AM BEST MAINTAINS NEGATIVE OUTLOOK ON INDONESIA NON-LIFE INSURANCE MARKET

KUALA LUMPUR, Oct 31 (Bernama) -- Global credit rating agency, AM Best, is maintaining its negative market segment outlook on the Indonesia non-life insurance segment, citing challenges in credit and motor insurance and ongoing macroeconomic uncertainties.

Claims frequency normalisation, which has the potential to dampen the segment’s profitability, also underpins the negative outlook.

In a new Best’s Market Segment Report, “Market Segment Outlook: Indonesia Non-Life Insurance”, AM Best notes that it expects the segment to exhibit higher growth in 2022, supported by the resumption of domestic activity and demand as Indonesia transitions to treating COVID-19 as endemic and moves away from strict lockdowns seen up to 2021.

However, market growth is likely to fall short of the levels seen prior to the pandemic given the downside risks to domestic economic expansion, including a potential global recession, inflationary pressures and domestic monetary tightening.

In AM Best’s view, the poor underwriting performance in the credit insurance line is a systemic issue that continues to affect the market.

“Underwriting losses stemming from credit insurance have led to financial strain for several industry players, as the economic impact from COVID-19 hampered the debt repayment abilities of consumers.

“In turn, this has led to higher default rates, and therefore, higher credit insurance claims,” said AM Best senior financial analyst, Chris Lim, in a statement.

Inflationary pressures are also anticipated to constrain the underwriting margins for insurers. In particular, AM Best expects claims inflation to weigh on the underwriting margins for motor and health insurance.

More details at www.ambest.com.

-- BERNAMA