INSURANCE AS A TOOL OF

DISASTER RISK MANAGEMENT IN

INDONESIA

Frans Y. Sahusilawane

PT. Asuransi MAIPARK Indonesia

31 March 2011
Why Insurance?

• Protecting the People

• Relieving the Pressure on the State Budget
• Promoting disaster-resilient community
• Strengthening the Basic Foundations of
Indonesia’s Insurance Industry

2
 OPENING REMARKS
• “The present is The Key to the Past”, exclaimed James Hutton, the Father of the
Geological Sciences, more than 100 years ago.
Meaning that the geological processes in the past followed along the same pattern
of the present day processes (this is right to a certain extent)

• Great catastrophes which happened in the past will recurr, although we do not
know when.

• The Krakatau Great Eruption in 1883 was due to the collapse of the volcanic body
(>100 years ago), creating the present day Krakatau Caldera.

• There same event could have happened before, this could have happened before
… in 416 AD (NOAA) and in 523 AD (Wohletz).

• This same phenomenon could happen again in the future. If it does the losses of
human lives, dwelling houses, buildings, infrastructures could be many fold.
TOPICS TO BE DISCUSSED
I. Earthquake Risk in Indonesia

II. Legal Aspect

III. MAIPARK : Establishment & Achievement

IV. Risk Management of Natural Disaster

TOPICS TO BE DISCUSSED
I. Earthquake Risk in Indonesia
II. Legal Aspect

III. MAIPARK : Establishment & Achievement

IV. Risk Management of Natural Disaster

World’s and Indonesia’s Earthquake Epicenter Map
for Earthquake with Magnitude > 5.5 (1964 – 2010)

Almost 20% of Damageable and tsunamigenic

Earthquake Occurred in Indonesia.
 EARTHQUAKE HAZARD IN INDONESIA

Earthquake occurrences in Indonesia for

magnitude more than 5,0.

Overall, it is rising in number since year of 2000.

Histogram: Number of Earthquake in Indonesia from 1965 to April 2009.

 Los Angles EQ, 1987 Mexico City EQ, 1985

Yogyakarta EQ, 2006

Remote epicenters could brutally hit cities.

Mexico City is the most significant case, whereas 350
km of earthquake’s hypocenter distance destroyed
177 buildings completely.
Los Angles, Mexico City and Yogyakarta: local geology and soil play very important roles in earthquake damage.
 ECONOMIC LOSSES AND HUMAN CASUALTIES DUE TO EARTHQUAKE 2004 – 2010 (June)

Economic Loss Insured Loss (million

Earthquake Events Date Magnitude Casualties
(million USD) USD)
Nabire Eq 26.11.04 7.2 31 55.00 0.37

Aceh Eq - Tsunami 26.12.04 9.2 126,732 5.00 68.40

Nias Eq 28.03.05 8.6 905 668.00 0.22

Padang Eq 10.04.05 6.7 0 22.20 0.22

Yogyakarta Eq 26.05.06 6.3 5,749 3.10 28.90

Pangandaran Eq 17.08.06 7.7 637 17.50 0.31

Padang Eq 06.03.07 6.3 67 167.00 5.60

Bengkulu Eq 12.09.07 8.4 25 164.00 10.10

Dompu Eq 26.11.07 6.7 3 8.80 -

Dompu Eq 07.08.08 5.7 0 12.90 -

-
Gorontalo Eq 16.11.08 7.3 1 380.00
-
West Papua Eq 04.01.09 7.6 4 320.00

West Java (Tasikmalaya) Eq 02.09.09 7.2 81 790.00 5.08

West Sumatra (Padang) Eq 30.09.09 7.6 1,117 2,080.00 90.00

TOPICS TO BE DISCUSSED
I. Earthquake Risk in Indonesia

II. Legal Aspect

III. MAIPARK : Establishment & Achievement

IV. Risk Management of Natural Disaster

 LEGAL ASPECT

• Law Number 24/2007 :

National Disaster Management.

• Government Regulation Number 21/2008 :

Implementation of National Disaster Management.
DISASTER MANAGEMENT LAW OF INDONESIA (1)

• Disaster Management Law of Indonesia Number 24/2007 and

Government Regulation Number 21/2008 mention that :

• The Government encourages the participation from Private Sectors in

the national risk management.

• (Law Number 24/2007 section 28, 29, 57, 59 and Government

Regulation Number 21/2008 section 67, 75, 87)

• The law stated that the BNPB is the sole agency to perform disaster
management (Ministerial level).
DISASTER MANAGEMENT LAW OF INDONESIA (2)

• The Government of Indonesia has the obligation to protect the

citizens against any disaster.

• This Law stipulates that every Indonesian citizen has the right
to be protected against any disaster.

• Encourages the participation of private sectors in national

disaster management programs.
 TOPICS TO BE DISCUSSED
I. Earthquake Risk in Indonesia

II. Legal Aspect

III. MAIPARK : Establishment & Achievement

IV. Risk Management of Natural Disaster
INDONESIAN EARTHQUAKE REINSURANCE POOL
Indonesian Earthquake Reinsurance Pool (IERP)
Established in December 2002, start operation 1st January 2003
 Decree of Directorate General of Financial Institution, Ministry of Finance
 Number : SE-1505/LK/2002
 Date : April 12, 2002

 PT. ASURANSI MAIPARK INDONESIA

Established in December 2003, start operation 1st January 2004
 Decree of Director General of Financial Institution, Ministry of Finance
 Number : SE-6047/LK/2003
 Date : November 11, 2003
PT. ASURANSI MAIPARK INDONESIA
MISSION STATEMENTS

• To promote proper handling of earthquake insurance in indonesia

insurance industry

• To collate statistic, prepare nationwide database and risk profile

• To do research and studies on earthquake risk and related matters

• To generate local capacity

SURVEYS AND RESEARCHS BY MAIPARK

• seismological research
• Earthquake intensity survey
• Geophysical and Geological survey
• Catastrophe model:
• Earthquake and Flood hazard
 Cities along west cost of
Sumatra facing the subduction
earthquake and tsunami threat.

Cities along Barisan Mountain

facing the shallow earthquake
due to Sumatra Fault activity.

Simple Explanation

Sumatra Oblique Subduction

Mentawai thrust fault

Segment of Sumatra Active Faults, Sumatra fault zone

Their Fractal Dimensions and Seismicity (From Left to Right)

A seismotectonic sketch map showing the segments of Sumatra Fault Zone and the Mentawai Fault Zone.
 Geological Survey at Sumatra
Site: Bukit Tinggi, West Sumatra

Bukit Tinggi, West Sumatra: Settlement was Dramatically Stand on the Sumatra Fault Line.
 Cummulative numbers of
earthquake occurrences in Sumatra
fore-arc (1964 – 2009)

Research: Seismic Activity of Sumatra Fore Arc Region.

 SUMATRA FAULT ZONE
• Right lateral

• Analogous to the San Andreas Fault in California

• Not one single fault, but a fault zone, broken into >13 segments

• 1650 km (Banda Aceh-Semangko Bay in Lampung)

• It dissects the Barisan Range

- on top of the Barisan Range:
- volcanoes-acid volcanoes
- In numerous places there are sand layers-water saturated sand layers

• A great potential for liquefaction. Dangerous for buildings and infrastructure

 Geological Survey at Sumatra
Site: Kepahyang Regency, Bengkulu

Geological Survey: research on soil condition at West Sumatra and Bengkulu.

 DOMPU EARTHQUAKE SURVEY, 7 AUGUST 2008
Site: Desa Kadindi Atas, Kec. Pekat
Earthquake: M 5.7

DOMPU EARTHQUAKE SURVEY, 7 AUGUST 2008

Site: Desa Kadindi Atas, Kec. Pekat
Earthquake: M 5.7

After-Earthquake Survey: Research on “How Dwelling House’s Construction Response to Earthquake?”

 Gravity Survey at Gorontalo
Site: Tolingula, Gorontalo Province

Geophysical Survey: research on soil condition using gravity method at Gorontalo Province.
 Fault Line
Subduction
Epicenter

Local Fault as seismic source in Java Island.

 Bantul, which was mostly devastated
during the 2006 earthquakes, due to the
26 soft foundation of the rock, where the
seismic waves acquired a strong
Bantul amplification.
Regency
Southeastern part of Mount. Merapi.
It consist of lava flow, pyroclastic flow
and laharic deposits.
Limestone deposits from Mount. Kidul area.

150.000 rumah River deposits from the Opak River.

Wonogiri Reef limestone, calcarenite.

Regency
Limestone and marly sandstone
deposit from Setolo formation.
Andesitic breccias, tuffs, lapilli tuffs.

Unsorted debris from Kebobutak formation.

Eq Epicenter
Gempa Yogyakarta, 26 Mei 2006
1.750 At top right : remnants of the old Merapi
Rumah
halfly surrounding the young cone of
Mount. Merapi. undiferrerentiated tuffs,
ashes, breccias, agglomerate and lava
flows. This are young volcanic deposits of
Mount. Merapi included solid lava flows
from Mount. Merapi, extensions of lava
tongues protruding from the crater area.
 Resistivity profile across Bantul area (Yogyakarta, Central Java)
The 2 kilometers thickness of soft sediment beneath In the other hand, only 81 casualties in
Bantul amplificated the earthquake wave, 4.143 Gunung Kidul, altough it is positioned
casualties in Bantul. closer to earthquake epicenter.

BANTUL GUNUNG KIDUL

Bantul Gunung Kidul

6.3 SR

Magnetoteluric profile shows the vulnerability of Bantul Area due to its soil condition (Grandis, Widarto and Andriansyah, 2007)
 EQ Epicenter

41 rumah

1.365 rumah

I N D O N E S I A

Zoom Area
Dompu Earthquake, Sumbawa. August 7, 2008.
M 5.7 (Depth 10 km). This erthquake destroyed 1.396 dwelling
houses in Sumbawa Province. Data Source: BNPB (August 11,28 2008)
 The dwelling houses in Moyo Island, even though closer to the epicenter, are less damaged compare to those
around Dompu, which are located of lose volcanic pyroclastic debris from Mount Tambora.
Here the Seismic Waves obtained a strong amplification.
Moyo Island however is built up of reef limestone.

Field survey at West Sumbawa: soil condition also vulnerable to this Province.
 EQ Epicenter

nd
la
Is
Do

o
m

oy
pu

M
Re
ge
nc
y

DOMPU EARTHQUAKE SURVEY, 7 AUGUST 2008

Site: Kecamatan Pekat, Dompu
Earthquake: M 5.7 Dompu Earthquake, Sumbawa. August
7, 2008. M 5.7 (Depth 10 km).

DOMPU REGENCY (50 – 100 Km from

Epicenter):
1.365 Unit Dwelling Houses Medium and
Heavy Damage
11 Injured
2000 Refugees
DOMPU EARTHQUAKE SURVEY, 7 AUGUST DOMPU EARTHQUAKE SURVEY, 7 AUGUST 2008
2008 Site: Kadindi Village, Dompu Data Source: BNPB (August 11, 2008)
Site: Nangamiro, Dompu Earthquake: M 5.7
Earthquake: M 5.7
 Dompu Earthquake, Sumbawa. August
7, 2008. M 5.7 (Depth 10 km).

MOYO ISLAND (Epicenter Area):

DOMPU EARTHQUAKE SURVEY, 7 AUGUST 2008
Site: Labuan Haji, Moyo Island
Earthquake: M 5.7
41 Unit Dwelling Houses Medium and
Heavy Damage
3 Injured
DOMPU EARTHQUAKE SURVEY, 7 AUGUST 2008 No Refugee
Site: Labuan Haji, Moyo Island
Earthquake: M 5.7 Data Source: BNPB (August 11, 2008)

EQ Epicenter

nd
la
DoDom

Is
m p

o
pu u
oy
M
ReReg
ge en
nc cy
y

DOMPU EARTHQUAKE SURVEY, 7 AUGUST 2008

Site: Labuan Haji, Moyo Island
Earthquake: M 5.7
Earthquake; Jakarta
and Surrounding Area

32
South Java Seismic Gap n gs
of
i
fi nd K
e r AR
o th I P
A n M A
 Paleo-tsunami Research

Gunung Kidul Survey Sites Site BRN-01

34
Paleo-tsunami Research

Site KRK-02
35
Paleo-tsunami Research
Findings : (1)
• Some areas along the South Coast of Java are tsunami
prone. The inlets, bays, and low land regions.
regions

• Not the entire coastline are tsunami prone.

prone Even though
large earthquake occur off shore. Due to the morphology of
the coast. Some areas are being “protected” by small
limestone hills (bio-herm) which might provide save area for
the people to run to during times of emergency.
 Findings : (2)
• An “early warning system” is really and hardly
needed, even as primitive tower with human
observers on the watch is good enough than
none. Unfortunately this system is only
effective at day time.

• A “wall” of sea waves can be seen

approaching the shore and there is time
“enough” for the observers to sound the alarm
and to climb down the tower to save them
self.

• Preceding the tsunami waves more often than not, the sea can be seen receding from the beach. Along
stretches of beach could run dry. Please remember the local wisdom of local people of Simelue : “if you see
receding run to higher ground”. We must use this to teach people (children, vacationers, swimmers) of this.
This is very important for vacationers (bathers, swimmers and children playing in the water)

• This whole things can only be done if we have an early warning system. This we have not. But the local
communities can erect bamboo observation towers near the beach and having same people watching the
sea all the time and warn people of the impending danger.
Merapi Eruption; Survey of damaged area

38
39
CATASTROPHE MODEL - EARTHQUAKE

Hazard

Vulnerability Loss

Inventory

PADANG EARTHQUAKE 30/09/09

40
 DAMAGE ESTIMATION WITH CATASTROPHE MODEL

Earthquake Epicenter
M5.7 (Depth: 20 km)
April 16th, 2009 (08:03:42 WITA)
Intensity (MMI)

I II III IV V VI VII VIII IX X XI XII

MAIPARK Catastrophe Modeling estimated IDR 108

Billion of losses from Palu Earthquake. This earthquake
occurred from Palu – Koro Fault activity.
Catastrophe Modeling: Economic Loss Calculation within Hours after an Earthquake Occurrence.
 FLOOD AND FLOODING

• Flooding has become a very menacing problem in Indonesia

• In terms of money the yearly losses due to flooding have

exceed the losses due to earthquake

• MAIPARK starts studying this, and starts to build a database

MAIPARK’s FLOOD CAT-MODEL
| Jakarta as a Pilot Project |

Flood in Indonesia
Indonesian Flood Catalogue during 2002-2009*

Rainfall Flood
Flash Flood
Coastal Flood Flood Catalogue in Java Island

140 135
Jakarta
107

44

34
2002-2009
2010
11
4 15 19 12
8

* Derived from MAIPARK’s flood catalogue

 PRE-ELIMINARY STUDY: FLOOD HAZARD
MODELING
MAIPARK starting to build a new
catastrophe model:

Flood Hazard Model

We cooperating with various

institution related to meterology,
hydrogeology, planology, geography
DAM BURST
and other earth sciences.
GRESIK

This model hopefully would useful

TUBAN
LAMONGAN
for mitigation and risk management
due to flood hazard.

BOJONEGORO
River Flood
Potential Area
Administrative Flood Area
Border

Flood map along Bengawan Solo River (Forum Peduli Bencana, 2009)
Risk Awareness Campaign
Conducted in 292 sub-villages
in Bantul District, Yogyakarta
Province, 2008.

Attended by 12,000
participant
TOPICS TO BE DISCUSSED
I. Earthquake Risk in Indonesia

II. Legal Aspect

III. MAIPARK : Establishment & Achievement

IV. Risk Management of Natural

Disaster
 THE NECESITY AND URGENCY OF
HAVING A RISK MANAGEMENT
PROGRAM

INDONESIA HAS EVERY REASON TO PERFORM IT MORE

ECONOMICAL THROUGH AN INSURANCE SCHEME

So far, all risk financing techniques rely solely on

state budget
 POST-DISASTER SPENDING 2001 - 2007
In Million USD

SOURCE: MINISTRY OF FINANCE, REPUBLIC OF INDONESIA

 PRE-DISASTER SPENDING 2001-2007
In Million USD

SOURCE: MINISTRY OF FINANCE , REPUBLIC OF INDONESIA

RISK MANAGEMENT OF NATURAL DISASTER:
EARTHQUAKES

INSURANCE PROVIDES A BETTER

ALTERNATIVE IN FINANCING RISK OF
NATURAL DISASTER !
 How Indonesian Insurance Industry
Prepare Itself to Participate in Natural
Disaster Risk Management

Other Countries : Insurance industry and government

sponsored insurance scheme only a response after
occurence of a big earthquake causing serious damage

Indonesia: Insurance supervisory authority and insurance

industry prepared themselves long before serious
earthquakes hit Indonesia
COMPARATIVE OVERVIEW OF INDONESIA AND COUNTRIES HAVING
AN INSURANCE SCHEME

Indonesia Land Area: 5,193,166 Km2

5 Biggest Islands
Kalimantan : 539,460 Km2
Sumatra: 473,606 Km2
Papua: 421,952 Km2
Java: 132,035 km2
Sulawesi: 89,035 km2

Japan New Zealand

394,744 Km2 268,671 Km2 Taiwan
Only 83% of Only 57% of 32,261 Km2 only
Sumatra Sumatra 36% of Sulawesi
 CRESTA Zone 3 of Indonesia
West Java, Jakarta and Banten
Total Area :
44.718 Km2
Total of Residential :
9.839.878 Units

CRESTA Zone 5 of Japan

Tokyo, Yokohama and Chiba
Total Area :
9.601 Km2
Total of Residential :
12.491.692 Units
 CRESTA Zone 5 of Indonesia
East Java
Total Area :
47.922 Km2
Total of Residential :
9.873.440 units

CRESTA Zone 8 of Japan

Osaka, Kyoto and Kobe
Total Area :
27.091 Km2
Total of Residential :
8.676.647 Units
 EARTHQUAKE INSURANCE SCHEME

• Features of Required Earthquake Insurance Scheme:

– The crux of the matter:

• Quick response to asses the damage (within two weeks after area accessible)
• Quick claims payment (two weeks after assessment)

– Deployment of nation wide insurance network necessary

– Strong local and international capacity needed

 TACTICS AND STRATEGY

Central and Provincial Government

MAIPARK and Indonesian

MAIPARK Insurance & Reinsurance Companies

•Munich Re
•Swiss Re
•ACR
•AON-Benfield
•Indonesian reinsurance companies

A Full Applications of the PPP Principle and the Corporate Social Responsibility
 CONCLUSSION
 Almost 20% of world’s damageable and tsunamigenic earthquake
occurred in Indonesia.

 The increasing tendency of government spending in pre- and post-

disaster relive effort already create heavy burden to the state budget.

 It is therefore imperative that Indonesia should be able to perform

more efficiently in risk management performances.

 Through establishment of IERP (2002) and MAIPARK (2003),

Indonesian insurance industry is ready to contribute in the national
risk financing program.
Thank You