best insurance stock today - prospect of indonesia insurance industry 2013 : Oct. 15 (Fitch) Fitch Ratings says in a new report, the rating outlook for the life insurance sector and general insurance in Indonesia is Stable, supported by a growing domestic market, sustained premium growth and strong regulatory requirements.
Fitch expects a steady premium growth in 2013, driven by increased prosperity in Indonesia, low market penetration, and increasing the awareness of natural disasters. Insurance penetration in Indonesia is still low, at 1.7% compared with 8.1% in the U.S., 11.8% in the UK and over 4% in neighboring countries such as Singapore and Malaysia.
The premium of the insurance sector in Indonesia grew 15.5% yoy to Rp 68.9 trillion in the first half of 2012. In Fitch's view, the increasing regulatory requirements, including the minimum capital to Rp 70 billion in 2012 and USD 100 billion in 2014, will drive market consolidation is more stringent. The number of insurance companies will shrink due in part to smaller insurance and weak will join with other companies to meet the new capital requirements or forced to exit the market.
In the long term, this is expected to help develop a greater awareness of the risks and improve the ability of insurance companies to manage capital resources. Foreign ownership in the Indonesian market with low insurance penetration rate is also expected to increase due to slower growth in mature markets, such as America, Japan and Korea. It is also driven by the limits on foreign ownership in Indonesia, at 80% is much higher than in other Asian countries.
Negatively, the prospect of growth in the insurance industry in Indonesia is hampered by the level of institutional transparency, public disclosure, and risk management are limited. Fitch, however, believes that the industry operating environment can be improved gradually by strengthening regulatory requirements and increasing interest of foreign investors. Outlook Stable may be under pressure from rising insurance losses was significantly unforeseen disaster in Indonesia. Exposure to natural disasters highlight the importance of insurance companies manage their exposure to natural disasters in a sustainable and prudent.
Economic slowdown, which Fitch looked at as less likely at this point, can also block the growth of the insurance market in Indonesia. The potential loss in investment due to the escalation of the euro crisis, may also cause Outlook revised to Negative. The report, '2013 Outlook: Indonesian Insurance Sector - Strong Industry Growth Prospects amid Strengthening Regulatory Requirements', available at www.fitchratings.com.
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