Why Indonesia’s new rules may drive up insurance mergers

Insurers with credit insurance operations face higher capital requirements.

Fitch Ratings expects Indonesia’s plan to raise minimum equity requirements for insurers and reinsurers to speed up industry consolidation, as smaller firms may seek additional capital or become acquisition targets to meet the new rules.

According to Fitch, about 90% of its rated insurers already meet the first phase of the higher equity threshold, which will take effect at the end of 2026. 

However, around 70% will need more capital to comply with the second phase, scheduled to begin at the end of 2028. 

Insurers with credit insurance operations face higher capital requirements than those without, though a 25% risk-retention limit for banks is expected to reduce insurers’ capital exposure and support their underwriting capacity.

Fitch said consolidation would be credit positive for insurers that meet the tougher standards and strengthen their financial positions. 

Weaker players that fall short may instead be absorbed into larger insurance groups.

The rating agency also noted that insurers implementing Indonesia’s new accounting standard for insurance contracts,

PSAK 117, from January 2025 have so far seen limited impact on their equity. 

However, Fitch expects their risk-based capital ratios to change as regulators finalise related guidance.

Meanwhile, Indonesia’s sovereign wealth fund, Daya Anagata Nusantara Investment Management Agency, has begun consolidating 15 state-owned insurers and reinsurers into single entities by segment. 

The agency announced in June 2025 the merger of three state-owned reinsurers, which Fitch expects will lead to a reduction in the group’s overall capacity.

Fitch said the impact of these regulatory and structural changes, along with the higher capital floors, will shape which insurers emerge stronger from the consolidation process.