Market volatility pressures Islamic insurance investment returns as sukuk becomes mainstay

Islamic insurance industry investment returns faced pressure in Q1 2026 amid ongoing global and domestic financial market volatility, as shown by Financial Services Authority (OJK) data indicating negative returns by end-March 2026. OJK data shows Islamic insurance investment returns posted a deficit of Rp 121.84 billion as of March 2026, reversing February’s surplus of Rp 545.24 billion. Despite industry-wide pressure, several Islamic insurance firms maintained investment growth through conservative and diversified portfolio management strategies. Zurich General Takaful Indonesia (Zurich Syariah) President Director Hilman Simanjuntak reported a year-on-year investment growth of over 15% as of March 2026, with the company’s returns reaching Rp 62.96 billion, per financial reports. According to Hilman, the company’s investment performance was supported by disciplined portfolio management amid market fluctuations, with Zurich Syariah’s investments remaining well-managed. Sharia State Securities (SBSN) remain the primary investment instrument for Zurich Syariah, offering stability, attractive returns, and alignment with the company’s long-term asset and liability management needs. “Additionally, we diversify into other instruments such as Sharia deposits and corporate Sharia bonds to optimise company investment returns,” he said. To maintain investment performance until year-end, Zurich Syariah employs an asset-liability management strategy prioritising stable and liquid instruments. The company continues to monitor global macroeconomic developments and geopolitical tensions that may impact financial markets. On the other hand, PT Prudential Sharia Life Assurance (Prudential Syariah) attributed the pressure on Islamic insurance investment returns in Q1 2026 to persistent market volatility. Chief Customer Marketing Officer Vivin Arbianti Gautama said the condition was reflected in Sharia stock market movements during the first quarter. “This indicates equity-based instruments experienced more significant adjustments compared to other instruments,” Vivin told Kontan on Friday (22 May 2026). Nevertheless, fixed-income Sharia instruments such as sukuk demonstrated relative resilience. Vivin noted sukuk recorded competitive returns of 5.5%-5.9%, helping maintain industry investment portfolio balance. This is crucial for Islamic insurance companies prioritising long-term fund management and cautious investment principles. Vivin acknowledged Prudential Syariah’s Q1 2026 investment returns were affected by financial market dynamics, particularly increased volatility in Sharia equities since the start of the year. Additionally, cautious global sentiment impacted domestic markets, including investor fund flows and rupiah exchange rate movements. Adjustments also occurred in Sharia fixed-income instruments due to changes in domestic sukuk yields, affecting investment valuations. To mitigate these conditions, Prudential Syariah continues to balance portfolios through investment diversification, strengthened asset-liability management (ALM), and optimising placements in more stable instruments. Currently, Sharia fixed-income instruments such as government sukuk and Sharia deposits dominate Prudential Syariah’s investment portfolio. These are deemed more suitable for medium-to-long-term fund management due to better stability. Moving forward, Prudential Syariah will continue diversifying across various Sharia investment instruments, including Sharia equities, sukuk, and Sharia money market instruments. The company will also strengthen selective asset selection, focusing on instruments with strong fundamentals and positive long-term growth prospects. With global uncertainties persisting, diversification strategies and dominance of Sharia fixed-income instruments are expected to remain key for industry players to maintain investment stability until end-2026.