Manajemen

Resiko
Oleh:
Dr. Rini Mulyani, M.Sc. (Eng.)

Email:
rinimulyani@bunghatta.ac.id
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Illustration: a man being shot

(Pym and Wilderman):
 Take cover (i.e. wall) to avoid the bullets
 Use a shield/placing someone else on the firing line
to divert the bullets
 Allow the bullet to hit him and plan to repair the
damage

Avoidance?????
Deflection?????
Contingency?????
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Three basic approaches to reduce risk:

 Avoidance
− Identify the risk
− Plan to eliminate it
 Deflection
Pass the risk on to someone else:
 Through Insurance: pass the risk to a third party
 Through Bonding: a security is held against the risk
 Through Contract: sharing the risk among people/parties

 Contingency
− Take no action in advance and draw up contingency plans
should the hazard occur
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More examples???
 Avoidance?

 Deflection?

 Contingency?
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Insurance and Financial Risk Transfer

 Insurance is a contract binding one party to
indemnify a second party against specified loss in
return for premiums paid (Scawthorn, et al., 2002)
 Insurance is one of the principal mechanisms used
to manage risk
 Insurance enables one to pay a
relatively small premium today to
protect oneself against an
uncertain but potentially large loss
in the future
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Insurable risk falls within 4 areas:

 Direct property damage
 Consequential loss
 Legal liability
 Personal Loss
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Type of Insurance

Life Insurance Home Insurance

Property Insurance Auto Insurance

Health Insurance
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Insurance Rate
 Ratemaking is the process of determining what
premium (rate) to charge on a property
 The premium that you pay is determined by an
actuary at the insurance company.
 Ratemaking is normally based on the law of large
numbers.
 The law of large numbers states that, as a series of
independent events under consideration increases,
the distribution of the frequency of those events
tends toward the normal distribution.
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Insurance rate formula for independent events

L = the expected value of loss for the n houses

li = the expected loss for the ith house, equal to the value of
that house times the probability of loss for the house
 = the standard deviation (a measure of the dispersion about
the mean)
Σn = summation over n
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Probability density function (pdf) of small portfolio (left)

and large portfolio (right)
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Classification of Risks by Degree of Ambiguity

and Uncertainty
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Example:
Insurance Rate for Building due to catastrophe events
 The annual risk is usually expressed in terms of pure risk
premiums (PRP) and is a function of expected annual damage
ratio (EADRk) and value (INSV)

Where,
EADRk : Expected annual damage ratio for k-type of structure
SHj : The annual probability of a certain level of hazard
MDRk (j): Average damage ratio for k-type of structure at certain
level of hazard-j
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Example:
Insurance Rate for Building due to catastrophe events
 Total insurance premium (TPk) is determined by applying a load
factor (LF) into the pure risk premium.
 The load factor takes into account hidden uncertainties,
administration, taxes and profits for the insurance company.

Where,
TPk : Total insurance premium for k type of structure
PRPk : Pure risk premium for k type of structure
LF : Load factor, taken as 0.4 (Yucemen, 2005)
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Basic earthquake insurance loss estimation process

LOSS MODEL
Exceedance
probability curve

Examples: (left) insurance

diagram and (right) loss
exceedance probability
curve with layer
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Lesson Learnt:
Disaster Insurance in Many Countries
 The value of catastrophe insurance in the recovery
process following major disasters has long been
recognized, and in some countries this has led to the
development of government-controlled natural disaster
insurance schemes.
 There are a number of government pools in existence for
natural hazards such as
 The California Earthquake Authority
 The Japan Earthquake Reinsurance Company
 The Turkish Catastrophic Insurance Pool
 New Zealand’s Earthquake Commission
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Lesson Learnt:
Disaster Insurance in Many Countries
 The California Earthquake Authority (CEA)
CEA was established in 1996 as a privately financed,
publicly managed entity to help California residents
protect themselves against earthquake loss.
Today, the CEA is the world’s largest residential
earthquake insurer. Acting through its participating
insurers, the CEA sells earthquake policies to
homeowners and provides retrofit assistance to help
people protect their homes against earthquakes.
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Lesson Learnt:
Disaster Insurance in Many Countries
 The Japan Earthquake Reinsurance Company
Earthquake insurance in Japan has only been available
since the 1950s, but then Residential earthquake
insurance tends to be regarded as poor value for money
and has limited use. Demand has increased since the
1995 Kobw earthquake and, as of 2000, it was estimated
that 15% of residents in Japan have earthquake
insurance.
Residential earthquake insurance is only available as a
special extension provided by the fire insurer but
reinsured through the Japan Earthquake Reinsurance
Company (JER).
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Lesson Learnt:
Disaster Insurance in Many Countries
 The Turkish Catastrophic Insurance Pool
The Turkish Catastrophic Insurance Pool (TCIP) was
established by the Turkish government in cooperation
with the World Bank, as a result of the 1999 Marmara
earthquake.
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Lesson Learnt:
Disaster Insurance in Many Countries
 The Turkish Catastrophic Insurance Pool (TCIP)
TCIP objectives are to:
1. Ensure most domestic dwellings have earthquake
insurance
2. Reduce government fiscal exposure
3. Transfer most of catastrophe risk to international
reinsurance and capital markets
4. Build up TCIP’s capital base over time to insure against
larger events
5. Encourage risk mitigation and safer construction
practices
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Lesson Learnt:
Disaster Insurance in Many Countries
 New Zealand’s Earthquake Commission
In 1941, the New Zealand government set up a special war
damages insurance pool funded by a levy of 0.25% of insured
value on all fire insurance premiums. The government soon
extended the scheme to cover earthquake, establishing the
pool as the Earthquake and War Damage Fund. After the war,
the levy was reduced to 0.05%. The scheme covered all
property for indemnity value and, over time, was extended to
other uninsured natural hazards. In 1993, it was restructured
as the Earthquake Commission (EQC), and currently offers
replacement coverage home insurance up to NZ $100,000 for
buildings and $20,000 for contents, at a levy of 0.05% on all
fire insurance premiums.
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Advantages of insurance:
 Victims are guaranteed a secure and predictable amount of
compensation for their losses.

 Insurance allows for losses to be distributed in an equitable

fashion, protecting many for only a fraction of the cost each
would have incurred individually if exposed to hazards.

 Insurance can actually reduce hazard impact by encouraging

policyholders to adopt certain required mitigation measures.
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Limitations of hazard insurance:

 Insurance may be impossible to purchase in the highest risk
areas if the private insurance companies decide that their risk
is too high.

 Participation in insurance plans is voluntary.

 Participation in insurance has been known to encourage

people to act more irresponsibly than they may act without
such coverage.

 Many insurance companies are pulling out of specific disaster

insurance plans because the probability that they will not be
able to cover catastrophic losses is too great.

 Catastrophic losses that cover a wide but specific geographic

space within a country may result in inequitable premium
increases if coverage areas are too general.
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Diskusikan:
Peluang, tantangan dan implementasi “Risk
Transfer” dengan menggunakan asuransi
bencana di Indonesia.