Three Indonesian tech giants to fund digital insurance start-up

Ride-hailing company Go-Jek, e-commerce firm Tokopedia and travel booking startup Traveloka – each of which is valued in the billions of US dollars – have come together to provide a Series A funding round for PasarPolis, an Indonesian digital insurance start-up aiming to tap Southeast Asia’s growing internet economy.

PasarPolis started out as an insurance comparison site, but today it offers micro- and modular-insurance online.

Go-Jek, Tokopedia and Traveloka are three of its major clients through which it offers ‘click box’ policies that are bundled with ride-hailing trips, e-commerce sales and travel deals.

The round itself is undisclosed, but Deal Street Asia reported it to be in the range of $5-8m.
Beyond the usual consumer-focused products, PasarPolis has developed programmes such as life insurance for Go-Jek drivers, and healthcare initiatives for SMEs that sell products on Tokopedia.

In the travel space, growth in insurance revenue for companies like Expedia is outstripping ticket sale growth, which has good prospects for Traveloka.

Currently, PasarPolis has its focus on developing new insurance products, solidifying its position in the market and also reaching out into new markets in Southeast Asia – which now has more internet users than the entire population of the US, according to a report co-authored by Google.

PasarPolis has already gone overseas by tapping India for talent – a move that Go-Jek and others have also employed. The company has 15-20 engineers in Bangalore, while the core team, partner support and tech integration staff are housed in Indonesia.


Indonesia Rendezvous – Highlights of past 10 years


Finding insurance-related solutions to counter natural catastrophes’ damages

Between the August and October that year, Indonesia was rocked by six earthquakes, all above level 6 on the Richter scale, with the highest recorded at 7.9 in Padang (30 September). The economic loss was around $2 billion, with a death toll over 1,100. Panellists and delegates reflected on the challenges confronting the industry and searched for insurance-related solutions to help countries threatened by natural catastrophes.


Bali rattled by 6.8-Mw earthquake during Rendezvous

The highlight of this year’s Rendezvous was the 6.8-Mw earthquake that jolted Bali just before noon on 13 October – ironically when panellists were discussing CATs. Insured losses were later reported at around IDR3-5 billion ($300,000-500,000). The epicentre was 145-km southwest of Nusa Dua, where the conference was held, and 10-km deep. In other areas of Bali, about 45 people were injured but the Rendezvous delegates were unharmed.


OJK wishes to set up new reinsurer & new tariff for floods and property

At this Rendezvous, the Indonesia insurance supervisor revealed that they are considering optimising local capacity through the establishment of a new reinsurance company with foreign participation as well as the merger of several local players into a unified reinsurer.

The OJK also announced their plans for the establishment of an insurance rating agency, to help regulate pricing competition in the market.


Indonesia gears up for the AEC

The quest for capital optimisation is especially important in the context of the forthcoming ASEAN Economic Community (AEC), said Mr Dumoly Pardede, deputy commissioner for Non-Bank Financial Institutions, OJK. “Without capital upgrade, we cannot take advantage of the opportunities in the AEC. We urge the AAUI to work on ways to help its member companies strengthen their capital,” he said.


Discussions on the compulsory local cessions begin

The compulsory cession rules which led to POJK 14 was first mooted in late 2015. OJK chief executive of Non-bank Financial Institutions Firdaus Djaelani said at the Rendezvous that more than just reducing the Indonesian insurance industry’s balance of payments deficit, these rules were aimed at capacity optimisation and intended to encourage the local insurance industry to step up on its risk management efforts and ensure better and more prudent underwriting by local players.


“Giant” reinsurer

This Rendezvous also coincided with the announcement that state-owned Indonesia Re was on track to become a “giant” reinsurance company by 2020. Indonesia Re was formed by the merging of four reinsurance firms, including PT Reasuransi Indonesia Utama (Persero) and PT Reasuransi Nasional Indonesia (Nasional Re).


Indonesia’s Long-Term Foreign- and LocalCurrency Issuer Default Ratings upgraded to ‘BBB’, from ‘BBB–’: Fitch

Indonesia’s resilience to external shocks has steadily strengthened in the past few years, as macroeconomic policies have consistently been geared towards maintaining stability. A more flexible exchange-rate policy since mid-2013 has helped foreign reserve buffers swell to $126 billion as at November 2017, reaching seven months of current account payments, compared with the ‘BBB’ median of six months.

Moreover, monetary policy has been sufficiently disciplined to limit bouts of volatile capital outflows during challenging periods. Macro-prudential measures have helped curb a sharp rise in corporate external debt, while financial deepening has coincided with improved market stability. The focus on macro stability is also evident in credible budget assumptions in the previous few years. Indonesia’s resilience has improved, but external challenges remain, including potential emerging market pressure in the context of the US Federal Reserve’s policy normalisation.

Indonesia’s dependence on commodities remains relatively high and both its net and gross external debt (166% of current account receipts; ‘BBB’ median: 130%) remain elevated compared with ‘BBB’ peers.

Political reform fuelling growth

Domestically, the possibility that political noise becomes a distraction from economic policy-making in the run up to the 2018 local elections and 2019 presidential election represents a risk to the strong reform drive and could undermine domestic and foreign market sentiment, although such an outcome is not Fitch’s base case.

The government’s concerted structural reform drive is improving a still-challenging business environment. Implementation of measures to reduce business procedural and permit requirements have sharply improved Indonesia’s position in the World Bank’s Ease of Doing Business ranking to 72nd out of 190 countries; a rise of 37 places in two years.

The reforms also seem to be contributing to stronger external finances, with foreign direct investment (FDI) picking up in recent quarters to such an extent that Fitch expects net FDI to cover the current account deficit over the next few years.

Standing out in Southeast Asia

GDP growth remains strong against peers, as illustrated by average 5.1% growth over the previous five years (‘BBB’ median: 3.2%), although this is still short of the above 6% levels prior to the terms-of-trade shock in 2012. Fitch expects GDP growth to rise to 5.4% in 2018 and 5.5% in 2019, from 5.1% in 2017. Indonesia is benefiting from the global pick-up in trade and stabilising commodity prices. Investment is also set to gain further momentum on higher public infrastructure spending, lower borrowing costs and structural reform implementation.

A low general-government debt burden of 28.5% of GDP in 2017, as expected by Fitch, compares well with the ‘BBB’ median of 41.1%. The government is adhering to a self-imposed budget-deficit ceiling of 3% of GDP, which has helped maintain investor confidence in Indonesia during times of market turbulence.
The government’s 2018 deficit target of 2.2% of GDP exhibits a conservative approach, providing leeway for budgetary pressure in an election year. Fitch believes the deficit outturn is more likely to remain broadly stable at 2.7% of GDP and stay within the 3% ceiling. The government’s revenue intake is very low; among Fitch-rated sovereigns, only four have lower government revenue as a percentage of GDP.

This constrains direct-government financing of infrastructure projects and increases reliance on state-owned enterprises (SOE) to address the large infrastructure deficit. Hence, non-financial SOE debt of 4.5% of GDP as of July 2017 is likely to increase substantially in the coming few years, raising the state’s contingent liabilities. Fitch considers the sovereign’s exposure to banking-sector risks as limited.

A stable financial sector

Private credit represents only 37% of GDP and the banking sector’s capital adequacy ratio remains strong, at 23.2% in October 2017. Banks’ non-performing, special mention and restructured loan ratios stabilised in 2017. Risks that built up in the previous credit cycle led to deferral of private-sector capital expenditure and a rise in gross non-performing loans to 3.0% of total assets as of October 2017, from a low of 1.8% at end-2013.

Indonesia’s economy continues to exhibit some structural weaknesses, notwithstanding recent improvements from reform implementation, and is less developed on a number of metrics than that of many peers.

Average per capita GDP is low at $3,780, compared with the ‘BBB’ range median of $11,173, and governance remains weak, compared with rating category peers, as illustrated by a low World Bank governance indicator score in the 45th percentile, albeit improving from 42nd a year ago (‘BBB’ median: 60th percentile).


Asia: Top 10 Nat CATs in 2018 by economic losses


Letting the good times flow

In a flurry of color and batik shirts, the Indonesian insurance industry came out in full force to welcome the 24th Indonesian Rendezvous. With friends from all over the region, including Singapore, Korea and Malaysia, the welcome cocktail promised a good start to the next 3 days.


Meet The Team

General Manager Business Development: Sheela Suppiah-Raj
Editorial team: Osama Noor, Zuhara Yusoff, Cynthia Ang
Design & Layout: Charles Chau, Jerick Yu