the contracts by Sept. 15.

Most of the insurance contracts were reinsured to Singapore- based insurance companies.

The Singapore Reinsurance Association (SRA) recently began to advise its members to make payments of claims to Indonesia's riots victims, after initially insisting that the riots should not be covered because they were politically motivated.

But the SRA, which groups several major international insurance firms, demanded that the Insurance Council of Indonesia revise the terms and conditions of the loss insurance policies sold in Indonesia which contained riots, strikes and malicious damage (RSMD) clause to avoid ambiguity in policies in the future.

Kornelius said he was currently working as a drafter for the Association of Indonesian Insurance Management Experts to help come up with new wordings which would redefine the RSMD clause.

"It is currently under simulation," he said, adding that he hoped to finish the draft by the end of this month and to have the new wording applied by the end of the year.

He declined to specify the changes but said that the RSMD clause for loss insurance policies would be divided into narrow and the wide clauses.

The narrow clause would be applied to minor or "localized riots" such as labor strikes and brawls, while the wide clause would cover unrest on a larger scale, such as that happened on May 12 to May 15.

The wide clause would have higher premiums, he said, and would cover looting, which would not be covered in the narrow clause, he said.

"This will help us set fair premiums for different policy holders," he said.

The company's marketing director, Budi Hartono Purnomo, said the new clause would force insurance companies raise their premiums.

"The foreign reinsurance companies now charge higher premiums to Indonesian firms because we have a high country risk," Budi said.

Rates for different types of commercial and noncommercial properties which currently ranged from 0.275 permill (per thousandth) to 0.55 permill of the insurance claim reserves would be raised to between 1 permill and 3 permill, he said.

Kornelius said Sinar Mas' owned retention of the claims was Rp 15 billion. (das)