•    HOME   
•    NEWS   
•    BUSINESS   
•    INTERNATIONAL   
•    TECH   
•    SPORTS   
•    LIFE & TIMES   
•    OPINION   
•    MY JAKARTA   
•    BLOGS   

The 7.6-magnitude earthquake in West Sumatra will cost insurers an estimated Rp 1.3 trillion ($137.8 million) in claims, well surpassing the Rp 400 billion in total claims made after the major Central Java quake in 2006, according to the nation’s reinsurer.

However, the figure does not reflect the scale of the damage as not all buildings in the disaster zone were sufficiently covered.

The massive impact of the Sept. 30 quake also prompted major insurers to call on the government to make earthquake coverage mandatory for certain types of property and transactions.

“We are projecting the West Sumatra quake will trigger more insurance claims than the quake in Central Java, which saw claims of $40 million, because penetration of insurance in Padang and its surroundings are higher than other cities,” Frans Y Sahusilawane, president director of PT Asuransi Maipark Indonesia, told reporters at a news conference on Wednesday.

Maipark is the country’s only reinsurance company specializing in earthquakes, fire and explosions following earthquake, volcanic eruptions and tsunamis.

According to Maipark data, the estimated property damage in Padang and other areas affected by the quake will reach about Rp 1.3 trillion, although the insurance companies’ total payout should be lower because not all buildings were insured. Meanwhile, claims are already being processed.

“For total losses, it will be quicker because we already know how much is covered,” Frans said, “but for partial loss it will take about two to six months to know how much damage there is.”

Maipark data showed that most buildings in Padang suffered partial losses, while Jambi, Agam, Pariaman and Padang Pariaman had total losses because entire houses were lost in the landslides triggered by the quake.

The total coverage for the 3,830 insured buildings in Padang and the other affected areas, including housing, offices and other buildings, came to Rp 9.5 trillion, the data revealed.

Kornelius Simanjuntak, the head of Indonesia General Insurance Association (AAUI), said that the disaster was expected to prompt many more people to purchase additional coverage for natural disasters, especially earthquakes, which currently attracts little interest.

“The post-disaster testimony from people who were covered by insurance will cause interest in such types of insurance to increase,” he said.

Kornelius also called on the government to issue a regulation that required property owners to take out earthquake policies, saying this would ease the burden not only on customers and banks, but also the government when carrying out reconstruction programs.

“If the government has this kind of regulation, then they will pay much less,” he said.

The rules could also make the cost of such coverage cheaper because the increase in subscribers would allow companies to charge less for the insurance, Kornelius said.

The association also called for mandatory regulations to stipulate that mortgages be covered for earthquakes to minimize future losses and cover all damages caused by quakes, both directly and indirectly.

Kornelius said earthquake insurance penetration was presently very low. However, he could not provide further details because data about housing in Indonesia was not available.