Indonesia's Finance Ministry is considering a disaster risk insurance and financing scheme, that could be included in the State Budget in 2019.
Until now, there is no single legal umbrella covering this issue. The Ministry of Finance still needs to prepare the mechanism for natural disaster insurance. So far, existing pre-disaster financing regulations are still sectoral, such as the law for agricultural insurance and the law concerning insurance for fishermen, fish farmers, and salt farmers.
Head of the Fiscal Policy Office (BKF) at the Ministry of Finance Dr Suahasil Nazara highlighted the need for a policy to mitigate funding needs for natural disasters, reports CNN Indonesia. Economic losses due to catastrophic disasters in the period 2004-2013 reached IDR126.7 trillion (US$9 billion).
However, the State Budget is seen to have limitations in providing funds for disaster management activities. Budget allocations for contingency funds during the last 12 years was IDR4 trillion a year at the highest.
"The important thing is the mindset that risk is always there,“ said Dr Suahasil. Insurance is efficient because risks are pooled, he said.