Impending hikes in minimum equity thresholds are set to accelerate consolidation in Indonesia’s insurance sector as weaker firms face pressure to raise capital or be acquired, Fitch Ratings said in a special report on October 6.
Indonesia’s Financial Services Authority (OJK) will raise the minimum equity requirements in two stages, effective by end-2026 and end-2028. Fitch said around 90% of its rated Indonesian insurers already meet the 2026 threshold based on end-June 2025 equity levels. However 70% of life, non-life, and reinsurance companies would need additional equity to comply with the second-stage requirement for 2028.
In January 2024, OJK announced that the minimum equity for insurance firms would increase to IDR250bn (US$15.08mn) by 2026, from the previous IDR150bn. By 2028, the regulator will lift the requirement further to between IDR500bn and IDR1trn. OJK said at the time that limited capital capacity is one of the main issues that has the potential to disrupt the sector’s resiliency and stability in anticipating economic crises.
Fitch said the consolidation resulting from the higher equity thresholds would be credit positive for insurers that are able to comply and strengthen their market positions. Companies that cannot meet the end-2028 thresholds may instead join an insurance business group, or Kelompok Usaha Perusahaan Asuransi (KUPA), under a parent or holding company that meets the requirement. The agency also noted that the higher thresholds could prompt some insurers to pursue mergers or acquisitions.
In June, OJK announced the merger of three reinsurers that are ultimately state-owned, Indonesia Re, Nasional Re and Tugure, as part of the first step toward the new framework. Fitch said the merged group’s capacity would be reduced, noting that Nasional Re’s large negative net asset position would dilute the merged entity’s capital profile, leaving it only marginally above the new equity thresholds.
Insurers that operate credit insurance business will face higher capital requirements than those without, according to Fitch. The agency said the 25% risk share retained by banks will reduce insurers’ capital exposure to the business. It added that the loss ratio of the credit insurance segment remained high, at 82% in both the first half of 2025 and the same period in 2024, reflecting defaults from poor underwriting standards in previous years.
Indonesia’s insurance market is dominated by small domestic players, many of which are subsidiaries of large local conglomerates. Over two-thirds of the roughly 75 general insurers in the country each hold less than one percentage point of market share. The regulator has stated that by raising capital requirements, it aims to push companies to reassess their strategic objectives and strengthen the sector’s overall capital base.
Against this backdrop, consolidation activity has already begun. PT Asuransi Tugu Pratama Indonesia Tbk, which is 58.5% owned by state energy company PT Pertamina (Persero), had announced plans to acquire PT Perta Life Insurance. Perta Life is 71.39% owned by Dana Pensiun Pertamina, followed by PT Timah Tbk with 27.83% and the Ministry of Finance with 0.78%.
