Sluggish sales of investment linked insurance products are considered to have caused a decrease in the total assets of the non-bank financial industry (NBFI) in the first quarter of 2020.Total NBFI Assets - Total NBFI assets at the end of March 2020 reached IDR2,490.09tn ($178bn), representing an increase of 2.93% compared to a year ago, but a decrease of 2.64% compared to end-December 2019 (OJK).
Throughout 2019, total NBFI assets grew monthly. However, entering January 2020, the total assets declined until the end of the first quarter of this year.
OJK noted that of the seven NBFI sectors, four recorded a decline in total assets at end-March 2020. The four sectors were insurance, pension funds, special financial institutions, and supporting services. In percentage terms, the biggest decrease occurred in the supporting services sector which included insurance and reinsurance brokerage businesses.
Insurance sector - When viewed in nominal terms, the largest decline occurred in the insurance sector with assets reduced to IDR82.03tn. The total assets of the insurance sector are in five categories, namely life insurance, general insurance, reinsurance, compulsory insurance which includes Taspen and Asabri, as well as social insurance which includes BPJS Health and BPJS Employment.
Of the five categories, based on OJK data, general insurance and reinsurance recorded asset growth and three others recorded a decline in assets. The biggest decrease occurred in the life insurance business with a reduction in asset value of up to IDR61.5tn. The life insurance industry recorded total assets of IDR529.2tn at end-March 2020, a decrease of 10.4% compared to the end of December 2019 and a fall of 7.2% when compared to end-March 2019.
Poor Unit-linked Performance - The decline in the total assets of the insurance industry, particularly life insurance, was affected by slowing unit-linked performance which in turn had been hit by disruption in the capital market. The sluggish performance of the capital market caused a significant decline in the value of shares and mutual funds.
Regarding life insurance assets, most of them were insurance product assets related to investments. The assets were invested in capital market and money market products.
Based on data from the Indonesian Life Insurance Association (AAJI), unit-linked products represented 63.1% of the total policies in 2019.
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