Regulators turn to foreign firms to bail out struggling insurers

With six months to go before new solvency rules take effect, there is little sign of the anticipated merger activity

Indonesia’s finance ministry is trying to work out ways to deal with the extremely low capital base of local insurance companies. Nearly one third of the licensed insurers are expected to miss the 2008 deadline of meeting the capital requirement of $4.3mn. The government had expected a shakeout in the market with stronger players buying out the smaller insurers when it set the deadline last year, ministry sources said. Small insurance companies pose a serious risk because they do not have sufficient capability to meet emergencies like a sudden rise in claims.