Foreign insurance firms eye expansion

The Jakarta Post, Thu, 04/24/2008 12:25 AM  |  Business

Five insurance companies from France, Singapore, the United Kingdom, Italy and Malaysia are seeking local partners to tap the increasingly lucrative Indonesian life insurance industry, an insurance association says.

Chairwoman of the Indonesian Life Insurance Association (AAJI) Evelina Pietruschka said in a statement Wednesday the companies had approached the association for information on qualified companies for potential partners.

"They are now seeking suitable partners to enter the life insurance industry here," she said.

The association refused to name the foreign companies.

Optimism over the country's higher economic growth coupled with the need for a diversified long-term investment portfolio are the primary reasons the foreign companies are setting out to engage the Indonesian market.

The association has forecast a 30 percent growth in revenue from premiums for 40 major insurance firms in Indonesia this year, to around Rp 58 trillion (US$6.3 billion).

Last year, the industry experienced unprecedented growth of 67 percent from Rp 26.5 trillion in 2006 to Rp 44.4 trillion, according to the AAJI.

"For five years, the industry grew by 25 percent each year. But last year's 67 percent jump in revenue from premiums was an outstanding phenomenon.

"The growth was fueled mostly by a shift in investor interest in putting money more into long-term insurance products than into short-term bank deposits. I believe the trend will continue as the public becomes aware of the benefits of insurance," Evelina said.

With investable funds worth Rp 90.9 trillion last year, up by 50 percent from Rp 60.7 trillion in 2006, the industry recorded a 76 percent jump in investment proceeds to Rp 10.4 trillion.

The 40 insurance companies' combined assets were worth Rp 101.2 trillion as of 2007, a 52 percent increase from the previous year.

The companies include a state-owned firm, 24 domestic firms and 15 joint ventures.