Analysis of the Influence of Macroeconomic Factors on Stock Price of Insurance Companies Listed on the Indonesia Stock Exchange

This study investigates the influence of macroeconomic variables and firm-specific financial indicators on the stock prices of insurance and reinsurance companies listed on the Indonesia Stock Exchange. Using monthly panel data from January 2020 to December 2024, the analysis evaluates how interest rate, inflation rate, and exchange rate fluctuations affect the performance of the insurance sector compared to the broader Indonesian stock market index. A two-stage regression framework is employed. The first stage compares the macroeconomic sensitivities of insurance stocks and the composite market index, while the second stage estimates the incremental effects of firm-level financial characteristics, including total assets, net income, and premium income. To address endogeneity arising from the strong correlation between interest rate and exchange rate, an instrumental variable approach is applied using the one-month risk-free interest rate. The results reveal that insurance stock prices are significantly affected by macroeconomic factors, particularly interest rate and exchange rate movements. The inflation rate is found to have a positive relationship with stock valuation. Firm size, measured by total assets, enhances the model’s explanatory power, while net income and premium income are not statistically significant. These findings highlight the importance of accounting for both external economic conditions and internal financial attributes in analyzing insurance sector performance and demonstrate that listed insurers respond to macroeconomic changes in ways that differ from the general equity market.