In order to provide earthquake insurance protection to the public, the Ministry of Finance (
The finance ministry yesterday discussed the residential earthquake insurance system with Central Reinsurance Co (
The policy is likely to include coverage on the building itself and exclude any property inside the building. Additional coverage includes a NT$3,000 daily room-and-board expense, with a 60-day maximum. The policy would be attached to fire insurance policies. The new system may be available by Jan. 1, 2002.
Central Reinsurance Co has completed an earthquake evaluation report on the maximum amount of damage an earthquake could bring to the island and an insurance premium estimate report with EQE Co, an international risk evaluation company. Central Reinsurance Co signed a contract last May with EQE to conduct the survey.
Since the 921 earthquake struck Taiwan in 1999, the finance ministry has been trying to set up a universal earthquake insurance protection system.
"There are five major features in the design of the new earthquake insurance protection system," said Shen Lin-long (
"Basic protection would be provided, which would keep the coverage high in the early stage. About NT$1 million in coverage would be offered at the beginning. We might be able to raise the coverage later on without raising the insurance premium," Shen added.
"Other features include a NT$3,000 emergency room-and-board allowance, with 60 days maximum coverage and a ceiling of NT$180,000. This would be included in the fire insurance policy currently available. This is meant to raise the percentage of earthquake insurance coverage through the popular fire insurance policy.
"Since this is the beginning stage, we would like to keep the insurance simple," Shen said. "When an earthquake strikes again, it won't matter if one's residence is totally destroyed or partially damaged, the NT$1 million will be paid in full. Once the government verified the extent of the damage on a residential building and posted the results, the insurance company would not conduct a second evaluation," Shen said.
"Originally, the ministry had designed a three-layer system for earthquake protection," Shen said. "The first layer was domestic insurers and, through a reinsurance system, the second-layer would have been foreign reinsurance companies. The third layer would have been the government. However, there have been a number of serious earthquakes in recent years, which have caused insurance premiums to rise significantly. Therefore, the ministry has changed its original design, which leaves out foreign reinsurance companies," Shen said. "The first layer will be domestic insurance companies and the second layer will be a fund guaranteed by the government. If we go several years without a catastrophe in Taiwan, the fund will have accumulated sufficient funds [to cover future loss]. The new plan does not depend on foreign reinsurance companies."
According to Central Reinsurance's current plan, domestic insurers could afford a total of NT$2 billion in losses currently. If the annual insurance premium is set at NT$1,000 per household and 700,000 households buy the policy, this will generate NT$700 million in premiums a year. Currently, there are 760,000 households covered by fire insurance policies in Taiwan, or about 46 percent of total households. Since only 0.2 percent of households are currently covered by earthquake insurance, once the combination of fire insurance and earthquake insurance is put into effective; about 700,000 households could have earthquake insurance in one year.
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