CEO unfolds how Indonesian firms can focus on growth amidst new regulations

Whilst the market drives towards growth, new rules shrink insurer presence.

Insurers in Indonesia could benefit from the tightening regulation surrounding credit insurance, where banks will be required to retain 25% of the insured default risk. Similarly, Sompo Insurance Indonesia Chief Executive Officer (CEO) Eric Nemitz told Insurance Asia about the huge potential insurers now have in Indonesia’s market, whilst adapting to huge regulatory changes.

Prior to this change made earlier in the year, insurers carried 100% of the insured risk. “Tougher minimum equity requirements for Indonesian insurers are likely to reduce the number of companies operating in the sector and encourage a healthier competitive landscape,” Fitch Ratings said in an insight.

The Financial Services Authority (OJK) plans to significantly raise minimum equity requirements by the end of 2026, with a further increase by the end of 2028. Insurers offering a full range of products, including credit insurance, will face higher-tier minimums, and reinsurers will also see increased requirements.

Fitch estimated that around 90% of its rated issuers already meet the 2026 requirements, but 62% of the rated portfolio, particularly in the non-life and reinsurance sectors, will need more equity to meet the 2028 standards.

Whilst organic capital generation might suffice for about 50% of those needing to raise equity by 2026, the tougher 2028 requirements will likely necessitate additional measures beyond organic growth, which has averaged a 7% CAGR over the last five years but would need to grow at 15% to meet the new standards.

Fitch Ratings also explained that insurers unable to meet these new standards may need to raise additional capital or consider mergers and acquisitions. Those meeting the 2026 requirements but not the 2028 standards can join an Insurance Business Group (KUPA) with a parent or holding company that meets the higher requirements. 

The new credit insurance regulations are expected to be credit-positive for rated insurers but have an uncertain net impact on banks. Stricter underwriting standards by banks could slow micro and consumer lending but improve risk profiles. 

Conversely, retaining more risk could deteriorate banks’ risk profiles and affect capitalisation ratios due to increased risk-weighted assets.

Other regulatory changes are aimed at reducing information asymmetry between banks and insurers. OJK will require banks to include credit risk profile data in credit insurance contracts.

Adjustments to capital requirements for credit insurers may prompt smaller non-life insurers to shift focus to simpler product lines like property and motor insurance, fostering healthier competition and better risk pricing in the credit insurance segment.

From an insurer's perspective, Sompo's Nemitz shared how Indonesian insurers could adapt to different currents.

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/Eric Nemitz, CEO, Sompo Insurance Indonesia.

Could you share with us some key initiatives or strategies you've implemented to maintain this competitive edge and drive growth within the company?

We are focused on providing asset and health protection, enhancing products, and supporting additional revenue generation for our partners and clients in our three major business segments: international and; local industrial and corporate clients and retail customers. For example, we offer customised services to our corporate clients, such as loss-prevention assessments and thermographic surveys, to help them further mitigate risks for their business.

For the retail segment, we utilise automation and AI to help accelerate motor vehicle claim survey processes. Thus, our customers can easily record a video on our Sompo Digital Survey app to show their vehicle’s damage from home instead of going to a workshop or making an appointment with surveyors. Our systems automatically analyse these videos, enabling a correct and speedy damage assessment.

Whether corporations or individuals, we focus on providing them security and peace of mind.

How do you envision Sompo Insurance’s role within the Indonesian insurance market, and what guiding principles do you prioritise to achieve your objectives?

Backed by Sompo Group’s 130 years of financial strength and history, we seek opportunities to build on our legacy in Indonesia to be the top preferred general insurer. We are constantly working to deliver a frictionless risk management journey for everyone we serve by merging our underwriting expertise, deep local knowledge, and broad global reach to craft meaningful solutions.

We will continue to focus on our commercial and consumer lines business. 

What is your outlook for Indonesia’s insurance market, and what are your aspirations for Sompo Insurance Indonesia in the coming years?

There’s an immense opportunity to increase the insurance penetration rate in Indonesia through ongoing collective efforts by the industry’s stakeholders to improve trust, increase people’s awareness of relevant and significant risks, promote product innovation, and diversify efficient distribution channels supported by automation and digitisation.

The corporate business segment is expected to grow in line with the overall economic development, especially in property, engineering/construction, and marine cargo lines of businesses.

Additionally, motor vehicle insurance is predicted to play a role in the overall growth of the industry, with the upcoming compulsory Third-Party Liability insurance stipulated in Law No. 4/2023 (UU P2SK) and other regulations further being stipulated. 2025 is expected to be a promising year for the insurance industry.

Despite the new regulatory minimum capital implemented in 2026 and 2028, Indonesia’s insurance market is expected to remain highly competitive (currently 72 general insurers and 152 direct insurance brokers) although the number of market players is likely to decrease.

At Sompo, we believe sustainable growth results from our expertise and excellence in delivering products and services that meet customer demands and needs. We will continue to anticipate their needs based on economic development and industry growth and ensure we continue to ease our partners’ and customers’ experience with us at every step of their journey.

*This article was updated as of 13 June.