Closing the Nat Cat protection gap: Jakarta

Jakarta is the engine behind Indonesia's economic growth. But the city is confronted with a high risk from earthquakes and floods, and only a small part of the economy is insured. Without improved disaster preparedness, Jakarta could face a widening gap between economic and insured losses.

Like its economy, Indonesia's urban population is expanding rapidly. Much of that growth is centred on the capital of Jakarta, a large metropolitan area that is home to 28 million people and generates around 25% of the country's national income.

But Jakarta is also one of the world's riskiest locations: floods, earthquakes and volcanoes all pose a significant threat to its residents and economy. According to Swiss Re's study Mind the Risk the city ranks fourth globally in terms of people potentially affected by earthquake and river flooding combined.

However, in spite of its risk exposure a large part of Jakarta's economy remains uninsured.  As the city continues to grow and develop at a rapid pace, the gap between economic and insured losses that would result from a major flood or earthquake could jump from an average of USD 10 billion today to USD 28 billion by 2023. Narrowing this gap is a challenge that Jakarta's authorities and the insurance industry must tackle together to secure the city's future development path.

"Helping Jakarta's residents and businesses cope with the financial fallout from a disaster is a key part of strengthening the city's economic resilience," says Gabor Jaimes, Head Property Product Management Asia-Pacific for Swiss Re. "The insurance industry, together with the public sector, can play an active role in better preparing its urban community through risk mitigation and risk transfer measures."

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