Changes to Indonesia’s insurance regulatory regime

By Ahmad Jamal Assegaf and Indra Pambudy, Lubis Ganie Surowidjojo

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.
Ahmad Jamal Assegaf Partner Lubis Ganie Surowidjojo
Ahmad Jamal Assegaf
Lubis Ganie Surowidjojo


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.


In comparison to Regulation No. 73 (1992), regulation Nos. 67 and 68 provide for higher minimum paid-up capital requirements as follows: For insurance companies under regulation No. 67, 150 billion rupiah (previously 100 million); for resinsurance companies 300 billion rupiah (previously 200 million). For insurance brokerage companies under regulation No. 68, 3 billion rupiah (previously 1 billion); and for reinsurance brokerage companies 5 billion rupiah (previously 1 billion).

As introduced in the 2014 Insurance Law, an insurance company must comply with the single presence policy in which a party can only be the controlling shareholder of one of each of the insurance company categories. If an insurance company has not met this provision, it must adjust to conform to the provision of a single presence policy no later than 17 October 2017, by conducting: a merger; a consolidation; a sale of half or all of the shares ownership it controls; or other corporate actions based on OJK approval.

Indra Ppambudy Associate Lubis Ganie Surowidjojo
Indra Pambudy
Lubis Ganie Surowidjojo

An insurance or reinsurance company that has not complied with the single presence policy is required to submit its compliance action plan to the OJK by 28 June 2017. Failure to comply with this provision could lead to administrative sanctions in the form of a written warning, partial or total business suspension, or licence revocation.

The current maximum foreign shareholding limit stands at 80%. The government is drafting a regulation that will further define the foreign shareholding criteria. A draft is planned to be issued by April 2017. Once issued, qualitative and quantitative restrictions for foreign shareholders can be expected.


Insurance companies must design and implement a GCG system. An insurance business company’s primary GCG obligations are:

  1. Mandatory BOD and BOC meetings. All BOD members must conduct monthly meetings. The board of commissioners (BOC) must also hold a monthly meeting, and such meetings within one year must be held with at least four meetings attended by BOD members and one meeting attended by the external auditor.
  2. Annual GCG report submission to the OJK. Under regulation No. 73, insurance business companies must undertake a self-assessment of its own GCG and report implementation to OJK annually.
  3. Mandatory disclosure by BOD and BOC. Pursuant to articles 16 and 27 of regulation No. 73, information that must be disclosed includes: (i) shares owned by a BOD/BOC members where the shares amount to 5% or more; and (ii) financial and familial relationship between BOD member(s) in question with another BOD/BOC member and shareholders, and vice versa. Such disclosures must be reported to the OJK annually.

Primary parties in financial services institutions are subject to a fit and proper test (FPT). Regulation No. 27 introduces new classifications for principal parties in an insurance company: the controller; the BOD; the BOC; the shariah supervisory board; the internal auditor; and (vi) the company actuary.

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


Lubis Ganie Surowidjojo

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