An increase to Indonesian infrastructure spending may drive up demand for insurance products, according to Fitch.

The ratings agency’s outlook for the nation’s insurance sector next year is stable, reflecting rising insurance awareness, conservative investment practices, economic growth and enhanced reinsurance coverage.

“The outlook also reflects Fitch’s view that Indonesia’s large population, low insurance coverage, growing middle-income sector and greater insurance awareness should also support sector growth,” it says.

“Generally conservative investment allocation is likely to mitigate against volatility in operating results.

“Meanwhile, the non-life insurance segment will still be driven mainly by motor and property insurance.”

The stable outlook reflects an expectation that Indonesia’s economic conditions remain manageable.

It could be revised to negative in the event of “any extreme external shock in the form of an economic or financial crisis to which developing economies such as Indonesia are more vulnerable”. A significant, unexpected rise in insured losses from catastrophe events could also put downward pressure on operating profitability.