The Ministry of Finance (財政部) outlined details of its four-tier earthquake insurance mechanism for residential properties yesterday, saying the plan will most likely be launched early next year.
The multi-tier mechanism is designed to spread the financial responsibility for earthquake damage between home owners, insurance companies, foreign reinsurance firms and the government.
According to an official of the finance ministry's Department of Insurance (
Minister of Finance Yen Ching-chang (
"The earthquake insurance policy is not compulsory," said Tseng Wu-rin (曾武仁), a senior official at the Department of Insurance. "Instead, the earthquake insurance would be included along with fire insurance policies. Any consumer who purchases home fire insurance starting next year will have earthquake insurance automatically included."
According to the Department of Insurance, 700,000 to 750,000 people purchase new fire insurance policies each year, and hence, would also buy earthquake coverage.
One finance ministry official yesterday offered more details about the financial side of the quake insurance mechanism.
"The system is similar to those found in a number of foreign countries," said Tseng. "The ceiling of coverage on the first layer would be NT$2 billion, and will be serviced by property insurers and the Central Reinsurance Co.
"The second layer would be covered by a government guarantee fund, with a ceiling of NT$20 billion to NT$30 billion. The source of funding will come from the insurance premiums generated from the residential policies," said Tseng.
"The third layer would be covered by foreign reinsurance companies. The ceiling for the third layer is about NT$10 billion. Therefore the total of the first three layers could provide coverage of NT$30 billion to NT$40 billion. If payouts exceed NT$40 billion, those awards would be undertaken by the government, and covered by the government budget," said Tseng.
Since some areas are more earthquake-prone, premiums are expected to vary.
"There are different earthquake risks in areas across the island ... final insurance premiums for a nunber locations have yet to be determined," Tseng said.
Meanwhile, one industry pundit expressed concern that the policies fail to cover serious claims.
"The government-backed earthquake insurance protection will only provide basic protection for the general public, since NT$1 million could hardly recover most of the loss generated from a serious earthquake," said Chang Tien-haw (
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