New regulations set to improve Indonesia’s insurance sector dynamics

Written by Adam Cadle

06/02/2024

Tougher minimum equity requirements for Indonesian insurers are likely to reduce the number of companies operating in the sector and encourage a healthier competitive landscape, Fitch Ratings has said.

The Financial Services Authority (OJK) will raise minimum equity requirements from IDR 100bn to IDR 250bn from end-2026, and will then raise requirements again to IDR 500bn from end-2028 for Group 1 (insurers offering simple products) life and non-life.

For life and non-life (Group 2 – insurers offering a full range of products, including credit insurance), the OJK will raise the requirements from IDR 100bn to IDR 250bn from end-2026, and then to IDR 1,000bn from end-2028.

Fitch said Indonesia’s insurance market is fragmented, with 49 life insurers, 72 non-life insurers and seven reinsurers as of Q4 2023.

“This leads to intense competition that encourages aggressive business expansion and weakens pricing power and profitability,” it added.

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