Changes to Indonesia’s insurance regulatory regime

In December 2016, Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan, or the OJK) issued several regulations to further implement various key aspects of the Insurance Law 2014. The most important of these regulations are:

• OJK regulation No. 67 (2016) regarding Licensing and Institutional aspects of Insurance Company, Shariah Insurance Company, Reinsurance Company, and Shariah Reinsurance Company;
• OJK regulation No. 68 (2016) on Licensing and Institution of Insurance Brokerage, Reinsurance Brokerage and Insurance Loss Valuation Company;
• OJK regulation No. 73 (2016) on Good Corporate Governance for Insurance Companies; and
• OJK regulation No. 27 (2016) on Fit and Proper Test for Primary Parties of Financial Services Institutions.

BUSINESS LICENCES

Insurance, reinsurance, insurance brokerage and reinsurance brokerage companies (collectively insurance companies) must obtain a business licence from the OJK. The business licence application must be submitted by the board of directors (BOD) to the OJK. After the application is completed, the OJK will conduct an examination to determine whether approval will be granted or not, within 20 working days.

Under article 17, paragraph (1) of regulation No. 67, an insurance/reinsurance company must spin-off its shariah business unit to become a shariah insurance company or shariah reinsurance company when the value of the Tabarru’s Fund – a collection of funds derived from the contribution of the participants, with the mechanism of its use in accordance with the agreement or shariah reinsurance agreement – and participant investment funds has reached 50% of the value of the insurance fund, Tabarru’s Fund, and participant investment fund of its parent company, or within 10 years of law No. 40 (2014) enactment.

AHMAD JAMAL ASSEGAF is a partner at Lubis Ganie Surowidjojo and INDRA PAMBUDY is an associate at the firm