Souce: Financial Times
Original article available here.
JAKARTA, INDONESIA, May 3, – Munich, Re the world’s largest reinsurer, has launched the world’s first microinsurance flood cover in Jakarta, targeting millions of poor people living in 24 regularly inundated districts of the Indonesian capital.
The group, which is working with insurer Asuransi Wahana Tata and GTZ, the German government’s international development agency, says the year-long pilot project is primarily a corporate social responsibility scheme.
If it takes off, it should make money within three years and will be extended nationally and overseas. Experts say it could be a way to educate an underinsured country about the industry.
They say that, with severe weather becoming more frequent and sea levels rising, providing flood insurance to poor people is going to become increasingly important.
Data from Munich Re, which has one of the world’s largest databases on natural disasters, show the number of weather disasters in Asia has risen from 75 in 1980 to 275 in 2007. The losses from these events, in 2008 values, rose from $5bn to $45bn in the same period.
A 2007 study by WWF, the global conservation organisation, and the Bandung Technology Institute, an Indonesian university, predicted wet-season rainfall in and around Jakarta in 2020 would be 84 per cent higher than it was in 2001, and that rainfall run-off in watershed areas could be up to 50 per cent higher owing to deforestation and urbanisation.
Kua Ka Hin, Munich Re’s south-east Asia chief executive, said: “The key to this is that it is a trigger-based [and not open to interpretation], affordable, easily understandable and unbureaucratic product that is easily claimable.”
Residents in the pilot districts can buy as many Rp50,000 ($4.80) insurance cards as they wish during the dry season months of May to October. If, during the following rainy season, the water level at the Manggarai flood gate on the Ciliwung River reaches 950cm, each card can be exchanged for a one-off payment of Rp250,000. The cards are valid for a year.
The water level last rose to this level in 1996, 2002, 2005 and 2007. On the last occasion, 70,000 homes were flooded up to 5m deep and 69 people died, with 420,000 displaced. Losses were estimated at $450m.
Awang Sanwain, a neighbourhood chief in the pilot area, welcomed the product but said its parameters should be altered. “When the water is at 800cm [at the flood gate], the water is already 30cm deep in my house and, when it is at 900cm, the water in my house is two metres deep.”
Munich Re said refinements were likely.
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