Indonesia Explores Mandatory Disaster Insurance Scheme

Addressing Natural Disaster Risks

Indonesia is considering implementing a mandatory disaster insurance scheme to protect its citizens from the financial impact of frequent natural disasters. The Association of Indonesian General Insurance (AAUI) is at the forefront of discussions with the government about potential models for this national program.

Parametric Insurance Model

Chairman of AAUI, Budi Herawan, revealed that the association has been in frequent communication with the Ministry of Finance regarding the implementation of mandatory disaster insurance. One potential model being considered is parametric insurance, which pays out based on predetermined parameters when a disaster occurs.

Challenges and Considerations

The implementation of mandatory disaster insurance faces several challenges, including:

1. Public Education: The need to socialize the importance of disaster insurance to the public
2. Premium Payments: Finding a solution for premium payments, potentially through government subsidies or assistance
3. Regulatory Framework: Developing a clear regulatory framework for the implementation

Industry and Government Collaboration

Budi Herawan emphasized that the success of this national program requires collaboration between the insurance industry, government, and parliament. The industry is prepared to work together to find solutions to the challenges ahead.

Regulatory Mandate

The development of mandatory disaster insurance is backed by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK). This law mandates the creation of a disaster insurance scheme, providing a legal foundation for its implementation.

Industry Response

OJK Commissioner Mahendra Siregar highlighted the importance of developing insurance products that meet the needs of various stakeholders, including the government, regions, and the public. The industry is encouraged to prepare appropriate products for different types of risks and their magnitudes.