The financial health of insurance companies in Indonesia will not be affected by the 22 December tsunami in the Sunda Strait because of good risk management and strong capital,says Fitch Ratings.
In a statement, Fitch also states that Indonesia's insurance industry was not affected even though it had to pay large amounts of post-tsunami claims that hit Banten and Lampung.
Fitch Ratings insurance analyst Jessica Pratiwi said that although the profitability of insurance companies will be affected, insurance companies have appropriate disaster risk management and strong capital support.
Fitch cited data from PT Reasuransi Maipark Indonesia that the total insurance coverage in these two regions reached IDR307trn ($21.7m). Insurers' geographical exposure in coastal areas is considered low. Of the total, around 5% are in coastal areas with 50 potential claims amounting to under IDR15.9trn.
"We don't think there will be a significant escalation of claims that can affect insurance companies," Jessica said.
The tsunami, caused by an undersea landslide, killed more than 400 people and injured more than 1,400 others.
The profitability of insurance companies in 2018 is considered to have been disrupted after several disasters hit Indonesia. In addition, insurance companies need to recalibrate their disaster reinsurance coverage amid the increasing frequency of disasters.