Insurance
From The Report: Indonesia 2013
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Indonesia’s insurance sector stands out as the fastest growing and most promising in South-east Asia, within a region that’s largely seen as the most attractive for the world’s major underwriters. Supported by rapid economic expansion spurred by domestic consumption in the past decade, the sector has averaged a compound annual growth rate of 20% in gross written premiums and 26% in assets since 2007. Islamic insurance is expanding rapidly, with a 10-fold increase in contributions reported since 2010. Strong regulatory enforcement will be crucial to addressing low-penetration. If the long-awaited consolidation into better-capitalised underwriters is able to aid greater innovation in products and distribution channels, Indonesia’s current rapid growth should rise exponentially.
This chapter includes an interview with William Kuan, President Director, Prudential Indonesia.

Articles from this Chapter

Overview

Captured potential: The life segment leads, with expansion taking place across the board
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The country’s insurance sector stands out as the fastest growing and most promising in South-east Asia, even within a region widely seen as the most attractive for the world’s major underwriters. Supported by rapid economic growth spurred by domestic consumption in the past decade, the sector has averaged compound annual growth of 20% in gross written premiums and 26% in assets since 2007, according to Jakarta-based credit rating agency Pefindo. ON THE RISE: While this consistently rapid…

Interview

William Kuan, President Director, Prudential Indonesia: Interview
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Interview: William Kuan How do you assess the overall development of the insurance sector? What drives the industry’s growth? WILLIAM KUAN: There are huge opportunities for insurance growth currently present in the market. Indonesia continues to enjoy very good economic growth, and had a GDP of 6.3% in 2011. Based on recent World Bank reports, it is estimated that Indonesia will grow 6-7% over the next few years. The development of the insurance industry tends to follow economic development.…

Analysis

In the mix: New standards and greater awareness are bringing about a shift
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While life insurance has outperformed the overall market, both domestically and regionally, for a decade, heavy reliance on investment-linked products reveals the sector’s bias towards savings rather than outright protection. A sustained inflow of foreign underwriters, who now dominate the sector, has highlighted the segment’s strong growth prospects. BULL RIDE: New accounting standards and a growing realisation of the benefits of traditional life protection is spurring a shift in the…

Analysis

Sector overhaul: Underwriters hope new rules will make motor insurance compulsory
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Strong growth in Indonesia’s new vehicle sales in recent years has generated sustained growth in the motor segment. “Car sales have been increasing and in turn motor vehicle insurance has been growing rapidly,” Christian Wanandi, the president director of Jakarta-based general insurance company Asuransi Wahana Tata, told OBG. Yet motor’s share of total non-life premiums stood at 30.1% in the first half of 2012, far lower than 60% in Thailand and 46% in Malaysia in 2011. MANDATORY COVER:…

Analysis

Better risk management: Major changes are on the way for the regulatory framework
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The country has been one of the region’s early adopters of a risk-based capital (RBC) regulatory framework, since 2005. Despite improvements in risk weightings, however, the industry still suffers a significant gap across players in terms of risk management processes, with larger local and foreign players in line with international best practices but smaller underwriters still lagging in terms of accounting and governance. The existing regulator, Bapepam-LK, has gone some ways in enforcing…

Analysis

Reassuring growth: Consolidation is expected to boost local reinsurance capacity
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With limited local underwriting capacity, larger risks have traditionally been ceded offshore. The limited capacity of the four local reinsurers has stunted efforts to domesticate more risk, leading to volatile rates. Consolidating and developing reinsurance capacity will thus be crucial to future efforts to develop the industry, while higher profits are spurring underwriters to seek treaty reinsurance cover to boost their capacity. LIMITED DOMESTICATION: The existing regulator, Bapepam-LK,…

Analysis

A wider appeal: Mergers and acquisitions are bringing investors into the market
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The world’s fourth-largest population, a very low insurance penetration rate and strong prospects for growth are proving a draw for foreign investors eyeing Indonesia’s insurance market. Higher caps on foreign ownership than elsewhere in Asia – 80% of an underwriter’s equity, compared to 49% in Thailand and 26% in India – add to the appeal. With the sector regulator reticent to deliver any new licences for both life and non-life underwriters and looming capital requirement increases,…