AM Best, the credit rating agency, has retained its stable outlook for Indonesia’s non-insurance/" style="color:#c0392b;font-weight:700;text-decoration:underline;" class="hta-topic-link">life insurance market, pointing to supportive economic conditions, continued premium growth and measures designed to strengthen the industry’s financial resilience.
In its Best’s Market Segment Report, Market Segment Outlook: Indonesia Non-Life Insurance, AM Best said Indonesia’s macroeconomic fundamentals continued to provide support for insurers, while regulatory developments were helping to improve risk management and financial strength across the market.
The agency also highlighted measures being introduced to address rising medical costs, which it expects could provide support for Indonesia’s domestic health insurance sector.
“We expect prospective premium growth among Indonesia’s insurers to remain robust, but profitability continues to be constrained by claims inflation and competitive market conditions,” added XinYa Ong, Financial Analyst, AM Best.
AM Best said most insurers and reinsurers in Indonesia had achieved the first-stage minimum equity requirement of IDR 250 billion by July 2026, ahead of the end-of-year deadline. However, the agency said the requirement could continue to put pressure on smaller or financially weaker non-life insurers that have less flexibility in managing their capital positions.
The sector is also preparing for the gradual introduction of a new risk-based capital (RBC) framework. AM Best said regulatory reporting under the new framework is expected to begin in 2027, forming part of efforts to bring Indonesia’s insurance regulatory regime more closely into line with international standards.
“Although the implications for individual insurers will only become clearer as implementation progresses, the transition may drive stronger capital discipline and risk management practices across the industry over time,” commented Chris Lim, Director, AM Best.
According to AM Best, insurers are continuing to adjust pricing as they respond to increased claims costs, higher claims frequency and pressure on underwriting returns. The agency said profitability pressures had become more pronounced in several important areas of the market, including credit and health insurance.
Despite these pressures, AM Best considers the overall non-life insurance segment to remain resilient. The agency also said insurers continued to have access to sufficient reinsurance capacity, with both domestic and international reinsurers supporting the Indonesian market.
