Chief Executive of the Insurance, Guarantee and Pension Fund Supervision of the Financial Services Authority (OJK), Ogi Prastomiyono, said that the increase in the Bank Indonesia (BI) Rate or benchmark interest rate to 6 percent had an impact on reducing the value of insurance company investment assets. This is because an increase in the benchmark interest rate will increase the yield on SBN (Government Securities).
“The increase in the BI Rate will have an impact on decreasing asset values, especially investments in SBN that are currently owned,” said Ogi in a written statement, Wednesday, November 1 2023. However, he said, in general, insurance investment conditions are still sufficient to absorb the risk of increases BI Rate.
According to Ogi, the continuous increase in BI’s benchmark interest rate can still be tolerated as long as the increase is not too drastic. “However, this will affect market liquidity over a certain period of time, which may affect the performance of the insurance industry,” he said. Plus, insurance investment industry players tend to take a wait and see attitude.
Apart from the factor of increasing interest rates, he said, it is also necessary to pay attention to geopolitical conditions and the occurrence of conflicts in the Middle East, which are likely to have an influence on the global economy.
On the other hand, developments in China’s economic conditions, as well as increases in world commodity and food prices, could also have an impact on national economic growth and movements in financial markets. “So in the medium term we need to be aware of the increase in investment risk,” said Ogi.