A 99.6% Claims Ratio Puts Credit Insurance Under Pressure

Credit-insurance premiums are still growing.

Claims are growing much faster.

AAUI data reported in September show first-half 2026 credit-insurance premiums of approximately Rp9.32 trillion, up 9.3% year on year.[1]

Claims increased 32.7% to Rp9.28 trillion.[1]

The claims ratio consequently rose from 82.1% to 99.6%.[1]

The numbers are striking.

But 99.6% is also easy to misunderstand.

Claims ratio is not total profitability

A claims ratio compares claims with premiums.

It does not include the entire economics of an insurance portfolio.

Acquisition costs.

Operating expenses.

Reinsurance.

Reserve movements.

Investment income.

Therefore:

“credit insurers lost 99.6%”

would be incorrect.

What the figure does show is that underwriting headroom becomes very narrow when claims almost equal premiums before other expenses are considered.

Pressure was already visible in Q1

The credit-insurance claims ratio reached 102% in Q1 2026, with Rp4.21 trillion of claims against Rp4.11 trillion of premium.[2]

The first-half figure improved slightly from that level, but 99.6% remains extremely high.

Legacy claims matter

AAUI Chairman Budi Herawan said part of the pressure came from claims relating to earlier periods.[1]

That matters because insurance accounting and credit losses have timing lags.

Loans are originated.

Borrowers deteriorate.

Defaults occur.

Collection proceeds.

Claims are filed and assessed later.

A six-month claims number can therefore contain risk written in earlier periods.

Premium growth can conceal deteriorating economics

A 9.3% premium increase looks positive.

But claims growing at 32.7% tell a different story.

Growth is not automatically healthy growth.

Premiums can increase because of higher volumes, new lender partnerships, broader coverage, pricing changes or aggressive underwriting.

The quality of that growth is revealed only when losses emerge.

Credit insurance is fundamentally tied to lending quality

Property insurance protects against physical events.

Credit insurance depends on whether borrowers meet financial obligations.

That means insurers are exposed to the quality of the lender’s credit origination.

If the underlying loan is weak, insurance cannot fully repair the risk after origination.

Insurance should not replace underwriting

A lender should not assume:

“The borrower is risky, but insurance will absorb the loss.”

That creates moral hazard.

Insurance is a risk-transfer mechanism.

It should not substitute for borrower assessment.

Weak origination eventually becomes an insurance problem.

OJK has strengthened the framework

OJK Regulation No. 20/2023 governs credit-linked insurance and suretyship products.[3]

The framework covers product types, premiums, underwriting, claims and risk exposure.

Its purpose is explicitly prudential.

Capital and liquidity requirements are higher

General insurers marketing credit insurance and suretyship face enhanced equity requirements.

The framework requires at least Rp250 billion or 150% of the applicable minimum equity requirement, whichever is higher under the relevant stage.[4]

OJK also requires a minimum 150% liquidity ratio for insurers marketing these products.[4]

That reflects the risk intensity of the business.

Pricing adequacy is a central question

Credit-insurance pricing needs to reflect:

default probability;

loss given default;

tenor;

sector;

portfolio mix;

recoveries;

reinsurance;

and expenses.

Aggressively underpriced growth can produce attractive premium volume followed by poor loss economics.

Pricing alone will not solve adverse selection

Simply increasing rates can also push better risks away.

That is why pricing must work together with:

better selection;

better information;

limits;

portfolio controls;

and risk sharing.

Concentration can magnify losses

A large number of insured borrowers does not guarantee diversification.

If many borrowers are exposed to the same lender, sector, geography or economic driver, defaults can arrive together.

Credit insurance needs portfolio-level concentration management.

Longer tenors reduce visibility

Credit risk changes over time.

A healthy borrower today can deteriorate significantly over several years.

Tenor, premium and monitoring therefore need to match the uncertainty being insured.

Lender–insurer data sharing is crucial

Insurers need more than borrower names.

Useful underwriting may require:

repayment history;

arrears;

restructuring;

sector;

collateral;

portfolio vintage;

credit scores;

and historical portfolio performance.

Without data, insurers are effectively accepting someone else’s underwriting.

Better credit data can help—but cannot eliminate judgement

SLIK, alternative credit scoring and transaction data can provide richer signals.

They cannot perfectly forecast future shocks.

Management failure.

Fraud.

Sector disruption.

Liquidity shocks.

Historical data always have limits.

Claims management matters too

The claims ratio is not purely an origination issue.

Recovery and subrogation also affect ultimate economics.

An insurer that pays a claim may later recover part of the loss from the debtor or collateral.

That is why ultimate loss matters more than a simple cash claim figure in isolation.

Reinsurance spreads risk, but does not fix bad underwriting

Reinsurance can absorb part of the exposure.

But reinsurers also react to poor loss experience.

Capacity can tighten.

Pricing can rise.

Retention requirements can increase.

Risk transfer does not turn weak underwriting into strong underwriting.

Industry averages do not describe every insurer

The 99.6% figure is an aggregate line-of-business ratio.

Individual insurers can perform very differently.

Their lender relationships, portfolio mix, reinsurance and vintage are different.

The number should not be used to infer the solvency of a specific company.

The wider general-insurance system remains well capitalised

OJK reported an aggregate general insurance and reinsurance RBC ratio of 322.01% in July 2026, well above the 120% regulatory minimum.[5]

Credit insurance therefore represents a line-specific underwriting pressure, not evidence that the entire general-insurance industry is insolvent.

Combined ratio would tell us more

To judge full underwriting profitability, we would ideally need:

earned premium;

incurred losses;

acquisition costs;

operating expenses;

reinsurance effects;

and reserve movements.

Those data are not all available in the cited public line-level releases.

The correct conclusion is therefore narrower:

claims pressure is very high.

What insurers should review

Portfolio by lender.

Portfolio vintage.

Sector concentration.

Pricing.

Risk selection.

Data-sharing requirements.

Recovery performance.

Stress tests.

These are more useful than chasing premium growth alone.

Lenders also carry responsibility

Credit insurance works best when lenders remain economically invested in credit quality.

They still need to underwrite, monitor and collect.

Insurance should support discipline—not weaken it.

Product design should align incentives

Coverage structure matters.

Deductibles.

Coinsurance.

First-loss structures.

Retention.

Waiting periods.

Limits.

If coverage removes too much lender exposure, moral hazard can increase.

The party making the lending decision should retain meaningful economic risk.

99.6% is a warning, not a final verdict

The ratio clearly signals pressure.

It does not mean credit insurance has no economic purpose.

The product can still help lenders and trading businesses distribute unexpected credit losses.

But the 2026 numbers force a harder question:

Is premium growth being supported by healthy risk—or is exposure growing faster than underwriting, pricing and data quality can keep up?

That answer cannot be found in premium volume alone.

It lies in portfolio quality, claims vintage, pricing, risk sharing and underwriting discipline.

That is the real meaning of 99.6%.