Indonesia continues to be a magnet for foreign investors in Southeast Asia. With a population of over 280 million, abundant natural resources, and the government’s push to accelerate infrastructure development and the transition to new energy, investment opportunities are increasingly wide open in the final quarter of 2025. From mining and renewable energy to construction and manufacturing, foreign capital flows are expected to continue to increase rapidly.
However, despite these significant opportunities, foreign investors face numerous risks that cannot be ignored. Regulatory changes, global economic uncertainty, natural disasters, workplace accidents, and even the risk of default by local partners can pose serious threats that could disrupt business continuity. It’s no wonder that one of the most frequently asked questions from prospective investors is: “How much insurance premiums should I pay to protect my investments in Indonesia?”
This article will comprehensively discuss the types of foreign investment in Indonesia, the associated risks, real-life case studies, and estimated insurance premium costs for various sectors. It will also explain the strategic role of experienced insurance brokers like L&G Insurance Broker, who can help foreign investors obtain optimal protection at efficient premium costs.
Contact L&G Insurance Broker now at 08118507773 for a free consultation before the risks haunt your business.
Foreign Investment Opportunities in Indonesia
Indonesia is strategically positioned as a major destination for foreign direct investment (FDI) in Southeast Asia. The government continues to encourage foreign capital inflows through pro-investment policies, such as simplifying licensing through the Online Single Submission (OSS), providing tax incentives, and massive infrastructure development.
The sectors that are the favorites of foreign investment include:
- New and Renewable Energy (EBT): solar cell, hydro, and biomass projects, in line with the 2060 net zero emission target.
- Mining and Downstream: nickel, copper, and bauxite are mainstays due to global demand for batteries and electric vehicles.
- Infrastructure and Construction: toll roads, ports, airports, and industrial areas that continue to be developed.
- Manufacturing and Heavy Industry: automotive, steel, petrochemical, and pharmaceutical.
- Digital Technology and Finance: fintech, e-commerce, AI and big data-based startups.
In the fourth quarter of 2025, FDI realization is expected to increase significantly as many major projects enter the execution phase. With its combination of a large domestic market, competitive workforce, and political stability, Indonesia is seen as one of the most promising investment destinations in the region.
However, this opportunity must also be accompanied by thorough risk protection, because the potential losses due to accidents, natural disasters, and regulatory risks can be very large if not anticipated early.
Types of Foreign Investment in Indonesia
Foreign investment in Indonesia is increasingly diverse, spanning nearly all economic sectors. Some of the main investment types that attract the most interest from international investors are:
- Energy and Mining
Indonesia has abundant natural resource reserves, such as coal, nickel, copper, gold, and bauxite. The government is also encouraging downstream mineral processing, allowing foreign investors to not only mine but also build processing plants.
- Infrastructure and Construction
Toll road, port, airport, and industrial estate projects continue to require significant capital. Many foreign investors collaborate with state-owned enterprises and local private companies to fund strategic projects.
- Manufacturing and Heavy Industry
From steel mills to petrochemicals to automotive, Indonesia’s manufacturing sector is a target due to its competitive production costs and access to the ASEAN regional market.
- Property and Real Estate
Industrial areas, modern housing, and office buildings in big cities often involve foreign investors, especially from East Asia and the Middle East.
- Finance and Digital Technology
With high internet penetration, the fintech, e-commerce, and technology startup sectors are among the fastest-growing. Foreign investors are attracted to the vast potential of Indonesia’s digital market.
Each type of investment promises large returns, but also carries specific risks that need to be managed properly, especially through appropriate insurance protection.
Risks Faced by Foreign Investors
While investment opportunities in Indonesia are substantial, each type of investment carries significant risks. Foreign investors must understand this risk profile to develop effective mitigation strategies.
- Political and Regulatory Risks
Indonesia is a developing country with dynamic regulations. Changes in investment regulations, tax policies, or local content requirements can directly impact project profitability. Investors must also consider the risk of permit delays or changes in government policies.
- Financial Risk
Fluctuations in the rupiah exchange rate against the US dollar or other currencies can erode profits. The risk of default by local partners in collaborative projects is also quite high, potentially triggering liquidity losses.
- Operational Risk
Factories, infrastructure, or mines financed by foreign investors face the risk of fire, machine breakdowns, theft, and workplace accidents. Production disruptions can cause significant losses, both directly and indirectly.
- Construction Risks
In construction projects, the risk of delays, technical errors, accidents, and even force majeure events like floods or earthquakes is very real. Projects worth trillions of rupiah can be halted by just one serious accident.
- Environmental and Social Risks
Investments in the mining and energy sectors face environmental risks such as landslides, flooding, and pollution. On the social side, conflicts with surrounding communities can also trigger material and reputational losses.
These risks indicate that every foreign investor must have a solid risk management strategy, one of which is through insurance protection tailored to their investment profile.
Case Study of Risks in Foreign Investment
To understand the magnitude of the potential risks faced by foreign investors in Indonesia, here are some real-life examples of cases that have occurred:
- Nickel Mine Landslide
A Chinese mining company experienced a landslide at its mine in Sulawesi. Losses reached hundreds of billions of rupiah due to damaged heavy equipment, production line shutdowns, and loss of life, resulting in legal liability. The company’s Property All Risks (PAR) and Public Liability (PL) policies were a lifesaver, as they could be claimed for most of the costs.
- Flood Construction Project
A foreign consortium building an industrial estate in West Java suffered significant losses due to flash floods. Project materials and equipment were damaged, and work was delayed for more than three months. Fortunately, they had a Construction All Risks (CAR) policy that covered physical losses and additional costs resulting from the delay.
- Factory Owned by Japanese Investors Burns Down
A massive fire destroyed much of an electronics factory in the Karawang industrial area, causing total losses exceeding Rp 500 billion. Industrial All Risks (IAR) and Business Interruption (BI) insurance claims helped the company recover without losing its market position.
- Financial Risk – Default
A foreign investor in the energy sector suffered losses because a local partner defaulted on contractual obligations. This loss of tens of millions of dollars could have been mitigated with Trade Credit Insurance, which they unfortunately lacked.
These cases demonstrate that risks can arise at any time, even for large companies. With the right insurance protection, foreign investors can minimize losses, ensure project sustainability, and safeguard their business reputation in Indonesia.
Types of Insurance Required by Foreign Investors
Each foreign investment sector in Indonesia presents unique risks that require specific protection solutions. The following are the main types of insurance commonly required:
- Property All Risks (PAR) / Industrial All Risks (IAR)
Provides comprehensive protection for factories, buildings, or facilities owned by foreign investors. Covers losses due to fire, explosions, floods, earthquakes, and riots. Suitable for the manufacturing, property, and heavy industry sectors.
- Construction/Erection All Risks (CAR/EAR)
Mandatory for investments in construction and infrastructure. It protects projects from the risks of physical damage, on-site accidents, and force majeure. This policy can also be extended to Third Party Liability (TPL) coverage to cover third-party claims.
- Machinery Breakdown (MB)
Factories with large machinery are at high risk of technical breakdowns. An MB policy covers the repair or replacement costs of machinery damaged by a sudden accident, ensuring production continues.
- Public Liability (PL) & Employers Liability (EL)
Protects investors from third-party lawsuits resulting from accidents, damage, or injuries arising from operational activities. EL specifically covers employee liability for work-related accidents.
- Directors & Officers (D&O)
Legal risks to company directors and management are common in foreign investments, primarily due to differences in regulations and business standards. A D&O policy covers legal costs and compensation in the event of a claim.
- Trade Credit Insurance
Essential for investors in the trade or energy sectors, this policy protects against the risk of default by local partners, ensuring the company’s cash flow remains secure.
- Marine Cargo & Hull Insurance
For investors who import raw materials or operate ships, this policy protects goods and assets during land and sea transportation.
- Political Risk Insurance (PRI)
Particularly relevant for foreign investors, this policy protects against non-commercial risks such as changes in government policy, nationalization of assets, or political conflicts that disrupt the continuity of investments.
With the combination of the above policies, foreign investors can build a comprehensive risk protection framework, ensuring the safety and sustainability of their investments in Indonesia.
Premium Cost Estimate
Insurance premiums for foreign investment in Indonesia vary widely, depending on the type of investment, project value, risk profile, and field survey results. The following is a range of estimated premiums for several commonly used policy types:
- Property All Risks (PAR) / Industrial All Risks (IAR)
Rate: 0.25% – 0.35% of asset value per year.
Example: An electronics factory worth IDR 1 trillion → annual premium of around IDR 500 million – IDR 2.5 billion.
- Construction/Erection All Risks (CAR/EAR)
Rate: 0.10% – 0.35% of the contract value.
Example: Rp2 trillion toll road project → premium of around Rp2 – Rp7 billion.
- Machinery Breakdown (MB)
Rate: 0.25% – 0.35% of the machine value per year.
Example: Production machinery worth IDR 500 billion → premium IDR 250 million – IDR 1 billion.
- Public Liability (PL)
Rate: around 0.2% – 0.5% of the coverage limit.
Example: Limit USD 1 million → premium around IDR 300 million – IDR 700 million/year.
- Trade Credit Insurance
Rate: 0.10% – 0.50% of the contract value.
Example: Trading contract of IDR 200 billion → premium of IDR 200 million – IDR 1 billion.
- Political Risk Insurance (PRI)
Rate: 0.2% – 0.5% of the investment value.
Example: Mining investment of IDR 3 trillion → premium of IDR 6 – IDR 15 billion per year.
The estimates above show that premiums are relatively small compared to potential losses, which can reach hundreds of billions to trillions of rupiah. With proper planning and effective negotiation with an insurance broker, foreign investors can obtain maximum protection at an efficient cost.
PS: To get an accurate premium cost estimate, contact L&G Insurance broker now.
Why Foreign Investors Need Insurance Brokers
Arranging insurance programs for foreign investment in Indonesia is no simple task. Each policy has specific wording, clauses, and provisions that often differ from international standards. Furthermore, local regulations, differences in business culture, and project complexity require professional guidance from foreign investors.
This is where the role of insurance brokers like L&G Insurance Broker becomes very important.
- In-depth Risk Analysis
L&G helps foreign investors identify potential risks that may otherwise be unseen, ranging from political and financial to technical risks on the ground. The results of this analysis serve as the basis for designing protection tailored to specific investment needs.
- Integrated Insurance Program Design
Experienced brokers ensure every major risk is covered with the right combination of policies. For example, a construction project requires not only CAR/EAR, but also TPL, DSU/ALOP, and Workers’ Compensation.
- Competitive Premium Negotiation
With an extensive network of local and global insurance companies, L&G can negotiate the best premiums without compromising on the quality of protection. Foreign investors receive maximum value for their money.
- Claims Assistance
Foreign investment claims often amount to billions to trillions of rupiah. The process can be lengthy and complex, involving international loss adjusters. L&G assists clients from the outset, preparing claim documents, and ensuring smooth payment.
- Reputation & Experience
As a broker with over 30 years of experience in Indonesia, L&G has assisted numerous foreign investors in the mining, energy, construction, and financial sectors. This provides investors with added confidence that their interests are being professionally managed.
With the support of the right insurance broker, foreign investors can focus more on developing their business, without having to worry about the major risks that may arise.
Conclusion
Indonesia offers significant foreign investment opportunities, ranging from energy and mining to construction and digital technology. However, every opportunity carries risks: political, financial, operational, environmental, and even default. Without proper safeguards, losses can reach hundreds of billions or even trillions of rupiah.
This is where insurance plays a crucial role in a foreign investor’s risk management strategy. With the right policies—such as Property All Risks, CAR/EAR, Machinery Breakdown, Trade Credit, and Political Risk Insurance—investors can ensure their investments remain safe, bankable, and sustainable. A relatively small premium (0.05%–0.5% of the investment value) is a smart investment compared to the potential for much larger losses.
However, managing an insurance program in Indonesia requires an experienced insurance broker. L&G Insurance Broker is here to help foreign investors design a measurable protection program, negotiate the best premiums, and accompany claims through to resolution.
👉If you are a foreign investor who is or will be investing in Indonesia, don’t let risk be a barrier to your business success.
Contact L&G Insurance Broker today for professional, transparent, and reliable risk management and insurance solutions.
DON’T WASTE YOUR TIME AND SECURE YOUR FINANCIAL AND BUSINESS WITH THE RIGHT INSURANCE.
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