How can Indonesia’s insurers balance tighter capital rules and rising claims?

Disaster claims may raise premiums, costs, and tighten coverage.

Indonesia’s non-life insurance market is expected to face less intense competition as companies adjust to stricter capital rules and focus on strengthening their finances.

Fitch Ratings, Inc. expects profits to remain stable, supported by updated prices and tighter rules for approving policies, especially in credit and health insurance, where claims have been high.

Steady investment returns and domestic interest rates should also support earnings, the debt watcher said in a December report.

Premium growth is likely to remain modest. Fitch expects only a small increase in 2026, after 3% growth in the first nine months of 2025.

Weak motor insurance due to slow car sales may be offset by growth in property, credit, and health insurance, which together account for about half of nonlife premiums.

GlobalData Plc predicts overall premiums could rise 8.4% this year. Repeated floods and fires have raised awareness of risk, whilst regulations and government investment in disaster mitigation are encouraging demand.

Severe flooding in Bali in December 2025 and other regions has exposed large uninsured losses, prompting interest in broader flood and fire coverage.

Swarup Kumar Sahoo, a senior insurance analyst at GlobalData, said post-flood risk awareness, changes in underwriting, and new catastrophe-focused products are likely to boost growth this year.

Insurance that pays out automatically after floods or earthquakes is expected to cover public assets in 2026 and could later include private property.

Still, less than 0.1% of Indonesian homes have disaster insurance, and property insurance penetration is projected at only 0.13%.

More than 80% of losses from major floods remain uninsured.

Government measures to cut risks are also shaping insurance demand. Property insurance became more affordable in late 2025 as reinsurers offered more capacity, making coverage easier to get.

But rising claims from natural disasters could push up premiums, increase insurer costs, and tighten coverage in the coming years.

With low insurance coverage and rising disaster risks, companies face the challenge of expanding access whilst staying profitable.

Product design, distribution, and public trust will be key to closing the protection gap.

Questions to ponder:

• How can insurers expand property and disaster coverage in a market where few people are insured?
• How can they adjust pricing and policies to cover rising disaster risks without hurting profits?