This report profiles Indonesia’s insurance industry, discussing market trends through 2014 and outlook for 2015 and beyond. The report also highlights leading players in the sector including PT Panin Insurance Tbk, PT Asuransi Bina Dana Arta Tbk and PT Asuransi Multi Artha Guna Tbk.

FY14 proved to be a tough year for the Indonesian economy yet again with GDP slowing to a five-year low. The insurance sector was also affected by the dip in the overall economic growth. While the non-life insurance gross premiums recorded a double digit growth, the life insurance premiums recorded a low single digit growth in 9MFY14. The penetration rate of insurance is low in Indonesia, merely 2.1% of GDP, and life insurance coverage in Indonesia is still low at around 20% of the country’s population.

Consolidation within the industry will most likely gain momentum in order to strengthen market positions against bigger insurers. The recent ruling requiring larger minimum capital base for all players will force smaller players having problems raising capital internally to seek capital from external sources, such as M&As. This would push for a transfer of experience and stronger capital base, which in turn will make small local insurers more competitive. As a country with the largest Muslim population in the world, Indonesia has an untapped sharia market. The sharia market will benefit from further growth through improved regulatory environment.

The outlook for the Indonesian insurance industry is positive. The country’s large population size, positive capital market trends and rising incomes will drive the growth in the sector.

Key Points:

• Indonesia had an average GDP growth rate of 5.9% during 2006-2012. However, FY14 proved to be a tough year for the economy with GDP slowing to a five-year low of 5%. Insurance sector also reflected the dip in overall economy.

• After recording successive trade surpluses during 2008-11, the country recorded successive trade deficit during 2012-14. As a result, the Indonesian currency came under huge pressure and saw a significant depreciation.

• As of 9M2014, life insurance segment had the largest share of total premium in the insurance industry at 68%. Gross premium earned by the life insurance segment grew at a CAGR of 26% during 2007-12, while gross premium earned by the non-life and reinsurance segment grew at a CAGR of 19% during this period.

• During 2007-12, total premium earned by the insurance industry grew at a CAGR of 19%. However, insurance sector had to bear the brunt of the slower economic growth with premium growth rate falling to single digits during 2013-14.