The Indonesian general insurance industry is set to grow at a compound annual growth rate (CAGR) of 11.3% from IDR110.94 trillion ($7.3 billion) in 2024 to IDR170.39 trillion ($11.5 billion) in 2028, in terms of gross written premiums (GWP), forecasts GlobalData, a leading data and analytics company.

GlobalData’s Insurance Database reveals that the general insurance industry in Indonesia is expected to grow by 14.8% in 2024. The growth is expected to be driven by favorable regulatory reforms, rising demand for natural catastrophic (Nat-Cat) insurance policies, and government support for credit distribution to micro, small, and medium enterprises (MSMEs).

Swetansha Chauhan, Insurance Analyst at GlobalData, comments: “The Indonesian general insurance industry is expected to grow by 24% in 2023, registering the highest growth during the last 10 years. This growth is attributed to a robust economic recovery after the pandemic, a rise in residential property sales, and increasing demand for Nat-Cat insurance policies due to rising economic losses caused by extreme weather events. The growth is expected to normalize in 2024 and 2025 in line with the anticipated slowdown in the global economy that might trigger market volatility.”

Property insurance is the leading line of business, which is expected to account for a 37.2% share of the Indonesian general insurance GWP in 2024. It is expected to grow by 19.9% in 2024, supported by the demand for Nat-Cat insurance policies. According to the Badan Nasional Penanggulangan Bencana (BNPB), the National Disaster Management Agency, Indonesia witnessed 5,400 weather events in 2023, a 52% increase as compared to 3,544 events in 2022.

Swetansha adds: “A robust economic recovery and rising disposable income have led to a rise in the sale of residential properties, which will also support property insurance growth. According to Bank Indonesia, residential property sales increased by 3.37% in the fourth quarter of 2023 as compared to the same period in the previous year.”

Additionally, favorable government policies to support the housing sector will have a positive effect on residential property sales. These include the extension of the relaxation of the loan-to-value (LTV) ratio for property loans to a maximum of 100% until December 2024, as well as VAT exemptions on houses below IDR2.0 billion from November 2023 until June 2024. Property insurance is expected to grow at a CAGR of 15.4% during 2024-2028.

Financial lines insurance is the second-largest line that is expected to account for an 18.5% share of general insurance GWP in 2024. The growth of financial lines insurance is primarily driven by credit insurance. As per Bank Indonesia, credit distribution witnessed a rise of 10.38% in 2023 as compared to the previous year.

The support from the government in providing the relaxation of credit guarantee for MSMEs will also support financial lines insurance growth. In December 2023, the Financial Services Authority (OJK) proposed new regulations aimed at encouraging prudent lending from banks, thereby increasing the demand for credit insurance products. Financial lines insurance is expected to grow at a CAGR of 9.2% during 2024-28.

Motor insurance is the third largest insurance line that is expected to account for a 14.4% share of general insurance GWP in 2024. The motor insurance market is expected to register slower growth of 5.8% in 2024 as compared to 8.7% growth in 2023, due to a decline in vehicle sales. However, positive regulatory developments over the next couple of years are expected to support motor insurance growth. Mandatory motor third-party liability insurance will have a positive impact on motor insurance premiums. The motor insurance industry is expected to grow at a CAGR of 4.8% during 2024-2028.

Liability, Personal Accident and Health (PA&H), Marine, Aviation and Transit (MAT), and other general insurance products are expected to account for the remaining 29.9% share of the general insurance GWP in 2024.

Swetansha concludes: “The growth of the Indonesian general insurance industry over the next five years is expected to be fuelled by economic recovery and favorable regulatory developments. However, the profitability of general insurers in 2024 is expected to be impacted by a global economic slowdown and increasing losses from Nat-Cat events.”