Govt Issues Regulation on Foreign Insurance Companies
President Joko “Jokowi” Widodo on 17 April 2018 signed Government Regulation Number 14 of 2018 on Foreign Ownership of Insurance Companies to implement the provisions of Article 7 paragraph (3) of Law Number 40 of 2014 on Insurance.
The Regulation stipulates that Insurance Company shall only be owned by: a. Indonesian citizen and/or Indonesian legal entity directly or indirectly owned by Indonesian citizen or; b. Indonesian Citizen and/or Indonesian Legal Entity together with Foreign Citizen or Foreign Legal Entity that must be an Insurance Company having a similar business or a holding company which one of its subsidiaries is engaged in a similar business of insurance.
“Foreign Ownership of Insurance Companies shall only be processed through transactions in the stock exchange,” Article 3 paragraph (1) of the Government Regulation says.
Foreign Ownership in the aforementioned Insurance Company, according to the Regulation, shall be conducted through: a. direct investment in Insurance Company; b. transactions on the stock exchange of Insurance Company; and c. capital investment in Indonesian Legal Entity which has Insurance Company through transactions in the stock exchange.
Foreign Legal Entity which has Insurance Company shall meet the following criteria: a. It shall be an Insurance Company having a similar business or a holding company which one of its subsidiaries is engaged in an insurance business, except Foreign Legal Entity which has an Insurance Company through transactions in stock exchange and transactions in stock exchange of Indonesian Legal Entity which has an Insurance Company ; b. has an equity of at least 5 (five) times of the amount of direct investment in an Insurance Company at the time of establishment and upon change of ownership of an Insurance Company; and c. meet other requirements stipulated by Financial Services Authority (OJK).
“Ownership of Foreign Companies in Insurance Companies shall not exceed 80% of the paid-up capital of Insurance Companies,” Article 5 paragraph (1) of the regulation reads, except for listed Insurance Company.
In the event that Foreign Ownership in non-listed Insurance Company has exceeded 80% at the time the Regulation is in force, according to Article 6 paragraph (1) of this Government Regulation, the Insurance Company is exempted from the limitation of Foreign Ownership as intended. However, the Insurance Company is prohibited to increase the percentage of Foreign Ownership.
The Regulation further says that in the event that Insurance Company increases paid-up capital, the additional paid-up capital shall comply with the following provisions: a. at least 20% shall be obtained from Indonesian Legal Entity and/or Indonesian Citizen; or b. at least 20% shall be obtained through the initial public offering in Indonesia.
According to the Government Regulation, the OJK shall supervise Foreign Ownership in Insurance Companies. Furthermore, the Insurance Company is required to identify and report the Foreign Ownership and the compliance to OJK.
“The provisions concerning the reporting of Foreign Ownership and compliance in Insurance Companies shall be conducted in accordance with OJK Regulations,” Article 8 paragraph (2) of the Regulation reads.
Insurance Company which does not comply with the aforementioned provision, according to this Government Regulation, is a subject to administrative sanctions by the OJK in the form of: a. written warning; b. partial or full restriction on business activities; c. revocation of business license; and D. administrative fine.
The Government Regulation has been enacted by Minister of Law and Human Rights Yasona H. Laoly and shall apply as of the date of its enactment. (Pusdatin/ES) (RI/EP/Naster)