Indonesia: Calls for efforts to expand domestic capacity amid fall in value of the rupiah
Source: Asia Insurance Review | May 2025
The weakening of the Indonesian rupiah against the US dollar is considered a significant risk to the country’s general insurance industry in Indonesia.
Insurance observer Irvan Rahardjo told the news organisation Kontan, “The risk arising from the weakening of the rupiah is the exchange rate difference when the premium is received from the customer which is lower compared to the higher exchange rate when the claim occurs, especially if the policy is denominated in the US dollar. The same thing also happens with foreign reinsurance activities.”
Mr Irvan said that dependence by domestic insurers on foreign reinsurance has been unavoidable due to the limited local reinsurance capacity. This reflects the still low capitalisation of the domestic insurance industry, including in the reinsurance sector.
In the face of exchange rate pressures, Mr Irvan said that industry players need to increase domestic capacity and increase their own retention. This effort must be accompanied by an increase in capital, planning for which must take into account the prospects of the Indonesian insurance market.
The Indonesian rupiah weakened by 5.5% to IDR16,978 to the US dollar as of 9 April 2025 from IDR16,086 as of 31 December 2024, the lowest since the 1998 Asian financial crisis due to factors such as global trade tensions and concerns over US tariff policies. A