Securing Indonesia’s Public Infrastructure Against Disasters Through Insurance Models

Indonesia's Public Assets Insurance Program (ABMN) safeguards government infrastructure from natural disasters through proactive risk financing, robust partnerships, and advanced data management. It exemplifies resilience-building, addressing fiscal shocks and serving as a model for disaster-prone regions globally.

The World Bank's comprehensive report on Indonesia's Public Assets Insurance Program (ABMN) highlights the country's groundbreaking efforts to safeguard public assets from natural disasters. Developed by researchers from the World Bank’s Finance, Competitiveness, and Innovation Global Practice, the program is part of Indonesia’s broader Disaster Risk Financing and Insurance (DRFI) strategy. Spearheaded by the Ministry of Finance (MoF), it was launched under Ministerial Regulation PMK No. 97/2019 and represents a proactive approach to disaster risk management. Indonesia, located in the Pacific Ring of Fire, faces frequent natural disasters that pose significant human and economic challenges. Recognizing the inadequacy of traditional post-disaster recovery funds, the ABMN program bridges the gap by offering structured financial protection for public infrastructure, including offices, schools, and healthcare facilities. Its innovative design aims to reduce fiscal shocks and build resilience, shifting the focus from reactive recovery to proactive risk mitigation.

Expanding Coverage Through Strategic Implementation

The program has grown remarkably since its inception in 2019, starting with a pilot phase and gradually expanding to cover 10,920 government assets by 2023. The value of insured assets has skyrocketed from IDR 10.73 trillion to IDR 72.64 trillion, reflecting its scale and success. The phased implementation allowed the MoF to refine processes, improve data management, and address initial challenges. The Sistem Informasi Manajemen Aset Negara (SIMAN) is central to this expansion, a digital platform designed to catalog and manage state assets. This robust database includes critical asset information such as valuations, risk profiles, and geographic coordinates. Accurate data has been instrumental in determining fair insurance premiums and ensuring comprehensive coverage. Despite hurdles like incomplete data and outdated valuation methods, the MoF has continually upgraded SIMAN to align with insurance requirements, ensuring the program’s reliability and efficiency.

Partnerships Driving Program Success

A key factor in the program's success has been its collaboration with the Insurance Consortium for Public Assets (KABMN), which brings together over 50 insurance and reinsurance companies. This consortium model ensures financial stability and standardized policies while fostering trust and transparency. The KABMN's collective strength was tested during the 2021 Mamuju earthquake, where claims were settled efficiently despite valuation gaps. Selection criteria for consortium members, including financial solvency and expertise in catastrophe insurance, have safeguarded the program’s integrity. Additionally, the program promotes industry development by encouraging domestic insurers to expand their capabilities. The consortium has become a model for balancing government needs with market dynamics, emphasizing the importance of collaboration in scaling public asset insurance initiatives.

Engaging Stakeholders and Building Capacity

Stakeholder engagement has been vital to overcoming initial resistance from ministries and agencies, which faced budget constraints and limited familiarity with insurance concepts. The MoF’s strategic outreach included personalized engagements, formal communications, and targeted training programs. The introduction of the Asset Management Index (IPA) linked insurance participation to performance evaluations, incentivizing ministries to adopt the program. The COVID-19 pandemic presented additional challenges, such as transitioning to virtual training and addressing shifting budget priorities. However, the MoF's adaptability ensured the program’s continuity, with participation increasing even during the pandemic’s peak. Capacity building has been central to the program’s long-term success. Through collaborations with organizations like the World Bank and the Association of Indonesian Insurance Management Experts (AAMAI), the MoF developed comprehensive training initiatives, including e-learning modules, stress-test exercises, and workshops. These efforts have significantly enhanced public officials’ understanding of insurance mechanisms, ensuring effective program implementation and risk mitigation.

Future Challenges and Opportunities

While the ABMN program has achieved remarkable progress, challenges remain. Aligning insured values with replacement costs is critical, as highlighted during the Mamuju earthquake, where depreciated asset valuations limited payouts for rebuilding efforts. The MoF is refining valuation methodologies and exploring integration with the Pooling Fund Bencana (PFB) to expand coverage and enhance financial resilience. Global insurance market dynamics, including rising premiums, also pose risks to the program’s sustainability. Addressing these challenges requires continuous stakeholder collaboration, data accuracy, and adaptive policy frameworks. Looking ahead, the program aims to integrate with broader disaster risk management strategies, leveraging its successes to cover regional assets and expand its impact.

Indonesia’s ABMN program exemplifies the transformative potential of disaster risk financing integrated into public policy. By combining strategic planning, robust partnerships, and continuous capacity building, the program provides a model for safeguarding public assets in disaster-prone regions. Its success highlights the importance of proactive approaches to disaster risk management, serving as a global benchmark for similar initiatives. With ongoing refinements and a focus on resilience, the ABMN program stands poised to further enhance Indonesia’s ability to protect its people and infrastructure from the devastating effects of natural disasters.