www.marketwatch.com - HONG KONG, Jun 28, 2012 (BUSINESS WIRE) --
Indonesia's solid economy is fueling growth for a developing non-life
insurance market, well supported by domestic consumption and investment
offsetting a weaker international environment, according to a new report
from A.M. Best Co.
Stable growth of 5% to 6% in gross domestic product over the past five
years; a young and large population; rising spending on personal
property; and expanding government outlays have primed the non-life
insurance sector for further growth. The industry has generally
exhibited stable operating performance, and gross premium for nonlife
insurance increased 19.5% to IDR 34.4 trillion (USD 3.8 billion) in
2011, according to the General Insurance Association of Indonesia. (report) - (source)
The report, "Economy Boosts Indonesia's Insurers; Capital, Regulatory
Challenges Loom," adds that the country is refining its regulations to
strengthen insurance development in line with international standards.
Regulatory reform has accelerated market consolidation, but the number
of non-life insurers, which decreased from 97 to 87 between 2006 and
2010, is still considered excessive. This congested market remains a
challenge for insurers.
Takaful has been a key driver of growth in Indonesia, which has the
world's largest Muslim population, and improved and additional
regulation is expected to be introduced progressively. However, one
constraint for Takaful's growth in Indonesia has been the limited range
of products.
Other topics discussed in the report include as follows:
--
Strong domestic consumption, rising household wealth and expanding
infrastructure projects are creating demand for the non-life sector's
largest segment, motor insurance, along with personal property
insurance, life products with savings and investment functions, and
commercial and industrial insurance.
--
Indonesia's generally low insurance penetration has limited the impact
of natural catastrophes, but many insurance companies remain reluctant
to develop catastrophe insurance because of current low demand, along
with the absence of a government-backed scheme, lack of data and
catastrophe modeling and technical issues of rate adequacy for such
enormous risks.
--
Indonesia's reinsurance industry has remained stable, with no major
hits by natural disasters in recent years. However, the low capital
bases of local reinsurers restrain their ability to write coverage,
and the market still relies heavily on overseas capacity.
--
Indonesia is a potential market for microinsurance, but distribution
and product development are key challenges because of the country's
diverse population, distributed across a vast archipelago.
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