Maritime Insurance Consortium Must Be Made

Maritime Insurance Consortium Must Be Made

JAKARTA – President Joko Widodo’s plan to develop maritime sector is welcomed by insurance industry. For risk mitigation, Indonesian Public Insurance Association (AAUI)  proposed the creation of maritime insurance consortium.

AAUI Chairman, Ahmad Fauzie Darwis, explained maritime sector is identical with the development of fishermen and its infrastructure like fishing vessels. This business, previously, is less interested by banking sector since its risk is high. Similar with banking, public insurance firms also stated the business is risky since usually, fishermen only have handed-over vessel engine. “This vessel engine cannot be insurance,” he explained in Jakarta on Tuesday (12/9).

Seeing high risks in maritime sector, insurance firms want to have national development for example, in terms of insurance by creating maritime sector development consortium. It means loan provision by banks or financing firms will be protected by maritime insurance consortium.

AAUI Research, Information, and Analysis Head, Dadang Sukresna, explained the creation of this consortium is important since loss ratio in maritime sector is relatively high. By creating consortium, the claim will also be lowered. “Consortium form can follow the existing market consortium. Prior to that, public insurance firms also do not want to work on the sector but since there have been consortium and national initiative, it can run well,” Dadang said.

AAUI Executive Director, Julian Noor, explained the government must make innovation if we want to boost maritime sector. If we only wait for financial service firms, its process will be long. This innovation can be conducted by giving stimulus to fishermen like micro loans (KUR). “Joko Widodo-Jusuf Kalla’s government has fuel subsidy budget which can be a stimulus to develop fishermen. If we only waot for it, its process will be long,” he said.

Julian explained in this year, the protection conducted by public insurance in maritime sector has not been significant yet. Meanwhile for next year, its influence will really depend on the innovation done by the government.

According to Julian, at least, there are three insurances which will grow in maritime sector such as marine hull, marine cargo, or maritime transportation and loan insurance. Per September 2014, the premium obtained from marine hull insurance reaches IDR 1.17 trillion, marine cargo insurance reaches IDR 2.22 trillion, and loan insurance reaches IDR 2.42 trillion.

Cutting Budget

In his explanation, Julian stated until QIII of 2014, public insurance industry has recorded gross premium of IDR 38.97 trillion or a 14.8-percent increase compared to the similar period last year. The premium growth slows down compared to QII and QI which grow for 20% and 18.9% respectively.

According to Julian, the deceleration is mostly affected by governmental transition cutting state budget absorption realization. “Various ministries and institutions, in using budget, often conduct suspension since they are waiting for the new government’s policies,” Julian said.

The sector mostly supporting premium collection until QIII of 2014 is property insurance business line with gross premium of IDR 10.53 trillion and vehicle of IDR 11.82 trillion.

According to AAUI data, aviation and accident insurance business lines are included in the line experiencing premium revenue drop. Aviation sector joined with satellite insurance recorded gross premium drop to IDR 515.1 billion than the similar period in 2013 of IDR 610.5 billion. Meanwhile, accident insurance premium falls to IDR 1.13 trillion from IDR 1.7 trillion from the similar period in 2013.

He said accident premium drastic fall occurs after legislative election as well as president-vice president election in 2014. “It increases during campaign period and after that, the premium falls,” he said as quoted by Antara.

Meanwhile, public insurance gross claim in QIII of 2014 is IDR 16.42 trillion, higher than in QIII of 2013 of IDR 18.6%. High claim is recorded in vehicle insurance business line of IDR 5.4 trillion or a 16.4-percent hike than in similar period in 2013. Then, property insurance business line recorded high claim hike of IDR 4.04 trillion or a 20.6-percent increase.

AAUI Chairman, Ahmad Fauzi Darwis, is optimistic that high claim hike will not lower industrial profit significantly. If operational revenue is lowered, Fauzi said, industrial revenue can still be helped from investment revenue. “Therefore, if claim increases, operational revenue drops, but bank interest also increases. It means, our non-operational revenue increases,” he said.

AAUI is optimistic until the end of this year, public insurance industry gross premium will grow up to 19% to around IDR 46 trillion due to the increasing government expenditure. (Investor Daily)