AM Best has revised the outlook to stable from negative for Indonesia’s non-life insurance segment, citing factors that include robust growth prospects, the potential for compulsory third-party liability (TPL) insurance for motorists, and regulatory changes that are expected to enhance the sector’s long-term financial stability.

The Best’s Market Segment Report, “Market Segment Outlook: Indonesia Non-Life Insurance,” notes two moderating factors, including pressure that remains on underwriting conditions in core business segments and elevated pricing risk due to rapid growth of the electric vehicle market.

Indonesia’s economy grew by 5% in 2023 and is likely to remain robust over the near term, supported by steady domestic demand, rising business investment and fiscal spending, according to the report. The country’s non-life insurance segment reported robust top-line results in the first quarter of 2024. This followed the growth momentum from 2023 with key drivers being the property, credit, health and motor lines of business.

AM Best expects demand for commercial insurance to increase over time under the Indonesia government’s “Golden Vision 2045.” This strategy is designed to transform the economy through plans to modernise and develop the country’s existing infrastructure and increase renewable energy production. Additionally, a regulatory proposal to requiring motorists to have TPL insurance is expected to further bolster insurance demand, given that motor TPL insurance is currently purchased on a voluntary basis.

“Given the regulatory push to implement the policy in 2025, motor insurance demand is expected grow significantly over the medium term and help narrow the country’s insurance protection gap,” said Chris Lim, associate director, AM Best. “Nonetheless, successful implementation of the proposal will require effective product design, robust risk management, and adequate pricing strategies to mitigate potential underwriting challenges.”

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=347525.

Chris Lim will give a presentation on AM Best’s market segment outlook for Indonesia’s non-life insurance segment during the 28^th Indonesia Rendezvous, which is scheduled for 9-12 October 2024, at Bali Nusa Dua Convention Center in Bali, Indonesia. Lim’s presentation is scheduled for 1:30 p.m. on Thursday, 10 October. For more information, visit the event website.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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