What will keep Indonesian non-life insurers’ outlook remain steady?

Commercial insurance demand is also seen to rise.

AM Best has maintained its stable outlook for Indonesia’s non-life insurance market, citing steady growth prospects, regulatory improvements, and strong investment returns.

In its latest Market Segment Outlook: Indonesia Non-Life Insurance report, AM Best said the sector’s expansion is expected to continue, supported by infrastructure development, solid household spending, and sustained government investment. 

These factors are expected to boost demand for commercial insurance, whilst rising health awareness should drive growth in health coverage.

Regulatory reforms are also strengthening the industry’s long-term stability. 

As of June 2025, most non-life insurers have complied with the first phase of new minimum capital rules under the Financial Services Authority’s (OJK) Regulation 23 of 2023. 

AM Best analyst XinYa Ong said the higher equity requirements may pressure weaker insurers in the short term but will enhance the market’s resilience over time.

Indonesia’s relatively high interest rates continue to support investment income, as term deposits and fixed-income instruments make up most insurers’ portfolios.

However, underwriting results remain under strain in credit and health insurance. 

Credit losses have continued to rise, whilst health claims are affected by medical inflation and fraud. 

Statutory tariffs on property and motor insurance also restrict pricing flexibility, even as electric vehicle adoption introduces new pricing risks.

Chris Lim, associate director of analytics at AM Best, said the combination of limited pricing flexibility, higher catastrophe exposure, and inflation adds to pricing pressure. 

He added that ongoing regulatory reviews and possible tariff adjustments could help ease these challenges in the coming years.