February 2014

Spotlight – In international business, almost every market around the world does things in a different way. This often leads to misunderstandings and unfulfilled expectations. However, different does not need to mean difficult and knowledge of the needs and characteristics of specific geographic markets is an advantage to those who are active in the global economy. These articles help you understand different aspects of the insurance industry around the world, enabling those who do business there to feel more “at home, abroad.”

This month, we are very pleased to be able to share up to date information with our readers on the insurance market in the fourth most populous country in the world: Indonesia. With a population of a little more than 251 million, the insurance market is roughly the same size as Singapore and Venezuela, countries with 5.4 million and 28.5 million residents respectively. Indonesia is a founding member of ASEAN and a member of G20. The Indonesian economy is the sixteenth largest by GDP. An archipelago comprising more than 17,500 islands, it has been an important trade region for thousands of years and has experienced many cultural, religious and political persuasions throughout its long and colourful history. The country has vast areas of wilderness supporting the world’s second highest level of biodiversity.

The Indonesian economy performed strongly during the Global Financial Crisis and in the insurance sector, growth prospects remain attractive in the medium- to long-term. Insurance penetration is low – 1.77% compared with Singapore, 6.03% – and there is pressure to increase competitiveness. The country withstood flooding catastrophes in 2013 and an unexpected rise in insured losses could affect the non-life sector considerably. In the course of this year, Indonesia will strengthen the healthcare system which already covers about 60% of the population

Fitch Ratings (www.fitchratings.com) has issued a report that the rating outlook for Indonesia’s life and non-life insurance sectors in 2014 is stable, underpinned by steady market growth, manageable exposure to equity risk, and stable operating margins. Topics covered include catastrophe risks and economic conditions. We are grateful to Fitch Ratings for being able to publish this report here. Any comments or questions should be directed to Leslie Tan, Media & Corporate Communications Asia-Pacific, e-mail Leslie.Tan@fitchratings.com