Bermuda Association explains reinsurance risk spreading role

Syamsul Sunduseng on Report
"The global reinsurance market plays an integral role in spreading US
hurricane risk around the world," said a bulletin from the Association of
Bermuda Insurers and Reinsurers (ABIR). "Without it, the risk would be
concentrated in a single state (or geographic region) or in the US with
the result being higher insurance costs for US consumers."

The ABIR noted that "the reinsurers of US hurricane risk are predominantly
located outside of the United States with a very large number located in
Bermuda." Many of them are ABIR members.

ABIR president Brad Kading explained the following:

1. Bermuda's insurers and reinsurers understand property catastrophes
including hurricanes. We understand the tragedy they create for families
who lose loved ones or lose their homes. Hurricane Ike has the potential
to cause a tremendous loss of life. ABIR member employees themselves are
exposed to hurricane risk in Bermuda and they are familiar with what
families and businesses need to do to protect themselves against these
storms and to recover from those losses. We offer our heartfelt sympathy
to those affected so severely by Hurricane Ike in Texas and in the
Caribbean prior to the US landfall.

2. Bermuda's insurers provide an estimated 66 percent of the reinsurance
purchased by the Texas Windstorm Insurance Association (TWIA). The TWIA
protects the property most exposed to hurricane damage in Texas.

3. Based on an analysis of reinsurance premium from insurers most exposed
to hurricane risk in Texas, Bermuda's insurers will provide an estimated
45 percent of the reinsurance claims that will eventually be paid to
insurers for damage caused by Hurricane Ike. It is impossible to
accurately forecast the total insured losses for Ike at this time. All
loss estimates at this time are purely hypothetical. However, the more
severe Ike's damage is, the more likely it will be that reinsurers pay a
larger share of the actual insured hurricane damage. For example, if Ike's
insured losses are $10 Billion, insurers will primarily pay for these
costs (with exceptions including the TWIA payment noted above). If
Hurricane Ike's insured losses are $25 billion, reinsurers may pay $10 to
$15 billion of the eventual Hurricane claims. Based on these estimates
Bermuda reinsurers' share of these losses may then be $4 to $7 billion.

4. In the period from 2001 to 2008, Bermuda insurers have paid nearly $25
billion in insured and reinsured US property catastrophe losses. These
reinsurers have remained financially strong despite these losses and these
reinsurers have remained committed, and indeed have expanded, their
capabilities to provide protection to US insurers and their property
insurance clients. These reinsurers in turn in 2006-2008 continued to
provide protection to support US consumers and expanded their capacity
(either through their own underwriting capacity or via capital markets
resources) to provide even more protection to US consumers.

5. It is estimated that following Hurricane Katrina, Bermuda reinsurers
paid out enough to rebuild 45,000 homes in Louisiana and 24,000 homes in
Mississippi.

6. The lessons of the last decade indicate that Bermuda's reinsurers, and
global reinsurers generally, are: financially strong, capable of absorbing
enormous losses, capable of raising capital when needed and committed to
continuing to provide US property insurance and reinsurance protection.

7. Bermuda's reinsurers are well regulated by the Bermuda Monetary
Authority and have very high financial strength ratings and are well
capitalized to absorb these losses. Losses such as these are expected by
reinsurers. Reinsurers will reimburse their US insurance company clients
promptly as claims are submitted. Reinsurers are financially strong enough
to pay all these claims and more.

8. ABIR has 23 member insurance companies, all based in Bermuda. 14 of
these companies have US subsidiary insurance companies. These US
subsidiaries will also write US insurance for hurricane risk. Thus many
ABIR members will be paying claims both from their US subsidiaries and
their Bermuda parent corporations.















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Insurance targets cars and marine cargo premium

JAKARTA: The slight premium generated and the tariff war on property
business have made loss insurance maximize the cars and marine cargo
insurance business.

Vice President Technical Division PT Asuransi Central Asia (ACA) Debbie
Wijaya said the company did not do any special effort to minimize fire
insurance business and make it balance by expanding car insurance.

Fire insurance as the largest premium contributor has been shifted to car
insurance.

Fire insurance in 2007 hit IDR397 billion or rose from IDR320 billion in
2006. But car insurance has higher growth as from IDR314 billion in 2006
into IDR420 billion.

"So the fire insurance portion to the total premium dropped from 41
percent into 39 percent or less than that of car insurance," she said to
Bisnis this week.

The premium has less in number due to the fact that many insured that does
not have any incident and propose claim will call for insurance discount
this year.

"On the renewal, they will have window shopping so as to move if they get
lower price offer. Whereas, the insured should have been careful to see
the insurance company service quality, not simply the price," she added.

The tough competition in insurance industry has become one of the major
factors causing the less premium rate. Meanwhile, the car premium rate
remains standard and the issuance of PMK No. 74/2007 on Car Insurance has
limited the abnormal acquisition cost.

"If we have no support from the government on the property business
regulation as that of in car, we start seeing other more profitable
business," she said.

In addition to car insurance, the other major business line which might
tap premium is marine cargo and individual product such as trip insurance.

PT Asuransi Binagriya Upakara minimizes the fire insurance for corporate
and move to retail insurance including car insurance.

"The competition is so tough and property price is no longer realistic,"
said President Director of Binagriya Upakara Kapler A. Marpaung.

To realize the plan, Binagriya seeks cooperation with four multifinance
companies to boost up car insurance performance so as to hit the premium
target of IDR17 billion.

Separately, Operation General Manager PT Asuransi Tri Pakarta Yulius Patty
said the company relies on fire insurance with its 50 percent contribution
to the total of premium.

The company has so far marketed fire insurance through banks so that it
should provide the products required by bank. Besides, fire insurance risk
is less than the car insurance despite the less premium.

"Fire insurance uses per mil, car insurance uses percent. So, the
insurance price of one car might equal to 10 property insurance, but with
less risk than the mobile risk as car," Yulius said.

Lecturer with the Trisakti's School of Management Munawar Kasan said the
tariff war on property insurance gets worse.

"The insurance premium is like cellular tariff with 0,0000% calculation
due to their fond of premium. The inflation makes all prices soar but fire
insurance premium," he added.

The insured commonly called for premium cut down on the renewal with
abnormal demand of 30-40 percent.

"In fact, insurance could provide profit commission or no claim bonus with
normal variable as included in the policy."

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Poligami On Party

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Four Cell Phone Principals Delay Investments

At least four cell phone investors from Europe, the US, and Asia, threaten
to diver their investment plan worth a total of US$550 million from
Indonesia to Vietnam.

They reason the government so far has yet been able to provide favorable
regulations and proper infrastructures.

Chairperson of the Association of Indonesian Cellular Importers (AISI) Eko
Nilam viewed Indonesia had no clear and strict regulations on cell phone
import mechanism, creating a fertile soil for illegal products to prevail
in the market.

Over the past few years, he continued, the government had failed to take
strict actions against cell phone smuggling and to create favorable
regulations to attract new investments. As a result, he added, unhealthy
competition in the national cell phone market kept going on.

"The four principals also object to the product guarantee system applied
in Indonesia. If Indonesia doesnt deal with the problem, those four
investors may cancel their plans," told Eko yesterday.

Eko explained Motorola (one of the largest US cell phone makers) had
relocated their investment plan to Vietnam. Motorola previously planned to
make US$250 million investment in Indonesia to produce up to 3.5 million
units of cellphones per annum.

"We have twice met with the management of Motorola, but they finally
decided to choose Vietnam since the Indonesian government is unable to
give a clear solution."

According to Eko, two Asian investors and one European Union investor also
planned to build production facilities in Indonesia. The three investors,
he exposed, would make US$100 million investment each and their total
production capacity would reach 2 million units per annum. "I cannot yet
reveal the names of the three companies, but they are really interested in
realizing their investments," he said.

The three principals, he inserted, had even bought 6.5 hectares of area in
an integrated economic development zone in West Java.

General importers

Director of Telematics Industry at the Department of Industry Ramon Bangun
disclosed the Department of Industry had urged the Department of Trade to
restrict the number of cell phone general importers in Indonesia.

With such a restriction, he noted, Indonesia would be able to deal with
illegal product circulation to create a healthy business competition
needed to lure foreign investors to make Indonesia their cell phone
production hubs. "The decision is in the hands of the Department of
Trade," told Ramon.

The AISI estimated there would be 23 million units of imported cell phones
worth US$3 billion entering Indonesia this year. Until the first semester
of this year, he added, only 32%-35% of the import or around US$800
million had been realized. "The rest will follow in the second semester."

According to Ramon, a South Korean cell company was also probing for a
possibility to develop cell phone production facilities in Indonesia.

"The company is a South Korean research institute that has been supplying
product designs to a Chinese cell phone maker. Now they want to build
their own plant and brand in Indonesia."

According to the plan, he said, the investor would develop those
production facilities by the end of the year. Once their assembling plant
had started production, they would continue building a component
production plant.

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Stanchart & Mizuho provide US$104 million fund for energy project

Standard Chartered Bank (Stanchart) dan Mizuho Corporate Bank act as bank
leaders to the US$104 million syndication loan to fund the power plant and
gas field project owned by the Energy World Corporation (EWC) in Sengkang,
South Sulawesi.

Head of Project Finance, Asia Stanchart, Conor McCoole said this is the
first itme after a decade an international bank syndication funds private
power plant project without any protection in Indonesia.

"Despite the challenge of the existing loan market, the qualified projects
could evidently get long term fund facility such as in Sengkang," he said
on press release to Bisnis yesterday.

The funding activities include the loan transfer process from Stanchart
for the ongoing Sengkang power plant and gas field project with 135 MW
capacity.

Besides, the cooperation is deemed the new funding for additional 60 MW
capacity project as the next construction phase which will finish by 2008.

The results of the project will be soled to the State-owned Electricity
Company (PLN) through the power purchase agreement (PPA) in the long run.

The seven year funding is signed on October 2007 with the due date in
October 2013. The funding is fully syndicated in mid 2008.

Stanchart and Mizuho acted as the mandated lead arrangers and KBC Bank NV
Singapore branch office, Natixis and Nordkap Bank AG acted as the lead
arrangers.

All funding is given without any political risk insurance protection
despite the fact that the project got support from the Indonesian
government for the PPA.

Stewart Elliott, Managing Director EWC, said the Sengkang power plant
project is deemed the first gas energy project in Indonesia

"We are proud of cooperating with the five international banks in this
project and appreciate the given trust to EWC. The supports given by the
five banks here reflect their trust both to the project and PLN as our
user within the past 10 years."

In this project, Stanchart acted as EWC financial advisor. And, Baker
McKenzie law firm acted as the legal advisor for the debtor and Lovells as
the sponsor advisor.

The Australian based company through its subsidiary company, PT Energi
Equity, will produce liquefied natural gas (LNG) from the gas field in
quarter II/2009 with US$1 billion investment.

From SEngkang field, the company could possibly produce 5 million tons of
LNG per year. So, EWC plans to build four refinery units with 500,000 tons
capacity per annum each.

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Mau ta' taya di foto

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Hotel Sahid Targets to Operate 50 Hotels

Publicly listed PT Hotel Sahid Jaya Internasional Tbk, which is under the
Sahid Group, will gradually add 31 new hotels nationwide by 2013.

The plan will require IDR2 trillion in investment fund and will increase
the number of hotels under the wing of Hotel Sahid to 50 hotels.

Haryadi Budisantoso Gitosardjono, Head of Business Division at the Sahid
Group, revealed Hotel Sahid so far had operated 19 units of three-star to
five-star hotels nationwide.

"We target to add 31 new hotels by 2013 nationwide. We may even develop
hotels overseas," he informed Bisnis on the sidelines of the anniversary
of the Business Division of the Sahid Group in Solo on Tuesday night.

The additional new hotels, he continued, would increase the number of
rooms operated by Hotel Sahid to 12,000 rooms by 2013.

Haryadi added some of 19 hotels operating under Hotel Sahid flag at the
moment would be renovated and upgraded to five-star hotels.

According to him, the development of hotel business units also aimed to
support tourism and cultural promotional activities made by the
government.

In addition, Haryadi disclosed the group's property sector, which had its
separate market segment, would also be improved, including by a
possibility of building apartments in Yogyakarta and Surabaya.

"Frankly, we at first wanted to operate in Solo. However, due to the
crowded competition there, we are eyeing other regions, probably
Yogyakarta and Surabaya," he told.

Despite its impression to sell modern-class property products, the Sahid
Group, he guaranteed, would be committed to preserving buildings with
strong historic value, such as Kusuma Sahid Hotel Solo.

"Kusuma Sahid Hotel has a long legacy and heritage. Despite possible
changes, we will be committed to preserving the originality," he said.

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Japan: More Favouring Motorised Bicycles Over Cars

AIR, Vol VI Issue 27. Japanese companies are increasingly adopting
power-assisted bicycles, instead of cars, for business use due to rising
gasoline prices, reports the Yomiuri Shimbun.

At the same time, growing environmental awareness and measures to help
employees with weight problems are likely too to boost demand for the
bicycles, says the newspaper. The government introduced guidelines in
April requiring corporate health insurance associations and other
organisations to conduct medical checkups and to set up health guidance
systems to help prevent obesity.

According to the Bicycle Association, 282,000 power-assisted bikes were
sold in 2007, a 10% increase from the previous year.

Panasonic Cycle Technology Co in Kashiwara, Osaka Prefecture, said the use
of power-assisted bicycles by businesses had grown about 2.7-fold in the
year ended 31 March 2007, from the 12 months ended 31 March 2003. The firm
expects sales of the bicycles to increase by 80% in the current year.

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Market Anticipates Interest Rate

The government's policy to raise fuel prices by an average of 28.7% last
weekend will be responded by the market by selectively buying blue-chip
stocks to anticipate inflation and BI Rate.

Investors' prudent stance is estimated to make the Composite Stock Index
(IHSG) on the Indonesia Stock Exchange (BEJ) hover limitedly at 2,500
throughout this week.

Head of Research at PT Paramitra Alfa Sekuritas Pardomuan Sihombing
revealed market players were still worried about the prospect of
inflation, especially the impact on the real sector and on
social-political stability.

"On the other hand, global crude oil prices are still likely to increase,
which will boost the performances of public mining and plantation
companies," he informed.

Global crude oil price hit a new record high of US$135 per barrel last
week in the wake of weaker US dollar, security threat in Nigeria, and
speculation over tycoon in the US that would lead to supply shortage.

Pardomuan forecasted sentiment for inflation would put pressures on the
index, which would move between 2,200 and 2,513. "Next week, the index
will be under pressures from several factors."

He argued the government had to be able to secure short-term foreign funds
in the market by upping interest rate.

The Central Bank (BI) plans to organize a Board of Governors' Meeting on
June 5.

The market estimates inflation will reach a two-digit level of 12%,
triggering a necessity to raise BI rate.

"The market speculates there will be rate hike, albeit slightly, to keep
the pace with inflation. If BI retains interest rate, the market will give
negative responses."

Maintain spread

BI Rate hike was necessary to keep the negative real interest rate spread
(the spread between BI Rate and inflation) attractive.

Although the spread in Indonesia was still attractive compared to the
spreads in other countries, BI still needed to provide a premium capital
gain, he added

"This is important to prevent the risk of capital flight," told Pardomuan.

On the other hand, the central bank had to use its authority to maintain
the rupiah exchange rate since weaker currency would only create negative
sentiments toward the bourse.

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