- The regulator
The Financial Services Authority (locally the Otoritas Jasa Keuangan, 'OJK') who supervises all financial institutions.
- Subsidiary/Branch
Branches of foreign insurers are not permitted. Only an Indonesian incorporated company can apply for a licence to carry on business as an insurer.
- FDI restrictions
Yes. Foreign shareholders of any entity carrying on insurance activities are limited to 80 per cent at establishment.
- Control approvals
Any transfer of shares in an insurance company requires approval of OJK.
All "Key Parties" must pass the OJK's 'fit and proper' test before being appointed or acquiring shares. Key Parties means members of the Board of Directors, Board of Commissioners, Sharia Supervisory Board and Member Representative Board as well as Controlling Shareholders, Experts and Expatriates. A Controlling Shareholder is a shareholder that holds 25% or more, or less than 25% but has the ability to influence management and/or policy of the insurer.
- Minimum capital
Insurer: | IDR 40bn1/70bn2/100bn3 |
Sharia insurer: | IDR 50bn1 |
Reinsurer: | IDR 100bn1/150bn2/200bn3 |
Sharia reinsurer: | IDR 100bn1 |
- Risk based capital
RBC Solvency Margin Ratio = net asset value (book value)/net asset value recalculated with possible adverse risks taken into account (risk based capital). Specific risk factors are applied to asset values to reflect potential for asset default, currency mismatch of assets and liabilities, adverse claim experience and reinsurance default.
- Group supervision
No.
- Policyholder protection
Each insurance company must form its own protection fund as a means of "last resort" to protect the interests of policyholders. The protection fund must constitute at least 20 per cent of the insurer's capital plus 20 per cent of annual premiums. The funds representing the protection fund must be deposited with a bank.
The insurance law gives policyholders preferential rights in a liquidation procedure ahead of secured and unsecured creditors but behind preferred creditors (tax liabilities and employee compensation).
OJK Regulation No. 1 of 2013 gives a policyholder the right to report a complaint to the OJK with an indication of a dispute between an insurance company with a policyholder and/or an alleged violation of the financial laws and regulations. Further, it also requires insurance companies to have annual program on customers and/or public education to promote financial (insurance) literacy.
- Portfolio transfers
Yes: first requires the consent of the OJK, then announcements in national newspapers. If customers do not object, consent is deemed. The transferor must have a procedure for handling objections. The transferor must retain all rights and obligations under policies of customers who do not wish to transfer.
- Outsourcing
An insurer may not outsource "core" functions, which include: risk underwriting, financial functions and payment of claims. Additionally, an insurer must retain responsibility and at least a functional head for underwriting, financial management and insurance services. An insurer may outsource administrative functions, e.g., accounting, IT and back office functions.
*as at 1 January 2014
Footnotes
1by 31 December 2010
2by 31 December 2012
3by 31 December 2014
IDR12,160 = USD1 at 2 January 2014
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.