Jakarta is the coastal megacity which has the highest flood risk globally. WTW Indonesia’s
WTW Indonesia country leader and head of corporate and risk and broking Kames Natakusumah speaking with Asia Insurance Review said, “Jakarta’s topography makes it highly flood prone. Since Indonesia’s independence, Jakarta has experienced land subsidence. This is largely due to uncontrolled groundwater usage by residential, commercial and industrial urban enclaves. Together with poor urban planning, water pipe infrastructure and bureaucratic regulations, the challenge of achieving any long-term solutions remains.”
The Jakarta region is set on a low-lying plain, crisscrossed by multiple rivers. Much of the city is situated close to sea level and the 13 rivers that flow through the metropolitan area take a long time to drain into the Jakarta Bay. Even relatively short periods of heavy rain cause water volumes to build up easily.
Given its low topography, water flows in from the four satellite cities of Bogor, Depok, Tangerang, and Bekasi whenever there is heavy rain. Poor urban planning, lack of green-spaces and a poor sewage system are just some of the other contributory factors causing Jakarta to sink.
Mr Natakusumah said, “Jakarta’s population has grown from 3m in the early 1960s to over 10m today. Moreover, the mega-metropolitan region Jabodetabek refers to Jakarta, Bogor, Depok, Tangerang and Bekasi. This mega-metropolitan region comprises of over 27m people.”
Growing population, massive land use conversion
“With this huge increase in population, massive land use conversion has been taking place. The built-up area in the Jabodetabek region has grown from 65sq km to 2015sq km from 1972 to 2021. The Indonesian government has been trying its best to move some people from Jabodetabek to other cities outside of the Java island under a programme called ‘transmigration’. However, since the majority of financial and trading activities are still concentrated in Jakarta, the take up rate of transmigration is still very low.”
He said, “The most recent plan to move the new capital from Jakarta to east of Kalimantan island (IKN – Ibu Kota Nusantara) may well be the answer to the flood problem. Yet, this probably is a little too late to execute. However, it’s a start of a new era since Kalimantan is much less prone to flood and land subsidence.”
Risk management strategy
Mr Natakusumah said, “Radical changes in the city’s risk reduction regime is therefore necessary. This calls for the need to have fundamental transformations not only in the built environment and hydraulic infrastructure but also in institutional patterns of risk governance.
“Unfortunately, the current risk reduction and adaptation efforts have not been sustainable. Transformational risk reduction would involve an engagement with the root causes of flood risk and the consideration of expected future risk trends.”
Developing a flood management strategy is a complex problem. It needs to cover hydrology, hydraulic, erosion of catchments area, river engineering, river morphology and also sedimentation, drainage system and waterworks. The success of a flood-management strategy also depends on other aspects related to social, economics, environments and laws.
Flood risk transfer
Mr Natakusumah said, “The insurance industry in Indonesia will have to continue to work closely alongside the government to make flood insurance affordable and give people incentives to buy it. Neither the industry nor the government can do it alone. In the absence of meaningful insurance cover, the cost of relief and reconstruction falls on government, non-governmental organisations, and worse, the affected households which is a financial burden to low-income countries.”
“In Indonesia, most corporates and institutions have flood covers as a part of their insurance programmes. However, most residences in Jakarta do not have proper flood insurance covers to protect their houses or properties except when they are forced to buy flood insurance by their lenders or banks.”
He said, “This is quite ironic considering the history of Jakarta flood which has been occurring almost every year during the rainy season.”
Alternative risk transfer
Indonesian Financial Services Authority Otoritas Jasa Keuangan (OJK) has introduced premium tariff for catastrophe risks which includes flood in addition to earthquake, volcanic eruption and tsunami since 2017. This tariff was introduced partly to improve the combined operating ratio of insurers should they suffer natural catastrophe losses. OJK has also imposed a minimum deductible for catastrophic risks along with the implementation of the tariff.
Mr Natakusumah said, “WTW also offers an alternative risk transfer (ART) solution through its flood parametric insurance product which may well respond to the insured or customers’ CAT risks protection. This also provides more flexibility in the limit purchase, as well as premium savings at the same time.
“With a flood parametric insurance programme, insurers will be able to provide a seamless flood protection by agreeing on a few parameters in order to pay flood claims without having to conduct loss adjustment or claims survey following a ‘parametric loss’.”
He said, “The private and public sectors need to join forces to implement effective flood disaster risk management systems at the macro level. This includes adaptation measures for new risks in particular, incentivised by insurance-based risk transfer solutions.
“At the same time, to promote insurance penetration in retail and commercial lines of business at the micro level. Specific measures could include using innovative risk transfer solutions such as parametric insurance which provides rapid payouts that would allow households and businesses to recover much more quickly in the initial stage.”
He said, “We work closely with insurers to support companies in Indonesia through other ART solutions that can help them mitigate against risks such as earthquakes, weather, drought and solar irradiation for solar power generators where there are limits or that are uninsurable by traditional insurance.”
Restoring ecological balance
Mr Natakusumah said, “Jakarta’s lack of law enforcement with regards to environmental protection and urban planning has led to the establishment of illegal settlements along the bank of the Ciliwung river. These areas could have been zoned for mangroves to protect the land from erosion other than being aesthetic as mangroves are most suitable for growth along a riverbank, beach or shoreline.
“The legal factors lie in the lack of regulations for squatters. There is no available water pipe access, hence wherever squat settlements exist, waste and garbage will automatically be released directly into the river, causing clogs in the system and ultimately contributing to diseases and flooding. Over 60% of the people of Jakarta release residential and commercial waste directly into the river without passing through the city’s wastewater management and killing freshwater animals.”
Educating the people of Jakarta in addition to collaboration amongst various levels of the community and governmental sectors are required to resolve these issues. Most importantly, lawmakers need to ensure that law enforcement is properly executed. A