Fitch Ratings, a credit rating agency, stated on 14 August 2025 in Sydney and Jakarta that the proposed consolidation of three Indonesian reinsurers could undermine the capital strength of the domestic reinsurance sector in the absence of fresh capital injections.
Fitch said the merged company would likely have reduced underwriting capacity, although market competition could ease if the transaction is completed.
The agency noted that two of the three firms have weak capital positions, with one currently carrying a negative net asset balance.
According to Fitch, Danantara announced in June 2025 its intention to merge PT Reasuransi Indonesia Utama (Persero) (Indonesia Re), PT Reasuransi Nasional Indonesia (Nasional Re), and PT Tugu Reasuransi Indonesia (Tugure, A+(idn)/Stable), all of which are ultimately owned by the Indonesian government.
Fitch reported that this move forms part of Danantara’s broader state-entity restructuring plan, aiming to reduce the number of state-owned enterprises from 889 to about 200.
Fitch emphasised that no specific details of the proposed merger have been disclosed, including the timeline, which entity will remain after consolidation, or whether the government plans to provide additional capital.
The agency recalled that a similar government-led merger initiative in 2013 failed to materialise. Fitch said any developments from this new plan, and their implications for Tugure’s credit standing, could influence its ratings outlook.
Fitch affirmed Tugure’s current rating in November 2024, citing its adequate regulatory capital position, “Moderate” company profile, and historically volatile financial performance. According to Fitch, Tugure has stated that it remains focused on surplus growth to meet regulatory equity requirements by 2028.
Fitch highlighted that as of end-June 2025, Nasional Re—the second-largest of the three—had negative equity of IDR2.1 trillion (USD129 million), an increase in losses from when negative equity was first reported in 2022.
Fitch attributed this to large reserve additions in its credit insurance portfolio, which pushed its regulatory risk-based capital (RBC) ratio to -156%.
Indonesia Re’s RBC ratio was 133%, slightly above the 120% regulatory minimum, while Tugure posted a higher 173%. Fitch concluded that Nasional Re’s substantial negative net asset position would weigh heavily on the merged company’s overall capital profile.
Fitch pointed out that regulatory changes introduced in December 2023 require reinsurers to maintain minimum capital of IDR1 trillion by 2026, rising to IDR2 trillion by 2028.
Only Indonesia Re, with IDR2.6 trillion in equity at mid-2025, meets both thresholds. Tugure, at IDR1.6 trillion, satisfies the 2026 requirement but falls short of the 2028 standard.
Fitch estimated that the merged entity would only narrowly meet these requirements and projected its combined net premiums-to-capital ratio would rise to 4.9x on a pro forma basis, compared with 1.4x for Indonesia Re and 1.7x for Tugure in 2024.
Fitch noted that Danantara holds 99.9% of Indonesia Re, with the remaining 0.1% owned directly by the state. PT Asuransi Kredit Indonesia (Persero), part of the state-owned Indonesia Financial Group, owns 99.9% of Nasional Re. Tugure is 51% owned by PT Tugu Pratama Interindo, which is ultimately controlled by the government through PT Pertamina (Persero) (BBB/Stable).
According to Fitch, domestic reinsurers’ ability to take on larger and more complex risks has been constrained for years by weak capitalisation.
A 2015 Financial Services Authority rule requiring all insurers to place 100% of simple risk reinsurance with domestic companies—such as motor insurance—was repealed from 1 January 2021, opening the door to increased foreign participation.
Fitch said that while the Indonesian reinsurance market has benefited from improved treaty arrangements and steadier pricing, overseas reinsurers are likely to maintain a strong competitive presence by offering cost-competitive coverage.
