Welcome to the Liga Asuransi! Hello global investors, especially those of you from China and other Asian countries! Foreign investment in Indonesia is currently experiencing a significant surge, particularly in the construction, manufacturing, and infrastructure sectors.
But behind this great opportunity, there are real risks that cannot be ignored. Natural risks, legal, and even social disruptions can disrupt the smooth running of a project and harm your investment. In this article, we’ll discuss why project protection through insurance is very important, and how insurance broker can help you run projects safely and efficiently in Indonesia.
Foreign Investment Trends in Indonesia
Data from the Investment Coordinating Board (BKPM) shows that the value of foreign direct investment (FDI) in Indonesia continues to increase annually. China, as one of the countries with the largest investment value, has invested in various sectors, including:
- Infrastructure: toll roads, ports, high-speed trains
- Energy: power plants, coal mines, renewable energy
- Industrial and manufacturing areas
Projects such as the Jakarta–Bandung High-Speed Railway and the Morowali industrial area are concrete examples of how Chinese companies are taking a major role in Indonesia’s development.
The main factors that encourage foreign investment in Indonesia include:
- Abundant natural resources
- Competitive workforce
- Government support through national strategic projects (PSN)
- Strategic geographical location for Southeast Asian market
However, as investment increases, so does the complexity of risks. Projects managed by foreign companies often face different challenges than local projects, ranging from adapting to Indonesian regulations, differences in language and work culture, to cross-regional logistics.
Project Risks in Indonesia
Indonesia presents its own challenges as a major project location. Some common risks that frequently occur and must be anticipated include:
- Construction Risks
- Work accidents resulting in injury or death
- Project materials are damaged, lost, or delayed due to adverse weather conditions.
- Heavy equipment such as cranes, excavators, or batching plants experience damage due to intensive use or operator error.
Construction is the phase most vulnerable to physical damage. Small errors in planning or execution can have significant impacts on time and costs.
- Natural Risks
- Indonesia is a country prone to disasters such as earthquakes, floods, and landslides. Meteorology, Climatology, and Geophysics Agency (BMKG) data shows an increase in the intensity of extreme weather in recent years.
- Projects built near rivers, coastlines, or earthquake-prone areas are at higher risk and require extra protection.
- Social and Political Risks
- Cultural and communication differences can trigger conflicts between foreign and local workers.
- Land legality issues and lengthy licensing processes could delay the project.
- Local protests against the project’s environmental impact could also temporarily halt work.
- Financial and Legal Risks
- Foreign investors may face claims from third parties if the project causes accidents or damage.
- Changes in fiscal policy, currency exchange rates, and protectionist policies can affect project budgets.
If there is no risk mitigation such as insurance, losses can reach millions of dollars and affect the overall ROI of your project.
The Strategic Role of Insurance Brokers in Foreign Projects
An insurance broker is a professional partner tasked with protecting investors’ interests. Unlike insurance agents who work for insurance companies, brokers work entirely for you, the client.
Broker services include:
- Comprehensive project risk identification and analysis
- The best policy recommendations from various leading insurance companies in Indonesia
- Efficient premium negotiation and clause arrangement according to foreign project needs
- Bilingual (Indonesian–English) insurance document processing assistance
- Assistance during the active policy period, as well as when a claim occurs
Why brokers are important for foreign investors:
- Bridging the language and legal culture gap between investor countries and Indonesia
- Provides a clear overview of OJK regulations and national insurance contract standards.
- Adjust protection according to project characteristics (investment value, location, type of work)
L&G Insurance Broker Advantages:
- Experienced in large-scale foreign projects
- Master English and understand the work standards of multinational companies
- Complete legality and supervised by OJK
- Has been trusted to handle project insurance from Chinese, Japanese and European investors
With the support of insurance brokers such as L&G, you will be more relaxed in running projects in Indonesia.
Important Types of Insurance for Foreign Projects
Several types of insurance policies that foreign investors must consider:
1. Contractor’s All Risk (CAR)
Guaranteeing construction projects against various physical risks during construction. Protecting materials, structures, and damage from natural disasters.
2. Erection All Risk (EAR)
Specifically for heavy machinery or steel structure installation projects, such as factories and power plants, this policy is essential for industrial projects.
3. Third Party Liability Insurance
Covers legal claims from third parties for accidents, property damage, or injuries resulting from project activities.
4. Equipment Insurance
Protects heavy equipment from damage, theft, or accidents. This includes both rented and investor-owned equipment.
5. Workmen Compensation Insurance
Mandatory for worker protection on project sites. Provides compensation for work accidents, medical expenses, and death benefits.
6. Business Interruption Insurance
Compensation for financial losses resulting from project operational disruptions, such as floods or earthquakes that halt activity for several weeks.
All these policies can be tailored to your project needs by an experienced insurance broker.
Case Study: Foreign Projects Without vs. With Protection
Case A: No Protection
A foreign company suffered heavy equipment damage due to flooding. There was no insurance. The project was delayed three months, and the investor paid the full cost of replacing the equipment. Consequently, the investor lost potential profits and faced late fees from the contract.
Case B: With Insurance Broker
A foreign company used a broker and purchased a CAR + Equipment Insurance policy. During the flood, the claim was approved within two weeks, delaying the project by only three days. The broker’s services facilitated the claims process and avoided potential legal disputes.
Results:Project profits remain secure and investors are satisfied. Risk mitigation has been successful, and relations with the project owner remain positive.
How Foreign Investors Can Get Insurance Protection
Here are the simple steps to get protection:
- Contact an insurance broker officially licensed by OJK with international experience.
- Project consulting: Submit the project plan, location, project value, and list of assets to be insured.
- Risk analysis: Brokers will map potential risks based on industry sector, geographic location, and type of work.
- Policy recommendations: Brokers put together a complete protection package with premium simulations and claim scenarios.
- Police closure: Signing documents and police publications in two languages.
- Active mentoring: Brokers monitor projects and are ready to assist in case of claims.
This process ensures that investors do not purchase inappropriate policies or pay excessively high premiums.
Conclusion
Foreign investment, particularly from China, continues to grow in Indonesia. However, the risks inherent in projects cannot be ignored. Insurance coverage is a crucial foundation for smooth project implementation and the security of your investment.
By holding hands professional insurance brokers such as L&G Insurance Broker, you’ll get the right, efficient, and regulatory-compliant solution for your project. From construction and installation to project operations, everything is covered.
Don’t wait for a loss to occur to realize the importance of protection. When you engage an experienced broker from the start, you gain a strategic partner who understands your needs and works in your best interest.
Looking for insurance products? Don’t waste your time and contact us now.
HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)
Website: lngrisk.co.id
Email: oktoyar.meli@lngrisk.co.id
—
