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major reinsurer seeks to take over foreign services following its launch after more than one year of planning.

The company, Indonesia Re, launched on Friday, is expected to help reduce the country’s current-account deficit, which partially stems from a high dependence on foreign reinsurance services.

In the insurance industry, it is common for an insurance firm to insure its business to a reinsurer. However, the practice is currently dominated by foreign reinsurers owing to their large capital and capacity.

As the service is considered imported, it weighs heavily on the current account, along with services provided by foreign firms in other sectors, such as shipping and tourism.

State-Owned Enterprises (SOE) Minister Rini Soemarno highlighted the country’s need for a large-scale reinsurer.

“We have had to import [the service] because our four reinsurers, two of which are SOEs, are so small that it is difficult for them to grow. At the same time, they have to compete for pricing, instead of creating value,” she said in her remarks during the launch.

Rini claimed that the insurance industry could book Rp 259 trillion (US$19.97 billion)-worth of premiums annually, but had to reinsure about Rp 20 trillion of the figure abroad each year.

The data is in line with that of the Financial Services Authority (OJK) that shows as much as Rp 14 trillion of reinsurance premium was placed abroad in 2015, an increase of 5.5 percent from 2014.

Indonesia Re still has to undergo several consolidation steps that will involve several state companies, namely Reasuransi Umum Indonesia (RUI), ASEI Re, Asuransi Kredit Indonesia (Askrindo) and Reasuransi Nasional Indonesia (Nasre).

The first phase of the consolidation has been completed with the merging of Reasuransi Internasional Indonesia (ReINDO) into Indonesia Re.

Its equity is projected to reach Rp 2.5 trillion by year-end, but Indonesia Re president director Frans Y. Sahusilawane said the firm was still in need of additional capital to strengthen its capacity.

“We hope to reach Rp 7 to 8 trillion in premium income in 2017. To realize that, we need extra capital of Rp 500 billion to Rp 600 billion to bring the total capital to Rp 3 to 3.5 trillion,” Frans said.

The additional capital is expected to come from other state firms as part of the SOE Ministry’s larger “SOE synergy” program. Frans said three to four insurers were expected participate in the program, including Asabri, which serves the Indonesian Military (TNI).

Indonesia Re is assessing the capital injection process and will soon discuss it with the ministry.

Meanwhile, OJK commissioner for non-banking financial industry Firdaus Djaelani said the establishment of Indonesia Re cemented an existing OJK regulation, which requires basic or simple insurance risks be reinsured to domestic reinsurer firms.

However, insurance companies with products that more global or particularly designed for multinational firms are still allowed to seek reinsurance services from foreign companies, pending approval from the OJK.

“We want to see [the current account] deficit reduced by 25 percent by year-end,” he said.

Bank Indonesia (BI) data reveals the deficit stood at $17.7 billion in 2015.