Indonesia-based reinsurer Marein to raise US$41 rights issue in 2017

Maskapai Reinsurance Indonesia (Marein), one of only four local reinsurance companies in the country, has made plans to raise US$41 million from a rights offering in 2017.

The company said it will sell up to 130 million new shares in a right issue by June 2017 in order to strengthen its existing capital.

Reinsurers provide insurance for other insurance companies, Marein along with Reasuransi Indonesia Utama, Reasuransi Nasional Indonesia, and Tugu Reasuransi Indonesia are the only four local reinsurance companies in Indonesia.

Local firms often lack capital compared to their larger foreign reinsurance peers, forcing Indonesian insurance firms to seek coverage for big insurance policies abroad.

However, when local insurance firms pay for premium overseas coverage, it will complicate government efforts to balance the country’s current account.

Hence, Financial Services Authority (OJK) has requested the four reinsurers, Marein and its rivals to increase their capacity to cover more clients.

“In order to increase the capacity, we have to raise capital,” said Marein president director Robby Loho to Jakarta Globe.

“The company is expected to reap IDR 1.5 trillion in premium income this year, with an increment of 40 percent from last year’s IND 1.07 trillion”, said Yanto J. Wibisono, Marein’s finance director.

Besides, the premium income at Marein has also reached IDR 907 billion in the first nine months this year, increasing by 29 percent from the same period in 2015. This was driven by a double-digit growth in life and general reinsurance segments this year.
Fitch Ratings, one of the big three credit rating agencies affirmed Marein’s national insurer financial strength with an A+, as well as its international IFS rating of BB back in August.

Fitch said that the rating reflects Marein’s high business concentration in catastrophe-prone Indonesia, its modest market position, and despite its long operating record, small asset size compared with some of its local and regional peers.

By Vivian Foo, Unicorn Media.

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