Best’s Market Segment Report: AM Best Revises Its Outlook on Indonesia’s Non-Life Insurance Market to Negative


AM Best revised its market segment outlook in the Indonesian non-life insurance market from stable to negative, citing a weaker than expected economic recovery, which will likely delay the segment’s recovery to pre-pandemic growth levels , as well as the increased likelihood of depressed investment returns and increased credit insurance risks.

The Best Market Segment Report, “Market Segment Outlook: Indonesia Non-Life Insurance,” notes that a resurgence of the COVID-19 virus, coupled with a slow progression in vaccination, has resulted in the re-establishment of strict mobility restrictions, hampering short-term economic recovery . Weaknesses in the economy and the potential inability to contain the pandemic could reduce demand for insurance in a number of product lines, such as property insurance, engineering, automotive, transportation and travel. Although revenue increased by around 2% to reach IDR 38.5 trillion (US $ 2.74 billion) in the first half of 2021, compared to the same period of the previous year, growth remained below average. pre-pandemic levels and may remain limited due to the latest round of mobility restriction measures.

Credit insurance, a key industry in the Indonesian non-life insurance market, is also under pressure with further economic weaknesses resulting from the escalation of COVID-19 infections. This could weaken debtors’ debt repayment capacities and lead to higher default rates, and therefore higher credit insurance claims, especially for the most vulnerable small and medium-sized businesses. Insurers with higher exposure to credit insurance and lower underwriting risk management may face disproportionate losses that could weaken their financial profile.

The low interest rate environment also continues to hamper the investment performance of Indonesian non-life insurers. The report says investment risks may tend to increase as protracted pandemic conditions erode the financial strength and earning capacities of debt and equity issuers.

AM Best expects mandatory prices in the non-life insurance market for property – including business interruption – and automotive lines of business to remain a supporting element in the market. Mandatory tariffs for these industries have helped to limit the level of unhealthy price competition often observed in other liberalized markets. In addition, greater investment in the technology and its use to support improvements in distribution and operational efficiency should help Indonesian non-life carriers achieve competitive advantages in the medium to long term.

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AM Best is a global credit rating agency, news publisher, and data analytics provider specializing in the insurance industry. Based in the United States, the company operates in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

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