Indonesia In Focus For GlobalData

Latest report from GlobalData;

Indonesia’s property insurance industry will grow at a compound annual growth rate (CAGR) of 8.7% from IDR26.6 trillion ($1.7 billion) in 2023 to IDR37.1 trillion ($2.4 billion) in 2027, in terms of gross written premiums (GWP), forecasts GlobalData, a leading data and analytics company.

According to GlobalData’s Insurance Database, Indonesia’s property insurance market is projected to grow by 7% in 2023 and 7.8% in 2024. The growth will be mainly supported by a surge in the demand for natural catastrophic (Nat-Cat) insurance, favorable government policies, and developments towards cleaner energy.

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Sutirtha Dutta, Insurance Analyst at GlobalData, comments: “Indonesia’s high exposure to Nat-Cat events, such as floods and earthquakes, will  support the growth of property insurance policies, which provide coverage for extreme weather events, in 2023.”

According to the National Disaster Management Agency (NDMA), Indonesia recorded 3,531 Nat-Cat events in 2022, an increase of 4% as compared to 2017. These events included 28 earthquakes, 1,524 floods, and 1,062 other extreme weather events, which resulted in a loss of IDR2.2 trillion ($151.1 million) for property insurers in 2022.

To minimize the impact of climate change, parametric insurance was introduced in Indonesia in October 2022 for takaful insurers to protect farmers against extreme weather events. This is expected to further support the growth of property insurance, as agriculture is one of the major sectors of the economy, contributing 12.3% of the GDP in 2022, according to Statistics Indonesia.

Sutirtha adds: “Apart from the regular occurrence of natural disasters, inflation also increased reinsurance rates in Indonesia. The property reinsurance rate for domestic reinsurers increased between 5% and 40% during 2022, which will support the growth of property insurance in 2023.”

Indonesia Re, the country’s top reinsurer, increased its acceptance capacity from $175 million to $615 million, through the addition of catastrophic protection worth up to $440 million. The negative impact of climate change on catastrophe event frequency and strong demand from ceding companies led to reinsurers raising premium rates, which resulted in higher pricing and tightening of proportional reinsurance terms.

Sutirtha continues: “Favorable policies implemented by the government to support the post-pandemic recovery of the housing sector as well as initiatives for the development of renewable energy resources will also support property insurance growth.”

According to PT Bank Tabungan Negara Tbk (Bank BTN), the relaxation of the loan-to-value (LTV) ratio for property loans from banks to a maximum of 100% led to a rise in demand for housing loans by 7.5% during the first half of 2023.

A memorandum of understanding (MoU) between government-owned power generation company PT Perusahaan Listrik Negara and Germany’s development bank KfW is expected to enhance the country’s electricity generation capacity to 27,571 MW from renewable energy sources. This will lead to a rise in infrastructural investments, which will further support the growth of property insurance.

Sutirtha concludes: “An increased frequency of NatCat events, inflation, and a rise in reinsurance premium rates will boost the growth of the Indonesian property insurance industry. This, combined with the government initiatives to transition to cleaner energy sources, will support in increasing the penetration of property insurance over the next five years.”

About alastair walker 12549 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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