A Call for Inclusive Disaster Risk Financing in Indonesia: Addressing Vulnerabilities in High-Risk Areas

¹ Research Center for Behavioral and Circular Economics - OR TKPEKM, BRIN
² Research Center for Population - OR IPSH, BRIN
³ Research Center for Cooperative, Corporation, and People's Economy- OR TKPEKM, BRIN
⁴ Research Center for Macroeconomics and Finance- OR TKPEKM, BRIN

^* Corresponding author email: syar012@brin.go.id

Abstract

Earthquakes are a growing threat to Indonesia, with limited resources for risk mitigation. The current reliance on government relief is unsustainable. Despite Law No. 24/2007 on Disaster Management, inclusive disaster risk financing schemes have yet to be established. This study aims to provide evidence for disaster risk financing strategies in Indonesia, focusing on geological disasters in active fault areas with high population density. Aligned with the Sendai Framework for Disaster Risk Reduction (SFDRR) Priority 2, this study seeks to address the financial impact of disasters on governments and societies. By analyzing responses to risk financing following the November 21, 2022 earthquake in Cianjur Regency, this study examines emotional reactions, risk perceptions, and willingness to participate in risk insurance. The findings highlight low participation in insurance programs due to limited insurance literacy and low enrollment in micro earthquake insurance. Material losses from the Cianjur earthquake impose a significant financial burden on the government. There is a critical need for disaster insurance schemes, especially for homes and fixed assets at high risk of land loss due to landslides. Willingness to participate varies among different socioeconomic backgrounds. This article emphasizes the urgency of implementing disaster risk financing in Indonesia, with a focus on the vulnerability of poor and low-income households.