Indonesian insurers’ higher equity threshold to drive consolidation

Written by Adam Cadle

06/10/2025

The introduction of higher minimum equity thresholds for Indonesian insurers and reinsurers is expected to accelerate consolidation, Fitch Ratings has argued, as weaker insurers potentially seek additional capital to meet the tougher requirements or become acquisition targets.

About 90% of Fitch-rated insurers already meet the first stage of the higher threshold, which takes effect at end-2026, but around 70% will require additional equity to meet the second stage commencing from end-2028.

Insurers with a credit insurance business face higher requirements than those without, but 25% risk-retention by banks will moderate insurers’ capital exposure and support underwriting capacity. “We believe any resulting consolidation will be credit positive for insurers that meet the tougher thresholds and strengthen their positions, while those falling short may join an insurance business group,” Fitch stated.

In addition, insurers that have adopted Indonesia’s new account standard for insurance contracts, PSAK 117, in January 2025 show a limited equity impact so far.

“We expect their risk-based capital metrics to evolve as guidance is finalised,” Fitch stated.

Indonesia’s newly established sovereign wealth fund, Daya Anagata Nusantara Investment Management Agency, plans to consolidate 15 state-owned insurers and reinsurers into one entity per segment. In June 2025, it announced the merger of three state-owned reinsurers.

“We expect the merged reinsurer group’s capacity to reduce. The execution of these changes, alongside higher equity floors, will determine the near-term winners from the consolidation,” Fitch concluded.

Related Articles