Indonesia Re says that reinsurance plays a crucial role in the stability and sustainability of the country's insurance industry.
Indonesia Re's president director, Benny Waworuntu, likened reinsurance to fuel, saying it ensures the insurance industry can continue to provide protection and peace of mind for individuals and businesses.
"Basically, reinsurance is fuel for the insurance industry, ensuring that they can continue to offer protection and calm to individuals and businesses, regardless of how big the risks they face," Waworuntu quoted Antara as saying.
Waworuntu said the goal of reinsurance is to reduce and distribute risks from insurance companies. The reinsurance manages risks to maintain, diversify, and distribute risks to reduce impact and prevent large financial losses.
Insurance companies can ensure financial stability and can pay claims by transferring financial responsibilities to reinsurance companies.
Woworuntu said that it is important to increase public awareness and the insurance company itself for the presence of reinsurance companies.
"Public awareness about the insurance industry is still low, especially because of the loss of trust due to unresolved insurance failure cases," he said.
Woworunto said that some cases of payment failure in insurance companies are due to the company's inability to manage risks and implement good governance.
Similarly, the failure is because of the management of insurance companies that did not implement good governance and insurance products that violated regulations.
He said that companies that take more risks than they can pay in claims will suffer total losses. It's part of the reason why companies are buying reinsurance to ensure they have the capital to pay claims.
Realizing capacity in the insurance industry, OJK through OJK Regulation (POJK) Number 23 of 2023 concerning Business and Institutional Licensing of Insurance Companies, Sharia Insurance Companies, and Reinsurance Companies, set minimum equity for insurance and reinsurance companies.
"This reflects regulatory efforts to strengthen the financial base of the insurance and reinsurance sector in Indonesia," he said.
Some insurance and reinsurance companies consider this regulation challenging to fulfill. It's because the industry operates under the pressure of economic uncertainty.
Therefore, Woworuntu hopes regulators can understand how regulatory changes affect the industry. He said that collaboration between insurance companies, regulators, and stakeholders is crucial in creating a customers and technology-centric future.
"The word 'transformation' is also needed by insurance and reinsurance companies to face challenges and take advantage of promising opportunities. To improve performance, business growth, provide the best service for customers, and strengthen resilience and sustainability, we open up space for discussions on the creation of resilience and sustainability in the insurance industry through transformation," he said.
