Government and disaster insurance

Indonesia is preparing a disaster insurance scheme to cover financial losses and provide for emergency needs as the country constantly faces strings of natural disasters causing heavy social burdens.
Finance Minister Agus Martowardojo said Thursday the insurance was important as natural disasters have caused increasing financial losses and emergency needs to handle the aftermath of such disasters.
The most recent natural disasters of an earthquake-triggered tsunami in Mentawai, West Sumatra, and the eruption Mount Merapi in Yogyakarta, have rallied people to show stronger support for the establishment of disaster insurance.
“I have asked the Indonesia Capital Market and Financial Institution Supervisory Agency chairman to conduct a study on the establishment of disaster insurance,” Agus told reporters at the Finance Ministry.
He added disaster insurance was a very common initiative for developed countries but not developing countries, including Indonesia. Agus said the government would soon reveal the study results in a meeting with stakeholders at the ministry.  “In principle, we have reached an agreement on the need to establish disaster insurance,” he said. “The insurance may be similar to other forms of life insurance,” he added without elaborating.  He only said the premium would be taken from the state budget although he was not sure whether it would be included in the 2011 State Budget.  Agus said the initiative needed careful arrangement including the insurance form, risk calculation and disbursement process.



“We will carefully study an appropriate insurance design to prevent any difficulties in its claiming process,” he said. “The proposed disaster insurance will be reinsured with world-class reinsurance companies. I haven’t seen any Indonesian companies that are ready to carry out the reinsurance program.”  Agus also said the government had proposed an additional disaster fund of Rp 150 billion (US$16.8 million) to the budget body of the House of Representatives. Previously, the government allocated a disaster fund of Rp 50 billion. Agus said the fund was separated from the budgetary allocation for the rehabilitation program. “The disaster fund will be managed by the National Disaster Management Agency [BNPB],” he said. The post-disaster rehabilitation program would have a separate budgetary allocation of more than Rp 3.5 trillion. The government allocates a total of about Rp 4 trillion for disaster management activities, higher than the Rp 3.79 trillion in the Revised 2010 State Budget. Ahsanul Qosasih, a member of the House Commission XI overseeing finance and banking, deplored the government for being unresponsive to strong public demand on the establishment of disaster insurance to minimize disaster risks. 


“It’s time for the government to establish disaster insurance,” he was quoted as saying by detik.com on Wednesday. “Disaster insurance is very urgent to support the disaster fund allocated within the state budget.” 

He said that his Commission had asked the Finance Ministry and the BNPB to officially propose and design a long-term disaster insurance scheme. “We have a very limited budgetary allocation for disaster management,” he said, adding that the insurance would be needed to cover any losses caused by natural disasters. (ebf)

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