Impact Forecasting, the catastrophe model development center of excellence at Aon Benfield, announced the launch of “its first tool to understand the financial impact of riots by developing an analysis of the threat within Indonesia.”
The bulletin explained that the “need to fully understand the political dynamics of Indonesia has become significantly more important in recent years as Indonesia continues to develop into one of the world’s leading economic powers. With the fourth largest population in the world and a rapidly expanding insurance market it is vital for insurers and reinsurers to fully comprehend the threat that can stem from rioting in Indonesia to avoid unforeseen losses.
“A key benefit of the catastrophe model for insurers and reinsurers is the improved understanding of the key risks in Indonesia. Impact Forecasting uses data from the United Nations and the World Bank that covers over 86 percent of all riots in Indonesia and documents the location, severity and catalyst for each event across the country.”
Aon Benfield gave the following details of the features included in the model:
• 600 unique events including the anti-Suharto rioting in 1998, ethnic rioting in Kalimantan and sectarian violence between Christians and Muslims in Maluku
• Location of central hotspots and the catalyst for each riot
• Motives around elections, governance, popular justice, land, separatism and identity.
Malcolm Steingold, CEO of Aon Benfield for Asia-Pacific said: “The threat of rioting in Indonesia following the fall of the Suharto regime has had a significant impact on the property and life insurance markets in the country. Indeed, in the last 20 years rioting in Indonesia has led to over 6,900 fatalities and damage to over 40,000 properties highlighting the destructive properties of riotous behavior. By understanding this risk, it will help insurers to grow their business in Indonesia while being fully aware of the risks and hotspots for violence.”
Mark Lynch, terrorism, riot and political risk catastrophe model developer at Impact Forecasting, added: “Riot modeling provides important information for insurers seeking to develop their capacity in emerging markets but are unsure of the stability of the country and, as a result, their insured assets. We have developed a map for each riot in Indonesia detailing the severity of potential property, life, and accident and health losses for each event. Modelers then overlay insurers’ exposures over each map to calculate the losses.”
Impact Forecasting/Aon Benfield