Liga Asuransi – The palm oil industry remains one of the main pillars of the Indonesian economy.the world’s largest palm oil producer, Indonesia contributes around 58% of total global production, with most plantation and processing activities concentrated in the regionSumatra and KalimantanIn the next few years, these two regions are predicted to experience a significant surge in investment, in line with increasing global demand and government policies strengthening the national downstream and bioenergy sectors.
Data from the Central Statistics Agency (BPS) noted thatThe export value of crude palm oil (CPO) and its derivative products rose by 24.8% in January–June 2025 to become US$11.43 billion, compared to the same period the previous year. This surge demonstrates that the Indonesian palm oil industry remains resilient amidst global market dynamics. In addition to strong demand from traditional markets such asIndia and China, there is an opportunity for expansion into the European Union as trade negotiations become more open, albeit with strict sustainability standards.
On the other hand, the government is accelerating policiesB50—a 50% biodiesel blend in diesel—which is projected to increase the need for CPO for domestic biofuel by up to 20.1 million kiloliters, up from the current 15.6 million kL. This means that, in addition to export opportunities, the domestic market is also becoming larger and more strategic for industry players.
This growth certainly attracts investors, contractors, and new business players. However, behind the great opportunities, there are…financial, operational and environmental risks which cannot be ignored. From the construction of plantations and factories, to logistics and exports, all stages require comprehensive insurance protection to ensure that investments remain safe and sustainable.
To support palm oil industry players in facing this major expansion, L&G Insurance BrokerReady provides the right insurance solutions. Contact us at 📞+62 811-8507-773 for consultation.
Palm Oil Investment & Expansion Trends in Sumatra and Kalimantan
The region of Sumatra and Kalimantan has long been the center of national palm oil production. Sumatra, especially the province ofRiau, North Sumatra, and South Sumatra, is an area with relatively mature infrastructure and an integrated palm oil industry network from upstream to downstream. Meanwhile,Kalimantan— especially Central Kalimantan and West Kalimantan — are new expansion areas with vast land areas and high productivity.
In recent years, investment trends have shown quite an interesting shift. Investors are no longer solely focused on opening new plantations, but are also beginning to…divert funds to downstream facility development, such as cooking oil, biodiesel, and oleochemical processing plants. This step is in line with the government’s strategy to reduce dependence on crude palm oil exports and increase domestic value added.
According to data from the Ministry of Agriculture and BKPM,Foreign investment (PMA) and domestic investment (PMDN) in the palm oil plantation sector have increased significantly in the last 2 years., with the largest portion flowing to Sumatra (±60%) and Kalimantan (±30%). The main factors driving this increase in investment include:
- Global CPO price stability, supported by strong demand from India, China and African countries.
- Fiscal incentive policy for downstream palm oil and bioenergy industries.
- Infrastructure improvement in the Kalimantan region such as port construction, road access, and logistics routes.
- Expansion of B40 and B50 programs, which provides long-term domestic market certainty.
Especially in Kalimantan, several large companies have started building a biodiesel factory and green refinery to adapt to global clean energy trends. In Sumatra, the focus is more on increasing production capacity and supply chain efficiency, including through smart farming technologies and mechanization.
This expansionary trend brings significant economic potential, from job creation and increased foreign exchange earnings to strengthening the national supply chain. However, it’s important to note that this significant investment also opens up a number of new risks, such as operational disruptions, land fires, legal risks over land, and global climate and market uncertainty. Therefore, the risk management aspect and insurance protection becomes crucial from the early stages.
Export Potential and Direction of National Palm Oil Industry Policy
As the world’s largest palm oil producer, Indonesia plays a crucial role in shaping the direction of the global market. In the first half of 2025,The export value of crude palm oil (CPO) and its derivative products rose 24.8% to US$11.43 billion., according to data from the Central Statistics Agency (BPS). This increase is not only driven by increased volume, but also relatively stable global prices and the expansion of Indonesia’s export market.
1. Key markets: India & China remain dominant
India and China remain the two largest export destinations. Both countries continue to increase demand to meet their domestic food and industrial needs. India, for example, has increased CPO imports as part of a strategy to maintain stable domestic cooking oil prices. Meanwhile, China relies on Indonesian CPO supplies to support its massive food and oleochemical industries.
2. The European Union market: opportunities and challenges
On the other hand, the European Union remains a significant market, although its contribution is smaller than that of India and China. Ongoing trade negotiations between Indonesia and the EU are beginning to open up new opportunities, including the possibility of access at more competitive tariffs. However, the main challenge is the stringent sustainability standards, particularly regarding deforestation and carbon footprint. To maintain this market access, industry players need to strengthen ISPO and RSPO certification and implement transparent sustainability practices.
3. Domestic policy impact: B50 as a game changer
The Indonesian government is accelerating the implementation program B50, namely a 50% biodiesel blend in diesel. If this program proceeds as targeted by 2026, the demand for CPO for biodiesel will increase from approximately 15.6 million kiloliters to 10 million kiloliters.20.1 million kilolitersper year. This means a large portion of palm oil production will be absorbed by the domestic market, reducing dependence on raw material exports and strengthening national energy security.
4. Impact on investors and industry players
This policy provides long-term market certainty, but also demands rapid adaptation. Companies that have historically relied on exports must begin downstream product diversification and strengthening domestic infrastructure. The government is also encouraging increased refining capacity, the construction of logistics terminals, and more efficient export facilities, particularly in key producing regions such asSumatra and Kalimantan.
Overall,Indonesia’s palm oil export prospects remain bright, but will be increasingly influenced by domestic policies and global market trends toward sustainability and clean energy. For investors, this is a strong signal to integrating business strategies with national energy policies and international standards.
IV. Investment Risk & the Role of Insurance in Palm Oil Projects
Despite the large economic opportunities, investment in the palm oil sector — particularly at the expansion and construction stage of new facilities — hascomplex risksand often have significant financial value. These risks can arise from the initial phase (plantation and infrastructure development) through to production and export. Without proper risk management, the potential for losses can be significant and disrupt the sustainability of investments.
1. Construction and operational risks
Refinery construction projects, biodiesel plants, and logistics infrastructure such as ports and road access often face construction risks, such as:
- Physical damage due to natural disasters (floods, fires, landslides),
- Work accident which may give rise to third party claims,
- Project delays due to extreme weather disturbances or technical errors,
- Equipment failure which increases operational costs.
For this risk, insurance products such asContractor’s All Risks (CAR), Erection All Risks (EAR), as well as Third Party LiabilityIt is very important to provide financial protection against unforeseen events during the construction period.
2. Risk of fire and production disruption
Land and facility fires are a classic threat to the palm oil industry, particularly during the long dry season. In addition to physical losses, fires can cause prolonged business disruption, decreased production capacity, and reputational damage. Insurance products such asProperty All Risks (PAR) And Business Interruption (BI)can provide compensation for damage and loss of profits due to disruption of operations.
3. Legal & environmental risks
Investments in the palm oil sector often intersect with issues of land management, permitting, and environmental impact. Legal disputes over land ownership or violations of environmental regulations can lead to project delays or heavy fines. Therefore, industry players need to consider safeguards in the form of:liability insurance, like Comprehensive General Liability (CGL) or Environmental Liability, to anticipate legal claims and compensation.
4. Supply chain & export risks
Logistical disruptions, shipping delays, or damage to goods in transit can cause significant losses, especially for export-oriented companies. In this context,Marine Cargo InsuranceIt is important to protect the value of goods during the shipping process to domestic and international markets.
With the increasing value of investment and expansion in Sumatra and Kalimantan,Insurance protection is no longer an additional option, but a key component of business strategy.. Companies that involve experienced insurance brokers from the outset can identify risks more accurately, get policies that suit your needs, and ensure claims run smoothly if an incident occurs.
Conclusion & Recommendations
The Indonesian palm oil industry is entering a period of major expansion, particularly in Sumatra and Kalimantan. The investment surge driven by high global demand, downstreaming policies, and the B50 program has made this sector a driving force for the national economy. On the other hand, the increasing potential of export and domestic markets also brings consequences: increasingly complex and substantial investment risks.
Investors, contractors, and business owners cannot simply rely on profit projections. They need to have a mature risk management strategy, especially in the face of challenges such as natural disasters, fires, legal disputes, climate uncertainty, and logistical disruptions. In this context,insurance plays a vital role— not only as a financial safeguard in the event of losses, but also as a mitigation tool that enables smooth operations and project sustainability.
Involving insurance brokers from the early stages of project planning can provide strategic benefits, from more accurate risk mapping and recommendations for appropriate coverage types to support during the claims process. This approach allows industry players to focus on expansion and innovation without being burdened by potentially unmanaged risks.
Contact L&G Insurance Broker
To ensure your investment in the palm oil sector is properly protected, trust us.L&G Insurance Broker— a trusted partner in managing industrial risks and large projects in Indonesia. 📞+62 811-8507-773