Indonesian brokers give their thoughts on the general level of enterprise risk management (ERM) maturity in Indonesia and whether there are any particular problems relating to arranging insurance cover in the country

Willy Ignatius, President director of Howden Indonesia (pictured)
“There is a strong tendency for organisations to move slowly towards a proper risk management approach. However, so far it appears that only the banking and oil and gas industries have progressed significantly. Insurance as a traditional risk transfer method is still considered low cost, hence most organisations in Indonesia are still heavily reliant on insurance as the first protocol of protection.

“For large corporations, it may be a challenge to obtain adequate capacity for natural catastrophe risks. Indeed, there may be additional capacity that can be obtained from the off shore market, although this would make it more expensive to insure them. There are also other challenges in respect of fl oods as they are part of gradual climate change. Insurers are now putting more restrictions on areas that are prone to flood risks, which has become a dilemma for clients who are exposed.”

Arman Juffry, President director of JLT Indonesia
“We have seen an increasing demand for ERM services via brokers and/or risk management consultants in Indonesia, especially for large corporations and even some state enterprises. We think the level of maturity is still quite low at this point in time, but it is improving.

“Natural catastrophes like earthquakes and tsunamis have been driving premiums for property insurance in Indonesia, as well as flood risks for certain big cities such as Jakarta and Bandung in West Java. We have seen underwriters who apply the sub-limits for earthquake risks and premiums having to follow the Indonesian EQ Pool and MAIPARK standard rates, which is a burden for the insured. After the past two years, with volcanic activity such as the Mount Merapi eruption in central Java and the recent Mount Sinabung eruption in Sumatra, natural catastrophes will remain the major risk for property underwriters, having caused an increase in premium for property and construction insurance.”

Simon McCrum, President director of Willis Indonesia
The level of maturity is very low and at present there are few indications that this is likely to improve in the short term. As long as good, cheap insurance capacity remains readily available, with no warranty or requirements for proactive risk management, corporations locally will not see the need to adopt ERM practices.

“No major obstacles exist to setting up large and complex insurance programmes for Indonesian interests and assets. Local capacity is growing and the reinsurance market (primarily in Singapore) remains very receptive to Indonesian risks.

Cameron Sheild, Technical adviser and head of specialty at Aon Risk Services in Indonesia
“ERM is still very much in its development stages, although there are some local organisations working extremely hard to implement sound ERM practices within Indonesia. For example, the Center for Risk Management Studies is activity promoting and adopting ERM best practice by way of workshops, training, conferences and seminars. PT Aon Indonesia contributes to ERM growth within Indonesia by actively supporting benchmarking workshops, a conference and Aon’s Risk Maturity Index [RMI] guidance. Recently the RMI was translated into Bahasa and we are expecting to see several corporations develop their ERM over the medium to long term.

“Getting ERM to the next level is an educational voyage for Indonesia, starting with educating non-government entities about the laws and changing their standard operating procedures in corporate governance/procurement. Ideally, we are moving insurance buying into the C-suite whereby ERM is an integrated risk platform and management tool. Even then, you still need C-suite executives who understand the model; they do exist, but far too few to make significant changes in the short term.”