Indonesia is increasingly being considered a prime destination for foreign investment in Southeast Asia. With a population of over 270 million, a growing middle class, abundant natural resources, and a government commitment to promoting industrialization, the country offers enormous business opportunities.
Foreign direct investment (FDI) continues to increase, particularly in strategic sectors such as mining, renewable energy, property, industrial estates, infrastructure, and the digital economy. Annual investment inflows reach tens of billions of US dollars, demonstrating investor confidence in Indonesia’s stability and long-term prospects.
However, every great opportunity comes with risks. Foreign investors often face challenges ranging from operational risks, natural disasters, to differences in insurance regulations in Indonesia. In this context, the question that always arises is:
👉“How can foreign investors get the best insurance protection with competitive premiums in Indonesia?”
This article will review the various risks faced by foreign investors, examples of losses, relevant insurance types, and how experienced insurance brokers like L&G Insurance Broker help investors get the best premiums and maximum protection.
Contact L&G Insurance Broker now at Phone number 08118507773 for a free consultation before the risks haunt your business.
Recognizing Potential Risks in Foreign Investment
Before discussing premiums, it is important to understand the risks faced by foreign investors in Indonesia:
- Operational Risk
- Work accidents in factories or mines.
- Damage to production machines due to overload or human error.
- Supply chain disruption.
- Environmental Risks and Natural Disasters
- Indonesia is prone to earthquakes, floods, volcanic eruptions and tsunamis.
- Factories or mines located in flood/earthquake prone locations bear higher premiums.
- Political and Regulatory Risks
- Changes in tax rules, permits, or environmental regulations.
- There is a new policy regarding foreign investment which influence project feasibility.
- Financial Risk
- Default from local partners.
- Fluctuations in the rupiah exchange rate against the USD.
- Credit risk from buyers or suppliers.
- Legal Risk and Liability
- Lawsuits from third parties due to pollution, work accidents, or breach of contract.
All of these risks need to be addressed with appropriate insurance. However, foreign investors are often unfamiliar with Indonesia’s insurance rate system. This is where brokers play a crucial role, bridging investors’ global needs with local regulations.
Case Study of Foreign Investor Losses
The following real-life cases demonstrate how foreign investors can suffer significant losses if they do not properly prepare insurance protection:
Case 1: Factory Fire in Karawang
A Japanese-owned electronics factory suffered a major flood, resulting in losses reaching hundreds of billions of rupiah. However, the insurance claim was not paid in full because the policy only covered FLEXA risks, excluding flood and earthquake coverage.
Case 2: Landslide at a Foreign Mine
A foreign mining company in Kalimantan experienced a landslide that damaged millions of dollars worth of heavy equipment. Because it did not include a landslide risk clause, its claim was partially rejected. The claims process took nearly two years.
Case 3: Property Project Failed to Hand Over
A Singaporean property investor is facing legal action from a buyer over a late handover. The Payment Warranty insurance policy that was supposed to protect the property was never purchased.
These cases demonstrate that choosing the wrong policy type and not understanding local regulations can cost foreign investors dearly—either in the form of higher premiums or unpaid claims.
Types of Insurance Required by Foreign Investors
To protect foreign investments in Indonesia, several types of insurance are essential:
- Property All Risks (PAR) / Industrial All Risks (IAR)
Covers risks of fire, explosion, flood, earthquake, and riot. Required for factories, warehouses, and commercial properties.
- Construction All Risks (CAR) / Erection All Risks (EAR)
Protecting construction projects, machine installations, and infrastructure development from the risk of damage during the work period.
- Machinery Breakdown (MB)
Specifically for high-value production machinery. Covers sudden breakdowns and repair costs.
- Business Interruption (BI)
Provides compensation for losses due to cessation of operations following fire, flood, or machine failure.
- Marine Cargo & Marine Hull
Protecting the delivery of raw materials and production results, whether by land, sea or air.
- Directors & Officers Liability (D&O)
Protecting management from lawsuits related to business decisions.
- Professional Indemnity & Cyber Insurance
Relevant for the technology and professional services sectors.
- Surety Bond & Trade Credit Insurance
Guarantees the risk of default, tender guarantees, and project implementation.
With a combinationpolicyIn this way, foreign investors can get comprehensive protection from various financial, operational and legal risks.
Factors that Determine the Amount of Insurance Premiums
Insurance premiums for foreign investments in Indonesia are determined by:
- Asset value & industry type: The larger the investment value, the higher the premium. High-risk industries (smelters, petrochemicals) pay higher rates than the food industry.
- Project location: Factories in flood/earthquake prone areas automatically fall into the high-risk category.
- Protection & HSE systems: Factories with hydrants, sprinklers, and fire alarms can reduce premiums.
- Claims history: Companies with large claims in the past typically pay higher premiums.
- OJK Rates: The Financial Services Authority sets minimum and maximum rate ranges. Brokers can help foreign investors choose the most competitive rates based on their risk category.
Without a broker, foreign investors often receive higher rates due to a lack of market information and limited access to many insurance companies.
The Important Role of Insurance Brokers Like L&G
Insurance brokers are independent consultants who work for clients, not insurance companies. L&G Insurance Broker’s roles for foreign investors include:
- Risk Consultant
Identifying the unique risks of each investment project, whether in the mining, energy, property or manufacturing sectors.
- Underwriting Information
Prepare complete risk documents for presentation to insurance companies so that foreign investors get competitive premiums.
- Market Comparison
L&G has access to a wide range of national and international insurance companies. By comparing offers, investors can choose the best premium with optimal coverage.
- Premium Negotiation
Experienced brokers can reduce premium costs without reducing the scope of coverage, in accordance with OJK regulations.
- Claims Assistance
When a major claim arises, the broker acts as the client’s advocate. L&G ensures the claim is paid according to the policy, from investigation to payment.
- Bridge of Culture and Business
Foreign investors often struggle to understand local regulations. L&G plays a key role in bridging the gap between business culture, language, and regulations.
L&G Case Study
- Foreign mining investors are assisted in closing CAR & EAR policies with 20% lower premiums.
- Foreign energy companies receive large flood claim payments thanks to broker assistance.
- With L&G’s support, foreign investors can focus on business development, while risk protection is handled professionally.
Conclusion
Indonesia is a market with enormous foreign investment opportunities, but the risks are also high. Fires, natural disasters, machinery breakdowns, and even lawsuits can threaten business continuity and result in significant losses.
Choosing the right type of insurance is crucial: Property All Risks, Business Interruption, CAR/EAR, Machinery Breakdown, and Liability Insurance. However, without local knowledge, foreign investors risk paying high premiums for minimal protection.
This is where experienced insurance brokers like L&G Insurance Broker play a crucial role. L&G not only helps lower premiums but also ensures comprehensive coverage, handles claims, and bridges the gap between foreign investors and Indonesian regulations.
💡Don’t leave your large investments vulnerable to anticipated risks.
👉Contact L&G Insurance Broker today for a free premium simulation and the best insurance solutions to suit your project needs in Indonesia.
By taking the right steps now, foreign investors can enjoy maximum protection, competitive premiums, and peace of mind when doing business in Indonesia.
DON’T WASTE YOUR TIME AND SECURE YOUR FINANCES AND BUSINESS WITH THE RIGHT INSURANCE.
HOTLINE L&G 24 JAM: 0811-8507-773 (PHONE – WHATSAPP – SMS)
Website: lngrisk.co.id
Email: halo@lngrisk.co.id
