by AZALEA AZUAR / pic by Bernama
ONLY 10% of economic losses are covered from last year’s great flood, which hit from Dec 16 to Dec 21 last year.
The flood’s damage to economic losses were reportedly between RM5.3 billion to RM6.5 billion.
According to the Malaysian Reinsurance Bhd’s (Malaysian Re) latest report entitled Malaysian Insurance Highlights (MIH 2021), Malaysian insurers only shouldered about RM1.5 billion to RM2 billion or 20% to 30% of the economic losses as a high share of manufacturing properties were hit in Kuala Lumpur and Selangor.
“The cost for flood insurance is rather nominal. The cover is available as an extension to the standard fire policy and costs about 0.086% of the sum-insured. In the personal lines, the pricing of the risk is perceived as high and is often only purchased in flood prone regions or following recent events,” Malaysian Re president and CEO Zainudin Ishak (picture) said in a statement yesterday.
“Most homeowners are insured as the banks arrange the cover as part of the mortgage. The lower-income segment of the population, which runs a high flood exposure, relies on the government in case of a loss. In the recent flood it supported the people affected with a financial contribution of RM1.4 billion,” he added.
He said that Malaysian Re is currently working with Bank Negara Malaysia and Malaysia’s National Disaster Management Agency to develop a solution that ties together those who can afford to insure with those who cannot afford to.
“While previously, the focus had been on developing a coverage which foremost addressed the exposure of the lower-income segments of Malaysia’s population, the current wholesome solutions aim to provide faster protection to consumers and encompass all parts of society or policyholders”, Zainudin explained.
MIH 2021 accentuates the need to address the protection gap as flood risk increases, where the demand for flood cover is influenced by the government’s support of the country’s low-income segment for the loss caused by a disaster.
This third edition of MIH also states that the December flood has impacted the pricing for flood coverage in Malaysia’s insurance markets.
Insurers are also expected to review their reinsurance structures to ensure they have sufficient coverages in place, due to the changing in our understanding of flood risk in Malaysia.
MIH 2021 is published in collaboration with Zurich-based research, communication, and business development consultancy Faber Consulting AG.
More than 24 executives representing 22 Malaysian insurers, reinsurers, intermediaries and trade associations have participated in this survey.