Indonesia: Insurance market likely to see higher growth this year
Source: Asia Insurance Review | Dec 2022
The Indonesian non-life insurance segment is expected to exhibit higher growth in 2022, supported by the resumption of domestic activity and demand as the country transitions to treating COVID-19 as endemic and moves away from strict lockdowns seen up to 2021, said AM Best.
However, market growth is likely to fall short of the levels seen prior to the pandemic given the downside risks to domestic economic expansion, including a potential global recession, inflationary pressures and domestic monetary tightening.
In a new market segment report, ‘Market Segment Outlook: Indonesia Non-Life Insurance’, AM Best said it is maintaining its negative market segment outlook on the Indonesia non-life insurance segment, citing challenges in credit and motor insurance and ongoing macroeconomic uncertainties. Claims frequency normalisation, which has the potential to dampen the segment’s profitability, also underpins the negative outlook.
AM Best views the poor underwriting performance in the credit insurance line as a systemic issue that continues to affect the market. “Underwriting losses stemming from credit insurance have led to financial strain for several industry players, as the economic impact from COVID-19 hampered the debt repayment abilities of consumers,” said AM Best senior financial analyst Chris Lim. “In turn, this has led to higher default rates, and therefore, higher credit insurance claims.”
Premium rate inadequacy, weaknesses in underwriting risk management and overexposure to credit insurance during a period of significant economic stress have weakened the financial profiles of various mid-to-large domestic insurers and reinsurers. This has led to a capital event for some and may continue to pose a drag on the operating performance of others. A