Director General of state assets Isa Rachmatarwata stated that public asset insurance or state property (BMN) can support the government’s efforts in improving fiscal resilience and budget flexibility that are needed in facing economic pressures after the Covid-19 pandemic. “Keeping the potential risk of financial losses to a minimum is one of the steps the government needs to take. BMN insurance is designed to achieve that,” he said when opening an international webinar entitled “Public Asset Insurance Portraits in Various Countries,” Wednesday (25/11).
In line with Isa, Senior Financial Sector Specialist in The Disaster Risk Finance and Insurance Program at the World Bank Group Benedikt Signer said that BMN insurance can be part of a broader risk management strategy. “After efforts to avoid and reduce risks, there will still be residual risks that must be accepted and allocated into the budget. On the other hand, the risk can also be shared financially through insurance,” he said.
The Directorate General of state assets (DJKN) implements this into Indonesia’s Disaster Risk Financing and insurance (PARB) strategy. BMN Director Encep Sudarwan explained that in the PARB strategy, disaster risk with frequent frequency but small impact is concentrated with budget allocation and reallocation, fund collection, and contingent credit. “Meanwhile, the risk of disasters with low frequency and large impact is transferred through insurance,” he said.
The BMN insurance Program in Indonesia was first initiated in 2016, and continued to be refined until the issuance of Minister of finance regulation number 97/PMK.06/2019 about BMN insurance. Insurance procurement is only implemented at the ministry level with the umbrella contract method signed by the Ministry of Finance. Insurance is provided on a single premium rate basis by an insurance consortium, with an all-risk insurance product. The object of insurance is focused on buildings or buildings that have an impact on public services and government performance, such as office buildings, educational buildings, and hospitals.
This Webinar presents, Greg Fowler, Former Government Official, Ministry of Business, Innovation and Employment of New Zealand, as a representative of a country with BMN insurance experience. He revealed that as one of the countries with the highest insurance saturation level in the world, ministries/institutions in New Zealand have long carried out BMN insurance. However, the running practice is insurance on an individual basis. Finally, after several earthquakes in 2010, 2011, and 2016, The New Zealand government finally realized their vulnerability to disasters and savings in the insurance market.
“We found a more efficient and effective approach to risk and financial management, which is to change from ministries / institutions that initially act as units that insure their own BMN, to an approach as a single unit of government,” he said. He hopes that this can be realized in the next two years.
Thomas Haller, head of South East Asia & East Asia, Public Sector Solutions at Swiss Re, presented a case study on the impact of earthquakes that occurred during 2010-2011 in New Zealand and Haiti. He said the losses from the disaster amounted to USD8.5 trillion or 120% of Haiti’S GDP. With only 1% insured, Haiti is forced to rely almost entirely on foreign aid. New Zealand, with a loss of $ 31 trillion, about 80% of that figure can be covered and replaced by insurance. “Although GDP declined slightly, growth soon resumed its rapid climb,” Thomas said.
He also reminded that the implementation of the BMN insurance program requires joint efforts from all stakeholders. Therefore, in facing the challenges of implementing BMN insurance, he emphasized the importance of effective cooperation between all stakeholders from an early age, sharing knowledge about the mechanism of insurance products, clarity regarding budget availability, asset values that are constantly updated and can be accessed easily, conducive policy scope, and implementation strategies for the use of insurance results.
Heddy Pritasa from ASEAN Research and Works Sharing, ASEAN Insurance Council, stated that although almost all ASEAN countries are vulnerable to natural disasters and have PARB, only Indonesia and the Philippines have included BMN insurance into their PARB strategy. “We hope that there will be continued collaboration among ASEAN members to overcome natural disasters,” he concluded.