Tokio Marine Indonesia Capital Strength Remains Resilient

PT Asuransi Tokio Marine Indonesia (TMI) is expected to maintain its strongest level of risk-adjusted capitalisation over the medium term, supported by steady internal capital generation and a conservative investment strategy, despite facing certain reinsurance-related risks, according to a recent assessment by AM Best.

The global credit rating agency said the insurer’s balance sheet strength remains robust, underpinned by capital adequacy at the highest level under Best’s Capital Adequacy Ratio (BCAR) model as of the end of 2025. The assessment reflects TMI’s ability to maintain a strong financial position whilst navigating the challenges of Indonesia’s competitive non-life insurance market.

A significant contributor to the insurer’s capital strength was the growth in shareholders’ equity, which increased by 21% during 2025. The rise was largely driven by the company’s decision to retain its full-year earnings, allowing profits to be reinvested into the business rather than distributed. This approach has strengthened TMI’s capital base and enhanced its capacity to absorb potential future losses or market shocks.

AM Best expects the company’s capital position to remain stable in the years ahead, supported by its consistent record of generating earnings internally. Sustained profitability has enabled the insurer to steadily build financial resources whilst maintaining prudent risk management practices.

The company’s conservative investment philosophy also plays an important role in preserving balance sheet strength. TMI’s investment portfolio is primarily concentrated in government bonds, cash and bank deposits, assets generally regarded as lower risk and highly liquid. Such investments provide a reliable source of income whilst limiting exposure to market volatility and credit-related uncertainties.

Despite these strengths, AM Best noted that TMI’s balance sheet assessment is constrained to some extent by its moderate reliance on reinsurance. Reinsurance is a common risk-management tool used by insurers to transfer portions of their exposure to other companies, helping them manage large or catastrophic claims. However, reliance on reinsurance can create counterparty risk if reinsurers face financial difficulties or fail to meet their obligations.

The rating agency highlighted elevated counterparty credit risk arising from TMI’s exposure to domestic insurance and reinsurance companies that do not hold internationally recognised financial strength ratings. Whilst these partnerships remain an established feature of the local insurance market, the absence of global ratings can make independent assessments of financial stability more challenging.

AM Best also expects TMI’s operating performance to remain strong. The insurer has consistently delivered favourable underwriting results, supported by disciplined risk selection and relatively low claims experience across its principal business lines.

According to AM Best’s calculations, TMI recorded a combined ratio of 84% in 2025. In the insurance industry, a combined ratio below 100% indicates that an insurer is generating an underwriting profit, as claims and operating expenses remain lower than premium income. The result underscores the company’s effective underwriting discipline and sound risk management.

Investment income is expected to continue making a stable contribution to earnings. Returns from interest-bearing assets, particularly government securities and deposits, provide an additional source of profitability and help reinforce the insurer’s overall financial performance.

Whilst financially strong, TMI’s business profile remains relatively limited due to its modest scale within Indonesia’s non-life insurance sector. The company accounted for approximately 2% of gross premiums written in 2025, reflecting its comparatively small market share.

Nevertheless, the insurer benefits from a moderately diversified portfolio that spans fire, marine and motor insurance. This diversification reduces dependence on any single line of business and helps support earnings stability across different market conditions.

TMI also continues to benefit from its affiliation with Tokio Marine Holdings, one of Japan’s leading insurance groups. Through this relationship, the company gains access to business generated by Japanese enterprises operating in Indonesia, providing a steady stream of opportunities linked to overseas investments and commercial activities.

AM Best’s assessment suggests that although reinsurance-related counterparty risks warrant ongoing monitoring, TMI remains well positioned to maintain strong capitalisation and stable financial performance. Supported by prudent investment management, consistent profitability and backing from its parent group, the insurer is expected to preserve its financial strength in the years ahead.