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SINGAPORE–(BUSINESS WIRE)–
AM Best maintains a negative market segment outlook for the Indonesian non-life insurance segment, citing challenges and ongoing macroeconomic uncertainties in credit and auto insurance. A normalization in billing frequency, which could reduce segment profitability, also underpins the negative outlook.
new Best Market Segment Report, “Market Segment Outlook: Property and Casualty Insurance in Indonesia,” AM Best finds that the segment will grow to It said it expects to show higher growth in 2022. However, given downside risks to the domestic economic expansion, including a possible global recession, inflationary pressures and domestic monetary tightening, market growth may fall short of pre-pandemic levels.
In AM Best’s view, poor underwriting performance of credit insurance lines is a systemic problem that continues to affect the market. Chris Lim, Senior Financial Analyst at AM Best, said: “The result has been higher default rates and higher credit insurance claims.”
Inadequate premium rates, weak underwriting risk management, and excessive exposure to credit insurance during periods of significant economic stress have contributed to the financial profile of a range of medium to large domestic insurers and reinsurers. Weakened. This could lead to significant events for one company and continue to affect the performance of others.
Inflationary pressures are also expected to constrain underwriting margins for insurers. In particular, AM Best expects claims inflation to squeeze underwriting margins for auto and health insurance. Myles Gould, Director of Analytics at AM Best, said: “Indonesia’s healthcare cost inflation is also estimated to be rising at a significantly faster pace than general inflation.”
Furthermore, the growth of the auto insurance business may be slowed by factors that adversely affect the demand for autos in the short term. Auto insurance business expansion in 2021 and the first half of 2022 benefited in part from higher new car sales stimulated by a temporary cut in the luxury goods sales tax. However, this tax incentive has ended.
AM Best may revise its outlook to stable should these challenges diminish in the future.
To access a full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=325505.
AM Best is a global credit rating agency, news publisher and data analytics provider dedicated to the insurance industry. Headquartered in the United States, we operate in over 100 countries. Countries with offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, see: www.ambest.com.
Copyright © 2022 AM Best Rating Services, Inc. and/or its affiliates. all rights reserved.
View source version at businesswire.com: https://www.businesswire.com/news/home/20221030005002/en/
Chris Lim
Senior Financial Analyst
+65 6303 5018
[email protected]
Miles Gould
Director, Analytics
+44 207 397 0304
[email protected]
Christopher Sharkey
manager, public relations
+1 908 439 2200, ext. 5159
[email protected]
Al Slavin
communication specialist
+1 908 439 2200, ext. 5098
[email protected]
Source: AM Best
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