NEGATIVE OUTLOOK FOR INDONESIA'S NON-LIFE INSURANCE SEGMENT - AM BEST

KUALA LUMPUR, Oct 9 (Bernama) -- Global credit rating agency, AM Best, is maintaining a negative outlook on the Indonesia non-life insurance segment, citing heightened reinsurance credit risk and potential pressure on underwriting margins owing to rising reinsurance costs and more-restrictive coverages.

In the new Best’s Market Segment Report, “Market Segment Outlook: Indonesia Non-Life Insurance”, states that the primary non-life market’s exposure to reinsurance counterparty credit risk has worsened as the financial strength of several domestic reinsurers has deteriorated in recent years due to outsized losses in their life, health and credit insurance lines.

The rating agency expects primary insurers’ underwriting margins to come under pressure because of the hardening reinsurance market as well.

AM Best associate director, analytics, Chris Lim said as an alternative to paying higher reinsurance costs, Indonesia’s insurers may choose to increase their retention levels.

“However, doing so increases income volatility, insurers will bear greater exposures to catastrophe risks given that the country is prone to natural disasters such as earthquakes and floods,” he said in a statement.

Underwriting losses in the credit insurance line of business, as well as slower premium growth in the property insurance line and rising health insurance claims, also are factors in the negative outlook.

Over the long term, AM Best expects the non-life segment’s expansion to be supported by the country’s economic growth, and particularly as Indonesia continues to develop its insurance market and increase non-life insurance penetration.

-- BERNAMA