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Indonesia – Tiger Set To Roar Loudest In The Insurance Market.

6 April, 2013



The insurance market in Indonesia presents the biggest growth opportunity among emerging economies in south east Asia, according to a poll conducted today at a seminar in London organised by law firm Clyde & Co.


62% of respondents selected Indonesia, ahead of Vietnam with 22% and Myanmar with 16%.


"With the number of large foreign companies establishing operations in Indonesiaincreasing, particularly around natural resources, and employment and income levels rising – it is hardly surprising that insurers see an increasing demand for their products,” said Michael Horn, an Asia Pacific Corporate Insurance Partner at Clyde & Co.


“Despite the fact that a number of insurers are looking for opportunities in Indonesia, there is a lack of attractive targets. Many local businesses are seen as weak, with insufficient business controls, and this deters potential entrants, particularly in light of growing anti-corruption legislation in developed markets in particular the UK and US.


“However, new regulations required insurers to have a minimum paid up capital USD7.7 million by the end of 2012. Failure to achieve this will result in the nonrenewal of a number of insurance licences. In the near term, this development is likely to be the catalyst for a flurry of M&A activity in Indonesia.”


Results from the poll show that when entering new markets, reinsurance via a local front is the most popular business model, cited by 80% of respondents. This was followed by establishment of a branch (40%), joint venture with a local insurer (36%) and acquisition (27%).


In terms of countries in the region where respondents are already doing business, Indonesia ranked joint first with Malaysia (64%), ahead of China (62%). Interest in Vietnam has already translated into action with almost half (44%) already operating there.


“As manufacturing and other businesses look for an alternative to China for lowcost production, Vietnam is continuing to attract foreign direct investment,” said Ian Stewart, an Asia Pacific Corporate Insurance Partner at Clyde & Co. “With a large population and rapidly expanding middle class, insurers are also maintaining a keen interest in the country, which has seen its general insurance market grow at a compound rate of 25% per annum since 2009 and is expected to continue at similar levels in the next three to five years.


Andrew Holderness, Global Head of the Corporate Insurance Group at Clyde & Co, said:“Burma, meanwhile, is a more of a long-term play, but international carriers across the region are eyeing opportunities in the country to make sure they are not left behind. The European sanctions have finally been suspended and 12 new insurance companies ere issued last year marking a break in the monopoly held by the state-owned


Myanma Insurance. Now the regulator is focused on helping the local market to grow but at some point it will need to look outside its borders for experience and expertise. When it does, anyone with an interest in the insurance market in the country will need to be ready to move.”


For further information, please contact:
Michael Horn, Partner, Clyde & Co

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