Tokio Marine Indonesia Maintains Robust Capital Position

PT Asuransi Tokio Marine Indonesia (TMI) is expected to maintain a strong capital position over the medium term despite ongoing exposure to reinsurance-related risks, according to a recent assessment by AM Best.

The ratings agency said the insurer’s balance sheet strength remains solid, supported by its strong risk-adjusted capitalisation, consistent earnings generation and conservative investment approach. These factors are expected to help the company preserve financial stability even as it operates in an increasingly complex insurance environment.

AM Best noted that TMI’s capital adequacy remained at the highest level under its Best’s Capital Adequacy Ratio (BCAR) model at the end of 2025. The insurer’s shareholders’ equity increased by 21% during the year, driven largely by the retention of its entire annual earnings rather than distributing profits. This strategy has strengthened the company’s capital base and enhanced its ability to absorb potential future shocks.

The agency expects TMI’s capital position to remain stable in the coming years, supported by a track record of generating profits internally. Strong earnings have enabled the insurer to steadily build capital whilst maintaining prudent risk management practices.

A key contributor to the company’s financial resilience is its conservative investment portfolio. TMI primarily invests in government bonds, cash and bank deposits, limiting its exposure to market volatility and higher-risk assets. Such an approach provides stability and liquidity, both of which are important considerations for insurers managing long-term obligations to policyholders.

Despite these strengths, AM Best highlighted certain factors that constrain the insurer’s balance sheet assessment. One concern is TMI’s moderate dependence on reinsurance arrangements. Reinsurance allows insurers to transfer part of their risk exposure to other companies, helping them manage large or unexpected claims. However, this reliance can also create counterparty risk if reinsurers encounter financial difficulties.

The agency pointed to elevated counterparty credit risk stemming from TMI’s exposure to domestic insurers and reinsurers that do not possess internationally recognised financial strength ratings. Whilst these relationships are common within local markets, the absence of global ratings can make it more challenging to independently assess the financial standing of counterparties.

AM Best also expects TMI’s operating performance to remain strong. The insurer has demonstrated a history of consistent profitability, supported by disciplined underwriting and favourable claims experience across its principal business segments.

Based on AM Best’s calculations, TMI recorded a combined ratio of 84% in 2025. 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 reflects effective risk selection and relatively low claims activity across the company’s portfolio.

Investment income is also expected to continue supporting earnings. Returns generated from interest-bearing assets, particularly government securities and deposits, provide a stable source of income that complements underwriting profits and enhances overall financial performance.

Whilst the company’s financial fundamentals remain strong, AM Best described its business profile as limited due to its relatively modest position within Indonesia’s highly competitive non-life insurance market. In 2025, TMI accounted for approximately 2% of the country’s gross premiums written, underscoring its comparatively small market share.

Despite its size, the insurer benefits from a reasonably diversified portfolio spanning fire, marine and motor insurance lines. This diversification helps reduce concentration risk and provides a broader earnings base across different segments of the market.

TMI also continues to draw strength from its affiliation with Tokio Marine Holdings, one of Japan’s largest insurance groups. Through this relationship, the Indonesian insurer gains access to business linked to Japanese companies operating abroad, including firms with investments and operations in Indonesia. This connection provides a valuable source of business opportunities and reinforces the company’s competitive position.

AM Best’s assessment suggests that whilst reinsurance-related counterparty risks remain an area to monitor, TMI’s strong capitalisation, prudent investment strategy and consistent profitability position it well to maintain financial strength and stability in the years ahead.