152 / 168
[
] 152
Building a bridge between
the insurance industry and Government
Frans Y. Sahusilawane, President Director, PT Asuransi MAIPARK Indonesia
D
ue to its unique geological and geographical characteris-
tics, Indonesia is prone to a range of natural disasters,
such as earthquakes, volcanic eruptions, landslides and
tsunamis. Most of its people are insufficiently prepared to cope
with these crises.
The great Indian Ocean tsunami that hit Aceh on 24 December 2004,
killing more than 200,000 people, was a reminder of the urgent need
to have holistic disaster mitigation systems in place.
As devastating incidents with huge losses have continued to
occur in Indonesia in recent years, the government has begun to
seek new strategies for disaster management. The old responsive
paradigm has gradually become more anticipative. Previously,
the common practice following an incident was to focus on post-
disaster activities only. Recently, pre-disaster mitigation activities
have been in place to support the goal of creating more disaster-
resilient communities.
In 2007, a law on disaster management was passed, marking
an important step for Indonesia as it provides a legal basis for all
stakeholders, clearly stating roles and responsibilities for the private
sector and society.
Establishment of Maipark
In the late 1990s, a series of major earthquakes hit Iran, China,
Turkey and Taiwan, causing a high number of casualties and vast
economic as well as insured losses. Prompted by these events, the
Indonesian insurance commissioner and the country’s insurance
industry association conducted field research to study the prepar-
edness of insurance companies to deal with a possible serious
earthquake and how to best handle the risk. The results of the
one-year study showed a serious lack of the knowledge, technical
capabilities and prudence necessary to properly handle earthquake
catastrophe risk.
Realizing that knowledge and technical capabilities are the founda-
tion necessary to build up competence in dealing with earthquake and
other natural catastrophe risks, the government and the insurance
association led the industry to set up a consortium on earthquake risk.
The Indonesian Earthquake Reinsurance Pool (IERP) consortiumwas
established at the end of 2002 and started its operations in January
2003, with the aim of providing a market vehicle for central statistics
and analysis as well as a pooling of expertise.
In order for IERP to comply with government regulations
regarding joint action by insurance industry players to deal with
natural disasters and other special risks, at the end of 2003 it was
transformed into a legal entity, PT Asuransi Maipark Indonesia
(Maipark).
Maipark was established to deal with all natural
disasters and other special risks, starting with earth-
quakes and their consequences. The mission statement
of the organization promises:
• To promote discipline and proper handling of
earthquake insurance in Indonesia
• To set a benchmark for earthquake insurance
pricing in the country
• To collate statistics and create a national database
• To build sound national reinsurance capacities for
earthquake insurance.
With the stated goal of enabling the Indonesian insur-
ance industry to become a knowledge-based industry,
Maipark also represents the industry in dealing with
various aspects of earthquake and natural disaster
management at the national level.
Catastrophe model for the insurance
industry and government
Maipark started to build national database in 2004
through compulsory cessions on earthquake insurance
received from all insurance companies. After four years
of work on the database, in 2007 Maipark undertook
the groundbreaking construction of a an Indonesian
Cat-Model for earthquakes. The project was finished
within two years at a marginal cost. The earthquake
catalogue that forms the main basis of the Cat-Model
has a register of more than 54,000 earthquake events
dating back as far as 1599.
The database is constantly updated with informa-
tion from research and surveys. Catalogue data has
been collected from the United States Geological
Survey (USGS), the Potsdam Geoforschung Zentrum
in Germany, the Meteorological Center in Japan, and
the Geophysical Meteorological Climatology Agency
of Indonesia, along with historical earthquake records.
With the Cat-Model, Maipark is able to estimate the
size of economic and insured losses caused by an earth-
quake within hours of its occurrence.
In 2008, the model was presented at the annual
convention of the Indonesian Geophysicists
Association. Discussions have taken place with experts
from various bodies, among others from the Bandung
Institute of Technology and Kyoto University on behalf
of the World Bank.
2004