AM Best maintains a negative outlook on the Indonesian non-life insurance market

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SINGAPORE, October 31, 2022–(BUSINESS WIRE)–AM Best maintains its negative market segment outlook on Indonesia’s non-life insurance segment, citing challenges in credit and motor insurance and continued macroeconomic uncertainties. The normalization of claims frequency, which has the potential to dampen segment profitability, also supports the negative outlook.

in a new Best Market Segment Report“Market Segment Outlook: Indonesia Non-Life Insurance”, AM Best notes that he expects the segment to post higher growth in 2022, supported by the recovery of domestic activity and demand as the Indonesia is transitioning to treating COVID-19 as endemic and moving away from the strict lockdowns seen through 2021. However, market growth is expected to be below levels seen before the pandemic given the downside risks to the domestic economic expansion, including a possible global recession, inflationary pressures and domestic monetary tightening.

According to AM Best, the poor underwriting performance in the credit insurance line is a systemic issue that continues to affect the market. “Underwriting losses resulting from credit insurance have resulted in financial stress for several industry players as the economic impact of COVID-19 has hampered consumers’ debt repayment abilities,” said Chris Lim, senior financial analyst, AM Best. “In turn, this led to higher default rates, and therefore higher credit insurance claims.”

Inadequate premium rates, weaknesses in underwriting risk management and overexposure to credit insurance during a period of significant economic stress have weakened the financial profiles of various medium to large domestic insurers and reinsurers. This led to a momentous event for some and may continue to weigh on operational performance for others.

Inflationary pressures are also expected to limit insurers’ underwriting margins. In particular, AM Best expects claims inflation to weigh on underwriting margins for auto and health insurers. “Rising inflation is expected to lead to higher auto claims costs, driven by the higher cost of labor and replacement parts,” said Myles Gould, chief analyst at AM Best. . “Medical cost inflation in Indonesia is also estimated to be rising at a significantly faster rate than general inflation.”

In addition, business growth in the auto insurance industry may be constrained by factors that negatively impact demand for motor vehicles in the near term. The expansion of motor insurance activity in 2021 and the first half of 2022 benefited in part from an increase in new car sales, which was stimulated by a temporary reduction in the tax on sales of motor vehicle products. luxury. However, this tax incentive has been removed.

AM Best may revise the outlook to stable if these challenges abate going forward.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=325505.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered 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 www.ambest.com.

Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

See the source version on businesswire.com: https://www.businesswire.com/news/home/20221030005002/en/

contacts

Chris Lim
Senior Financial Analyst
+65 6303 5018
[email protected]

Myles Gould
Director, Analytics
+44 207 397 0304
[email protected]

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200 ext. 5159
[email protected]

Al Slavin
Communications Specialist
+1 908 439 2200 ext. 5098
[email protected]

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