Insurance deficit in oil and gas sector reaches Rp 900 billion

The deficit in the insurance premium oil and gas sector reached over Rp 900 billion in 2002, a slight decline compared to Rp 1.3 trillion in 2001, according to a senior official of BP MIGAS, the government?s agency responsible for the supervision of oil and gas exploration and production activities.

?The larger part of the insurance premium went to foreign insurance companies due to the low retention capacities of the local insurers,? Djoko M. Slamet, the head of risk management at the agency told Kompas daily.

He said that the local insurance companies mostly have capital of less than Rp 100 billion, far lower than the average claim that reached about Rp 250 billion. Besides, the weak capital, the local insurances also lacked experts in oil and gas exploration and production activities.

The total insurance premium received by the local insurance companies from oil and gas sector reached about Rp 1.2 trillion in 2001, or about 12 percent of the total premium income booked by the local general insurance companies.

Most local insurance companies reinsure their insurance underwriting contracts to foreign reinsurance companies due to their low retention capacities. (*)