“We are optimistic about our target because the life insurance industry remains solid despite the rupiah depreciation and a slow economy. An average growth between 20 percent and 30 percent is good enough for us,” AAJI chairman Hendrisman Rahim said on Thursday.
He added that the life insurance industry had been majorly affected by the weakening of the rupiah against the US dollar and predicted that the rupiah would strengthen in the first half of this year.According to the AAJI’s latest assessment, Hendrisman said, the domestic life insurance industry would suffer only if the rupiah fell to 16,000-17,000 per US dollar.
“We have conducted a stress-test simulation that shows that a rupiah between 16,000 and 17,000 per US dollar would start to affect our liability ratio,” Hendrisman said.In addition, Hendrisman said, the Financial Services Authority (OJK) planned to merge state-owned reinsurer PT Reasuransi Internasional Indonesia (Reindo) with PT ASEI Reasuransi Indonesia to create Indonesia Re, a local and more powerful reinsurance company, as part of its efforts to retain dollars in the domestic market.
Given Indonesia’s relatively small reinsurance business, the domestic insurance industry, especially general insurance, routinely pays out large sums of dollars for overseas reinsurance.“The reinsurance merger plan will help Indonesia reduce forex outflows and the current-account deficit.
Usually, Indonesian insurance companies pay for reinsurance in the fifth month or May, so we can expect to see a boost to the rupiah soon,” Hendrisman said.Indonesia’s current-account deficit narrowed to 2.95 percent of gross domestic product (GDP) last year from 3.18 percent the previous year. Previously, the size of Indonesia’s current-account deficit has reached 4 percent of GDP, which has worried investors and put pressure on the rupiah.
The rupiah, along with other emerging-market currencies, has been under selling pressure because of increased demand for dollars amid better conditions in the world’s largest economy, with US central bank the Federal Reserve expected to raise interest rates mid-year.
The rupiah was trading at 13,008 per dollar on Thursday, strengthened from 13,164 per dollar a day earlier, according to the Jakarta Interbank Spot Dollar Rate (JISDOR).Meanwhile, the World Bank has forecast that Indonesia’s economy will grow by only 5.2 percent in 2015, lower than President Joko “Jokowi” Widodo’s target of 5.7 percent.Despite economic slowdown, Indonesia’s life insurance industry still managed to post a skyrocketing 458.2 percent growth in investment returns to Rp 40.84 trillion last year, from Rp 7.32 trillion.Hendrisman said the huge jump was prompted by the industry’s strategy to buy stocks when Indonesia’s stock market slumped in 2013, reaping the results when it rebounded in 2014.
“We are expecting investment returns to grow between 20 and 30 percent further this year, especially on the back of stocks and mutual funds,” he explained. - See more at: http://www.thejakartapost.com/news/2015/03/20/life-insurance-eyes-stable-growth.html#sthash.eKrZuKg1.dpuf
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