AM Best has maintained its stable outlook on Indonesia’s non-life insurance segment, citing resilient growth prospects, ongoing regulatory improvements, and strong investment returns.
The rating agency expects continued expansion in Indonesia’s non-life market, supported by infrastructure development, solid household consumption, and sustained government spending — all of which should drive higher demand for commercial insurance. Rising health care awareness is also expected to fuel growth in the health insurance segment.
AM Best noted that continued regulatory refinements are supporting the long-term financial stability of the domestic non-life insurance industry.
As of June 2025, most non-life insurers have complied with the first phase of the new minimum capital requirements introduced under Indonesia Financial Services Authority (OJK) Regulation 23 of 2023.
“While the minimum equity requirements impose short-term stress on financially weaker insurers, greater financial resilience of the industry is supportive of sustainable insurance market growth over the long term,” said XinYa Ong, Financial Analyst at AM Best.
The agency also highlighted that interest rates in Indonesia remain robust relative to historical levels. Given that term deposits and fixed-income instruments represent the majority of the segment’s investments, the robust interest rate environment is expected to bolster overall earnings.
However, AM Best observed that underwriting performance in the credit and health segments remains under pressure as paid loss experience of credit lines has continued to adversely develop, while health insurance claims have been affected by high medical inflation and fraudulent behaviour.
Another factor moderating the stable outlook is statutory tariffs on the property and motor business lines, which limits insurers’ ability to adjust premium rates. Pricing risks are also emerging in the motor segment as electric vehicle adoption increases across Indonesia.
“The lack of pricing flexibility, coupled with increased exposure to catastrophe losses, inflationary pressures and evolving risk profiles, heightens pricing risks,” said Chris Lim, associate director, analytics, AM Best. “Nonetheless, regulatory refinements under consideration and potential adjustments to property and motor insurance tariff rates may alleviate this risk over time.”
