am the best maintains its negative market segment outlook for Indonesia’s non-life insurance segment, citing challenges in credit and auto insurance as well as ongoing macroeconomic uncertainties. The negative outlook is also underpinned by the normalization of claims frequency, which could dampen the segment’s profitability.
In a new one Market segment report by Best“Market Segment Outlook: Indonesia Non-Life Insurance,” AM Best notes that the segment is set to show higher growth in 2022, helped by the resumption of domestic activity and demand as Indonesia moves to classify COVID-19 as endemic and move away from strict lockdowns until 2021. However, given the downside risks to domestic economic expansion, including a potential global recession, inflationary pressures and tightening domestic monetary policy, market growth is likely to remain below pre-pandemic levels.
AM Best believes poor underwriting performance in the credit insurance space is a systemic issue that continues to impact the market. “Underwriting losses resulting from credit insurance have created financial strains for several industry players as the economic impact of COVID-19 impacted consumers’ ability to repay debt,” said Chris Lim, senior financial analyst at AM Best led to higher credit insurance claims.”
Inappropriate premium rates, weaknesses in underwriting risk management and excessive credit insurance exposures in a time of significant economic stress have weakened the financial profiles of several medium to large domestic insurers and reinsurers. This has resulted in a capital event for some and could continue to weigh on the operating performance of others.
Inflationary pressures are also expected to squeeze underwriting margins for insurers. In particular, AM Best expects claims inflation to weigh on underwriting margins for motor and health insurance. “Rising inflation is…
