Indonesia: Stability/transparency rules to shape insurance sector

Indonesia’s life and non-life insurance sectors will be shaped by changing regulations that are aimed at greater transparency and stability for the industry, according to Fitch Ratings in a report titled “Indonesia Insurance Market Dashboard 1H14″.

The implementation in the first quarter of this year of insurance tariff regulations could enhance stability in insurers’ underwriting margin and ensure healthy bottom lines in the non-life sector are sustainable.

In addition, upcoming planned changes to the regulations governing bancassurance could encourage greater disclosure and tighten the regulation of fee agreements between insurers and co-operating banks. The new rules would require lenders to openly reveal the commission they receive from insurers for their bancassurance products. At present, in the life insurance sector, as many as 26 insurers and 40 banks are currently in bancassurance partnerships to distribute life insurance products.

Fitch Ratings also noted that the Indonesian insurance industry reported sound premium growth and posted favourable financial results in 2013, driven by manageable catastrophe losses. Fitch believes that exposure to catastrophe risks will remain a key challenge for insurers’ underwriting profitability (mainly for non-life) as Indonesia continues to be a catastrophe-prone region.

Steady industry growth is expected in the mid-term, underpinned by low penetration, improving risk awareness and rising population affluence, said Fitch Ratings.

Source: AIR eDaily