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RPT-Fitch: Insurance Sector Remain Stable on Growth Path
February 4, 2014 / 10:17 AM / 4 years ago

RPT-Fitch: Insurance Sector Remain Stable on Growth Path

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Feb 4 (Reuters) - (The following statement was released by the rating agency)

Indonesian Insurance sector small likely to be shaken by the flood of January, Fitch Ratings said. besides , the long term benefits to be gained from the new tariff regulation positive for the stability and improvement of general insurance lines underwriting margins, and which can sustain bottom-line performance healthier.

Preliminary estimates indicate that the budget claims related to flooding estimated at IDR1, 5trn, or just half of a similar flood in ago. The total losses incurred by the insurance company in Indonesia almost certainly lower than IDR638bn which is a disadvantage in early 2013, assuming conditions remain uncontrolled flooding throughout the rest of the rainy season until the end of March.

Claims expected to be lower because most of the flooding occurred in suburban areas with relatively low despite insurance coverage covers the same land area (approximately 30% of Jakarta). Meanwhile, in contrast to early 2013, the central business district with a concentration of offices, retail properties and larger housing - as well as higher insurance covered - not too affected.

Another credit buffer is because the scope of reinsurance activities. statistical industry indicate that approximately 50% of total gross premiums of the insurance industry Common channeled back in 2012. Mostly channeled to foreign reinsurers and retrocessionaires, because the capital base reinsurance companies in the country which resulted in a low dependence on foreign retrocession.

Finally, the risk of flooding is not automatically included in many policies motor insurance and property insurance in Indonesia. This will reduce the full scope of potential claims - that should be weighed on growth this industry.

Insurance coverage as a whole remained at the early growth stage, with penetration of just under 2% of the GDP of Indonesia. Industry not only able to cope with short-term challenges from natural disasters, but also Fitch believe that the industry is also ready for further growth and stable. Implementation of the regulation of insurance rates recently would be impacted in strengthen the stability of the general insurance companies underwriting margins. regulation can also help to maintain healthy competition and bottom-line performance of the insurance company.

General insurance sector in Indonesia reflects a growing market and a very competitive with a tendency to lower the price. More than 80 companies general insurers competing in the same market segment, which led to price discounts up to 50%. Therefore, the introduction of tariff regulation is considered to be reduce underpricing by setting the base price.

It can also help to create a balance between price charged and the risks taken by insurance companies, because regulations also set the maximum limit of the acquisition costs and discounts. arrangement price ceiling can also prevent overpricing. Rate regulation may result in higher prices for consumers to the same amount of coverage.

Even so, less likely hamper higher prices sustainable growth in product demand. This is because insurance penetration is still low while the economic outlook profitable - marked especially by the growth of prosperity and growing middle class in Indonesia.

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