Indonesia’s government and a consortium of 56 insurance companies have signed the first contract to protect state assets against disasters in the seismically active Southeast Asian country, reported Reuters.
The contract, which took effect on 1 December, provides cover for buildings valued at around $770m and comes after a devastating year of disasters in 2018 when earthquakes and a tsunami killed more than 3,000 people and destroyed homes and public infrastructure.
Despite the risk of disasters in many parts of the archipelago, Indonesia has not previously insured state assets because of difficulties in determining premiums based on different risks in its 17,000 islands, said Encep Sudarwan, director of state assets at the Finance Ministry.
The government and the insurance firms had settled on a flat rate to insure 1,360 buildings owned by the Finance Ministry valued at IDR10.84tn ($769.3m).
The government paid a premium of IDR21.30bn for the insurance cover, reported CNN Indonesia.
The assets are insured against natural disasters such as earthquake, floods and fires, as well as man-made disasters like rioting, terrorism and plane crashes.
“We hope if something risky happens, we can claim for reimbursement and we can speed up recovery. This also mitigates our risks,” Mr Sudarwan said.
Assets controlled by 10 other ministries will begin to be insured next year, he added. More assets from other agencies will be included under the insurance umbrella in subsequent years. The goal is to have all state assets insured by 2023.
An annual review will be carried out on the insurance programme, with the coverage of assets of the Finance Ministry treated as a pilot project.
The insurance consortium consists of 50 insurance companies and 6 reinsurers. The companies include Asuransi Tugu Pratama Indonesia, Asuransi Astra Buana, which is a unit of Astra International, and Asuransi Sinar Mas, part of conglomerate Sinar Mas Group, as well as state-owned Asuransi Jasa Indonesia and Asuransi Kredit Indonesia.
To qualify to join the consortium, insurance companies must meet several requirements, including: they are not sanctioned by the Financial Services Authority (OJK); their Risk Based Capital (RBC) ratio is at least 120%; and minimum capital is IDR150bn. The insurance companies must have a 100% liquidity ratio and be able to work with other consortium members.Within the consortium, Asuransi Jasindo is the policy issuer and Reasuransi Maipark Indonesia is the administrator.