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Yogyakarta, Indonesia, October 29, 2018 — IFC, a member of the World Bank Group, and PT. Reasuransi MAIPARK Indonesia, a special-risk reinsurance company, today hosted an event to present Earthquake Index Insurance (EQII) policies to three rural banks in Yogyakarta. The aim is to protect banks providing loans to individuals and micro, small, and medium enterprises from losses following earthquakes.
More than 12 million Indonesians live and work in earthquake-prone zones, with economic exposure reaching an estimated $80 billion. These risks are especially high in Java, Sumatra, and Sulawesi, where the worst-hit banks have lost between 15 and 35 percent of income following past earthquakes. These losses erode banks’ capital reserves and compromise their ability to lend.
Against this backdrop, EQII is a timely innovation, in that it automatically pays out to insured banks if there is an earthquake of magnitude 6 or above in their area. It meets the needs of rural banks, where increases in non-repayments of loans and savings withdrawals after an earthquake can cause liquidity constraints, precisely when the demand for cash is likely to increase.
“Indonesia's earthquake hazard exposure is among the highest in the world, both in terms of human mortality and economic losses. This was most recently witnessed by the Lombok and Palu earthquakes, showing us that risk mitigation mechanisms are needed,” said Heddy Agus Pritasa, Technical Director of MAIPARK, “PT Reasuransi MAIPARK Indonesia together with IFC have created the EQII product, licensed under the General Insurance Association of Indonesia (AAUI). This cooperation has allowed us to provide protection for banks against financial risk due to earthquakes.”
“EQII offers solutions for rural banks, helping them mitigate financial risks resulting from earthquakes, and providing much-needed support to these banks,” said Ascar Setiyono, Head of the Indonesian Rural Banks Association (Perbarindo) in Yogyakarta.
With IFC’s support, PT. Reasuransi MAIPARK has been working with local insurance companies to develop and distribute this product, which is sold by PT. Asuransi Binagriya Upakara.
“With three rural banks in Yogyakarta responding to the EQII product today, it is our hope that they can set a precedent for other rural banks in Indonesia, especially those affected by earthquakes,” said Dadang Sukresna, Chairman of AAUI.
“This is IFC’s first insurance project in Indonesia with the private sector, underlying our commitment to creating new markets and building fiscal resilience to natural disasters,” said Azam Khan, IFC’s Country Manager for Indonesia. He added, “Insurance protection for banks that provide loans to small and medium enterprises can help communities to access cash when they need it most.”
This IFC project, in partnership with PT. Reasuransi MAIPARK, is funded by the Global Index Insurance Facility, a multi-donor trust fund managed by IFC and jointly implemented with the World Bank. The donors include Japan, the Netherlands, the European Union/ACP and Germany. The facility’s objective is to expand the use of index insurance as a risk management tool in agriculture, food security, and disaster risk reduction.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. We work with more than 2,000 businesses worldwide, using our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In fiscal year 2018, we delivered more than $23 billion in long-term financing for developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit
www.ifc.org
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About PT. Reasuransi MAIPARK Indonesia
PT. Reasuransi MAIPARK Indonesia (MAIPARK) is a special-risk reinsurance company owned by all licensed general insurance and reinsurance companies in Indonesia. MAIPARK has been operating since January 1, 2004, providing reinsurance cover for earthquake, volcanic eruption, and tsunami risks. For more information, visit
www.maipark.com
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