Indonesia non-life insurers face profit squeeze despite stable outlook

Indonesia’s non-life insurance sector is expected to maintain a stable outlook despite facing a squeeze on profitability. According to an AM Best report, while prospective premium growth remains robust, earnings are being weighed down by rising claims costs, medical inflation, and intense market competition.

Economic factors also play a role in the sector's landscape. The International Monetary Fund forecasts Indonesia’s real GDP growth to ease slightly from 5.1% in 2025 to 5.0% in 2026. Additionally, Bank Indonesia raised its policy rate to 5.75% in June 2026 due to commodity price increases and pressure on the rupiah.

Regulatory shifts are introducing new challenges for insurers. Under OJK Regulation No. 23 of 2023, companies must meet phased increases in minimum equity requirements, with the first phase beginning December 31, 2026. While most firms met the initial $14 million requirement by July 2026, AM Best noted that meeting future standards may be difficult for financially weaker non-life insurers. The industry is also preparing for a new risk-based capital framework scheduled for regulatory reporting in 2027.