Natural Catastrophe Protection Gap in Jakarta to Widen

Jakarta is at the centre of Indonesia’s economic growth. But the city is highly exposed to natural disasters including the risks of floods, earthquakes, tsunamis and volcanic eruptions. Close to 28 million people in the Greater Jakarta area could potentially be affected if an earthquake or river flood strikes the city.


As the city and its surroundings grow and develop, more people, properties and infrastructure concentrate in this disaster-prone area. In spite of this risk exposure, a large part of the local economy remains uninsured.


The gap between the economic and insured losses could amount to US$0 billion if a major flood or earthquake hits Jakarta today. By 2023, the number may triple to US$28 billion unless the city improves its disaster preparedness.


According to Swiss Re’s study, "Mind the Risk: A Global Ranking of Cities Under Threat From Natural Disasters," Jakarta ranks fifth worldwide in terms of people potentially affected by earthquake and river flooding combined out of over 600 cities around the world.


“Narrowing this gap is a challenge that Indonesian authorities and the insurance industry must work together to secure the city’s future development path. Helping residents and businesses in Jakarta to cope with the financial fallout from a disaster is a key part of strengthening the city’s economic resilience,” says Gabor Jaimes, Head of Property and Product Management, Asia Pacific at Swiss Re.


Indonesians fear of natural disasters most widespread
Although emergency preparedness and disaster risk management has progressed globally in 2013, disaster events continue to generate increasing financial losses alongside ongoing economic development, population growth and rapid urbanisation, especially in many of the emerging countries in Southeast Asia.


In a Risk Perception survey conducted by Swiss Re globally last year, the fear of natural disasters was most widespread among respondents from Indonesia out of 19 countries that were surveyed.


Respondents were asked what concerns them most, including ageing, climate change, natural disasters, energy and food supplies. Nearly 9 in 10 Indonesians expect to see more extreme natural catastrophes in the future. This ranks the highest among other countries including Japan, Australia and Mexico.


The study reveals that 33% of Indonesians believe that the biggest threat to their country comes from natural catastrophes and many are worried  that things could only get worse.


More than half or 66% also believe their own neighborhood will face a greater risk of being hit by a natural catastrophe 20 years from now.Almost all respondents in Indonesia say that climate change and global warming are contributing to increased natural disaster risk.

84% also believe climate change directly threatens their community "to some or a great extent." This percentage is higher than anywhere else.


But even with this great concern, most Indonesians (56%) believe that they are not insured against damage to their properties from natural disasters. Almost 1 in 2 (52%) would either have to rely on themselves or their family and friends to help out in the event of natural catastrophe.


Call for collective action to close the natural catastrophe protection gap
"These findings show that more and more Indonesians are realising that being prepared for future natural catastrophes is vital with individuals willing to take as much responsibility as their leaders. This is also a call for collective action between partners from the private and public sectors to create better prepared communities through various risk mitigation and risk transfer solutions," says Eric Gan, Head of P&C Reinsurance, Southeast Asia at Swiss Re.


Improving data quality of insurance exposure and building inventory of public assets and infrastructure, making insurance accessible and affordable to larger parts of population and business, as well as innovation in terms of risk transfer solutions and diversification to other regions and products are some of the steps that can be taken to support government and the insurance industry to effectively close the protection gap from the impact of natural disasters.


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