Insurance Comparative Guide – – Indonesia

1 Legal framework

1.1 Which legislative and regulatory provisions govern the
insurance sector in your jurisdiction?

The main legislation governing the insurance sector in Indonesia
is the Insurance Law (40/2014). The Indonesian government has
issued numerous implementing regulations related to insurance,
including:

• Government Regulation 14/2018 regarding Foreign Ownership in
  Insurance Companies, as amended;




• Financial Services Authority (OJK) Regulation 23/POJK.05/2015
  of 2015 regarding Insurance Products and Insurance Products
  Marketing (‘POJK 23/2015’);




• OJK Regulation 27/POJK.03/2016 regarding Fit and Proper Test
  for Main Party in Financial Services Companies (‘POJK
  27/2016’);




• OJK Regulation 67/POJK.05/2016 regarding Business Licensing and
  Organisation of Insurance Companies, Sharia Insurance
  Companies, Reinsurance Companies and Sharia Reinsurance Companies,
  as partially revoked (‘POJK 67/2016’);




• OJK Regulation 68/POJK.05/2016 regarding Business Licensing and
  Organisation of Insurance Brokerage Companies, Reinsurance
  Brokerage Companies and Insurance Loss Appraiser Companies, as
  partially revoked (‘POJK 68/2016’);




• OJK Regulation 69/POJK.05/2016 regarding Business
  Implementation of Insurance Companies, Sharia Insurance
  Companies, Reinsurance Companies and Sharia Insurance
  Companies, as amended and partially revoked by OJK Regulation
  38/POJK.05/2020 of 2020 (‘POJK 69/2016’);




• OJK Regulation 70/POJK.05/2016 regarding Business
  Implementation of Insurance Brokerage Companies, Reinsurance
  Brokerage Companies and Insurance Loss Appraiser Companies
  (‘POJK 70/2016’);




• OJK Regulation 71/POJK.05/2016 regarding Financial Soundness of
  Insurance and Reinsurance Companies, as amended and as partially
  revoked (‘POJK 71/2016’);




• OJK Regulation 72/POJK.05/2016 regarding Financial Soundness of
  Insurance and Reinsurance Companies with Sharia
  Principles, as amended (‘POJK 72/2016’);




• OJK Regulation 73/POJK.05/2016 regarding Good Corporate
  Governance for Insurance Companies, as amended and as partially
  revoked (‘POJK 73/2016’);




• OJK Regulation 12/POJK.01/2017 regarding the Implementation of
  Anti-Money Laundering and Prevention of Terrorism Funding
  Programmes in the Financial Services Sector, as amended (‘POJK
  12/2017’);




• OJK Regulation 55/POJK.05/2017 regarding Periodic Reporting by
  Insurance Companies, as partially revoked (‘POJK
  55/2017’);




• OJK Regulation 4/POJK.05/2021 regarding Implementation of Risk
  Management in the Use of Information Technology by Non-Bank
  Financial Service Institutions (‘POJK 4/2021’);




• OJK Circular Letter 9/SEOJK.05/2018 regarding Application for
  Licensing, Approval, and Reporting via Electronic Means for
  Insurance Brokerage Companies, Reinsurance Brokerage Companies, and
  Insurance Loss Appraisal Companies (‘SE OJK 9/2018’);




• OJK Circular Letter 10/SEOJK.05/2018 regarding Application for
  Licensing, Approvals, and Reporting for Insurance Companies, Sharia
  Insurance Companies, Reinsurance Companies, and Sharia
  Reinsurance Companies via Electronic Means (‘SE OJK
  10/2018’);




• OJK Circular Letter 19/SEOJK.05/2020 regarding Marketing
  Channels for Insurance Products (‘SE OJK 19/2020’);
  and




• OJK Circular Letter 5/SEOJK.05/2022 regarding Investment-Linked
  Insurance Products (‘SE OJK 5/2022’).

1.2 Which bilateral and multilateral instruments on insurance
have effect in your jurisdiction?

To the best of our knowledge, no international instruments on
insurance have been ratified by, and thus have effect in,
Indonesia.

1.3 Which bodies are responsible for enforcing the applicable
laws and regulations? What powers do they have?

The OJK is the main body responsible for overseeing the
compliance of insurance companies with the applicable laws and
regulations in Indonesia. Pursuant to the Insurance Law, the OJK
carries out regulatory and supervisory functions for the insurance
sector. Among other things, the OJK is authorised to:

• establish laws and regulations in the insurance sector;




• approve or reject applications for insurance business
  licences;




• revoke the business licences of insurance companies;




• require the submission of periodical reports by insurance
  companies;




• examine insurance companies and other parties which are or were
  affiliated parties of or provided services to insurance
  companies;




• determine the controllers of insurance/reinsurance
  companies;




• approve or revoke approval for the controllers of
  insurance/reinsurance companies;




• conduct fit and proper tests for prospective actuaries,
  internal auditors, controllers, members of the boards of directors
  and commissioners, and members of the Sharia supervisory
  board of insurance companies;




• suspend members of the boards of directors and commissioners
  and/or the Sharia supervisory board and stipulate
  statutory managers of insurance companies;




• issue written orders to insurance companies to, among other
  things,:




• • take or not take certain actions for the purpose of compliance
    with the laws and regulations in the insurance sector; and

  
  

  • stop marketing certain insurance products;




• sanction insurance companies, shareholders, members of the
  boards of directors and commissioners, members of the
  Sharia supervisory board, company actuaries and/or
  internal auditors; and




• exercise other authorities under the laws and regulations in
  the insurance sector.

1.4 What is the regulators’ general approach in regulating
the insurance sector?

The OJK’s general approach in regulating the insurance
sector is based on the mandate of the applicable laws and
regulations and/or the need to develop the sector, taking into
account consumer protection.

As part of its supervisory duties, the OJK is entitled to
receive periodical reports from insurance companies (see question
8.2). The OJK uses these reports to assess:

• the effectiveness of the regulations;




• the financial soundness of companies; and




• their compliance with the prevailing insurance laws and
  regulations.

Any violation of the Insurance Law by insurance business actors
is subject to the following sanctions:

• written warning;




• restriction on part or all of the company’s business
  activities;




• prohibition on marketing insurance products or Sharia
  insurance products for certain lines of business;




• revocation of a business licence;




• cancellation of a statement of registration for brokerage
  companies or agents;




• cancellation of a statement of registration for actuarial
  consultants, public accountants, appraisers or other parties that
  provide services to insurance companies;




• cancellation of approval for mediation agencies or
  associations;




• administrative fines; and/or




• prohibition on holding certain positions in insurance
  companies.

The OJK is also generally open to discussions with companies in
the insurance sector regarding any difficulties they may be having
in complying with any of the provisions under the laws and
regulations in the insurance sector. Practically speaking, if there
is any violation of the laws and regulations, the OJK will usually
summon the management of the company in question for an
explanation. If the violation continues, the OJK will first issue
one to three warning letters, with adequate time between each
letter to correct the violation – typically one month –
before imposing further sanctions.

2 Insurance contracts

2.1 What are the main types of insurance available in your
jurisdiction?

The Insurance Law acknowledges two types of insurance: life
insurance and general insurance. Both types can be either
conventional or Sharia based.

The most common types of life insurance are:

• term life insurance;




• whole life insurance;




• endowment insurance; and




• unit-linked insurance.

The most common types of general insurance are:

• all-risk insurance; and




• total loss only insurance.

2.2 Are all insurance contracts regulated? What terms do they
typically include?

All insurance contracts in Indonesia are regulated under:

• the Insurance Law and its implementing regulations;




• the Civil Code; and




• the Commercial Code.

POJK 23/2015 governs the minimum terms of an insurance
contract/policy as follows:

• the effective period of the coverage;




• a description of the benefits agreed;




• the premium or contribution payment method;




• the grace period for the premium or contribution payment;




• the exchange rate used for insurance policies in a foreign
  currency if the premium or contribution payments and benefits are
  associated with the Indonesian rupiah;




• the recognised time period for receipt of premium or
  contribution payment;




• the company’s policy if the premium or contribution payment
  is made after the agreed grace period;




• the period when the company is unable to review the validity of
  the insurance contract (incontestable period) on a long-term
  insurance product;




• a cash value table, for insurance products marketed by life
  insurance companies containing cash value;




• a dividend calculation of the insurance policy or similar
  benefits, for insurance products marketed by life insurance
  companies guaranteeing a dividend or similar benefits;




• a coverage termination clause, allowing either the insured or
  the insurance company to terminate the policy, including the terms
  and causes of termination;




• claim filing terms and procedures, including supporting
  evidence that is relevant and necessary to file a claim;




• claim settlement and payment procedures;




• a dispute resolution clause that, among other things,
  includes:




• • an in-court or out-of-court settlement mechanism; and

  
  

  • selection of the dispute resolution jurisdiction; and




• the governing language in the event of a dispute or dissenting
  opinion if the insurance policy is written in two or more
  languages.

POJK 23/2015 provides the following additional minimum terms for
Sharia-based insurance contracts/policies:

• the type of contract (akad);




• the rights, obligations and authorities of each party based on
  the agreed akad;




• the amount of contribution allocated to the
  tabarru’ fund, ujrah and investment
  fund;




• the amount, time and payment method of investment revenue
  sharing if the insurance product uses a mudharabah or
  mudharabah musytarakah akad;




• the allocation of underwriting surplus for the
  tabarru’ fund, the participant fund and/or the
  insurance company’s fund; and




• the granting of qardh by the insurance company if the
  tabarru’ fund is insufficient to pay the insurance
  benefits.

2.3 What are the formal and documentary requirements for
conclusion of an insurance contract?

Insurance contracts must fulfil the minimum terms requirements
as discussed in question 2.2.

Normally, insurance companies will also require the prospective
insured to submit supporting documents, which may vary depending on
the policies of the insurance company, for risk analysis and
underwriting purposes before concluding the insurance contract.

2.4 What are the procedural requirements for conclusion of an
insurance contract?

The prevailing laws and regulations are silent on any strict
procedural requirements to be complied with for the purpose of
concluding an insurance contract. Practically speaking, the
prospective insured – with the assistance of the insurance
company or its agents or insurance brokerage company – will
first determine the type of insurance deemed compatible with the
needs of the prospective insured. Once determined, the prospective
insured will be required to submit an application along with the
required documents. The insurance company will then conduct the
risk analysis and underwriting process before deciding whether to
approve or reject the application. Once approved, the insurance
policy will be signed between the insurance company and the
policyholder. The policyholder will then be required to proceed
with the payment of premiums.

2.5 What are the respective obligations and liabilities of
insurer and insured, both on concluding an insurance contract and
during its term? What are the consequences of any breach?

The obligations and liabilities may vary depending on the terms
and conditions set forth under the insurance policy, and the
consequences of a breach will refer to these terms and conditions.
Generally, the insurer is required under POJK 69/2016 to administer
claims in a fast, simple, easily accessible and fair manner, in
accordance with generally accepted practices in the insurance
sector, in exchange for accepting premiums or contributions from
the insured. Further, the insurer is clearly obliged:

• to explain the insurance products to the insured; and




• to comply with applicable consumer protection provisions (see
  question 11).

The insured must also be transparent and honest in submitting
his or her personal information.

3 Making a claim

3.1 What are the formal and documentary requirements for making
a claim?

There are no definite requirements prescribed by the laws and
regulations. In practice, the formal and documentary requirements
for making a claim are set out in the insurance policy, and
therefore may vary according to each insurance policy and the
internal policy of each insurance company.

For instance, the documentary requirements for filing a life
insurance claim should include:

• the claim submission form;




• a doctor’s statement; and




• supporting documents for the doctor’s diagnosis.

The specific documents needed may vary for each type of claim
(eg, death, terminal illness, accident). General insurance claims
may require, among other things:

• a claim submission form;




• evidence of the insured event; and




• supporting documents for the insured event, such as
  photographs.

The specific documents required may vary for each type of claim
(eg, claim of fire, claim of flooding).

Each insurer may request different documents that must be
submitted by the insured when making an insurance claim. Further,
the claim must be made within the time limit stipulated in the
insurance policy.

3.2 What are the procedural requirements for making a
claim?

On the occurrence of an insured event (eg, the death of an
insured party, loss or fire), the insured or his or her beneficiary
is entitled to notify the insured and claim payment by providing
relevant evidence of the insured event, such as:

• photographs;




• doctor’s statements; or




• a death certificate from the relevant institution.

They can be assisted by an insurance broker or insurance agent
in settling these claims.

In practice, the notification requirements are set out in the
insurance policy and therefore vary according to each policy. These
requirements set out the time limit to submit a claim and the
documents, information and evidence that must be provided.

Insurance companies should require policyholders to submit a
claim immediately to avoid any evidence being lost or damaged and
to avoid any reason for the loss/damage being unidentified.

3.3 On what grounds can the claim be denied? How can the
insured challenge the denial of claim?

As discussed in question 2.2, an insurance policy must contain a
description of the agreed benefits, which includes the scope of
coverage or insured events under the policy. In practice, an
insurance policy may also contain a clause which requires a certain
amount of losses to be borne by the insured, while any amount in
excess of that agreed amount will be covered by the insurer. This
is normally known as ‘self-insured retention’.
Consequently, the insurer is entitled to deny the claim if the
event that occurred does not fall within the scope of insured
events stipulated within the insurance policy or the amount of the
claim falls within the scope of self-insured retention.

Further, the active status of the policy is also important to be
considered in submitting a claim. Insurance claims also can be
denied if:

• the submitted documents are not in accordance with the required
  documents;




• there is a discrepancy between the submitted data and the
  initial data provided by the insured at the time the insurance
  policy was taken out;




• the period for submitting an insurance claim has lapsed;
  or




• the policyholder has failed to pay the premiums.

Generally, the insured may challenge the denial of a claim by
enforcing the dispute resolution clause provided in the insurance
policy.

3.4 How can third parties make a claim?

Under the Insurance Law and its implementing regulations,
insurance products may cover legal liabilities against third
parties for any event suffered by the insured or policyholders.
That said, third parties can make a claim under an insurance policy
provided that the policy specifically states their right to receive
the insurance benefit or names such third parties as beneficiaries
under the policy (eg, the right of the insured party’s spouse
to claim the insurance benefit on the insured’s death). The
insurance policy can also include a banker’s clause under which
the bank of the insured is entitled to receive the insurance
benefit on the occurrence of an insured event.

4 Form and structure of insurers

4.1 What types of insurance companies are typically found in
your jurisdiction?

The Insurance Law requires insurance companies to take one of
the following forms:

• limited liability company;




• cooperative; or




• mutual business, for insurance companies established before the
  enactment of the Insurance Law.

In terms of market practice, insurance companies in Indonesia
usually take the form of a limited liability company. The
Investment Law (25/2007), as amended, further requires foreign
investment companies – including those in the insurance
sector – to be established in the form of a limited liability
company.

4.2 How are these insurance companies typically structured and
funded?

Insurance companies in the form of a limited liability company
must be structured in accordance with the Law on Limited Liability
Companies (40/2007), as amended. Some key provisions to be noted
with respect to the establishment of a limited liability company
are as follows:

• The company must be established by two or more founders by
  virtue of a notarial deed of establishment made in the Indonesian
  language;




• Each founder of the company must subscribe to a portion of the
  shares at the time of establishment;




• The company obtains its legal entity status on the date of
  issuance of a decree of the minister of law and human rights
  validating the legal entity status of the company;




• The minimum issued and paid-up capital must:




• • comply with the minimum amount provided under prevailing laws
    and regulations (if any); and

  
  

  • be at least 25% of the authorised capital; and




• The shareholding of the company must comply with any foreign
  ownership restrictions.

Insurance companies in the form of a limited liability company
are principally funded from the issued and paid-up capital injected
by the shareholders.

Insurance companies in the form of a cooperative must be
structured in accordance with the Law on Cooperatives (25/1992), as
amended. Some key provisions with respect to the establishment of a
cooperative are as follows:

• A cooperative must be established by at least nine individuals
  (for a cooperative consisting of individuals) or at least three
  cooperatives (for a cooperative consisting of cooperatives) by
  virtue of a notarial deed of establishment made in the Indonesian
  language;




• The cooperative obtains its legal entity status on the date of
  issuance of a decree of the minister of law and human rights
  validating the legal entity status of the cooperative; and




• The minimum capital must comply with the minimum amount
  provided under prevailing laws and regulations (if any).

The capital of a cooperative may be funded from:

• basic savings or compulsory savings from the cooperative
  members;




• reserved funds;




• grants; or




• borrowed capital from the members, other cooperatives (and/or
  its members), banks or other financial institutions, through the
  issuance of bonds or other securities and other legal sources.

4.3 Are there any restrictions on foreign ownership of
insurance companies?

Under the Insurance Law, insurance companies can only be owned
by:

• Indonesian individuals and/or Indonesian legal entities that
  are directly or indirectly wholly owned by Indonesian individuals;
  or




• Indonesian individuals and/or Indonesian legal entities
  together with foreign individuals or legal entities that are
  engaged in the same insurance business or a holding company with
  one subsidiary engaged in the same insurance business.

Based on Government Regulation 14/2018, foreign individuals can
only hold shares in an insurance company through a transaction on
the stock exchange. Foreign legal entities can hold shares in
Indonesian insurance companies through:

• direct participation in the insurance company;




• transactions on the stock exchange; or




• participation in an Indonesian legal entity that owns shares in
  an insurance company through direct participation or transactions
  on the stock exchange.

In addition to having engaged in the same insurance business or
having a subsidiary engaged in the same insurance business, the
foreign legal entity must:

• own equity of at least five times its direct participation in
  the insurance company; and




• fulfil other requirements set by the Financial Services
  Authority, such as an A rating or its equivalent from an
  internationally acknowledged rating agency.

The requirements are waived for foreign legal entities owning
insurance companies through transactions on the stock exchange or
participation in an Indonesian legal entity that owns shares in an
insurance company through the stock exchange.

Government Regulation 14/2018 further restricts foreign
ownership of insurance companies to a maximum of 80% of the paid-up
capital of the insurance companies. Foreign ownership is calculated
cumulatively for any means of ownership (direct and indirect),
including any foreign shareholding in an Indonesian legal entity
that holds shares in the Indonesian insurance company. Such foreign
ownership limitation does not apply for publicly listed insurance
companies.

Based on the Insurance Law and POJK 67/2016, a party may only be
the controlling shareholder in:

• one life insurance company;




• one general insurance company;




• one reinsurance company;




• one Sharia life insurance company;




• one Sharia general insurance company; and




• one Sharia reinsurance company.

The party cannot be a controlling shareholder in two or more
companies in the same category.

5 Authorisation

5.1 What authorisations are required to provide insurance
services in your jurisdiction? What activities do they cover?

Under the Insurance Law, insurance and reinsurance companies,
brokerage companies and insurance loss appraisers doing business in
Indonesia must be licensed by the Financial Services Authority
(OJK).

A life insurance company can only engage in life insurance
business, which includes annuity, health and self-accident
insurance. A general insurance company can only engage in general
insurance business, which includes health insurance, self-accident
insurance and reinsurance business. Reinsurance companies can only
engage in reinsurance activities.

However, POJK 69/2016 allows life and general insurance
companies to expand their business activities as follows:

• General insurance companies can expand their business to:




• • investment-related insurance products (unit-linked);

  
  

  • fee-based activities (ie, administrative services in relation
    to employee benefits and the marketing of non-insurance and
    reinsurance products from financial services institutions licensed
    by the OJK);

  
  

  • credit insurance and suretyship; and

  
  

  • other activities assigned by the government.




• Sharia general insurance companies can expand their
  business to:




• • investment-related insurance products;

  
  

  • fee-based activities; and

  
  

  • other activities assigned by the government;




• Life insurance companies and Sharia life insurance
  companies can only expand their business to include fee-based
  activities.

Insurance brokerage companies, reinsurance brokerage companies
and insurance loss appraiser companies can only engage in the
insurance brokerage, reinsurance brokerage and insurance loss
appraiser business, respectively.

5.2 What requirements must be satisfied to obtain
authorisation?

Insurance and reinsurance providers: The
details of the licensing of insurance and reinsurance companies are
regulated in POJK 67/2016. The application for a business licence
is submitted by the director of the company to OJK and must be
supported with the following documents:

• a copy of the company’s deed of establishment, with the
  minister of law and human rights’ approval;




• its organisational structure;




• evidence of payment of paid-in capital;




• an initial report of a guarantee fund and evidence of placement
  of a guarantee fund;




• a list of ownership;




• shareholder data;




• information on the controlling party;




• evidence that the company has employed experts, an actuary and
  internal auditor;




• the business plan for the next three years;




• risk management guidelines;




• details of insurance products;




• a copy of any agreements with any other party;




• details of the data processing administration and
  infrastructure system;




• evidence of licensing fee payment;




• evidence of operational readiness;




• the initial/opening financial statement;




• a human resources plan;




• anti-money laundering and prevention of terrorism funding
  guidelines;




• good corporate governance guidelines;




• investment governance guidelines;




• a shareholders’ or joint venture agreement between the
  Indonesian and foreign shareholders;




• an automatic reinsurance support plan; and




• a retrocession support plan (for reinsurance companies).

During the business licence application process, the board of
directors, board of commissioners, controlling shareholder,
controller, Sharia supervisory board, internal auditor and
actuary are subject to fit and proper tests. The application for
fit and proper tests must be submitted together with the business
licence application.

Insurance and reinsurance intermediaries: The
details of the licensing of insurance and reinsurance brokerage
companies are regulated in POJK 68/2016.

The application for a business licence is submitted by the
director of the company to the OJK and must be supported with the
following documents:

• a copy of the company’s deed of establishment and the
  minister of law and human rights’ approval;




• its organisational structure;




• evidence of the payment of paid-in capital;




• a list of ownership;




• shareholder data;




• information on the controlling party;




• evidence that the company has employed experts;




• a business plan for the next three years;




• risk management guidelines;




• a copy of any agreements with any other party;




• details of its data processing administration and
  infrastructure system;




• confirmation from the supervisory body in the country of origin
  of the foreign shareholder;




• evidence of licensing fee payment;




• evidence of operational readiness;




• an initial/opening financial statement;




• a human resources plan;




• anti-money laundering and prevention of terrorism funding
  guidelines;




• good corporate governance guidelines;




• investment governance guidelines; and




• a shareholders’ or joint venture agreement between the
  Indonesian and foreign shareholders.

The business licence application is submitted together with the
fit and proper test application (see above).

An insurance agent (ie, a person working individually or working
in a legal entity acting on behalf of an insurance company to
market insurance products) must:

• possess an agency certificate;




• be registered with the OJK; and




• have a written agreement with the insurance company.

Other providers of insurance and reinsurance-related
activities: An insurance loss appraiser company must also
follow the licensing procedures stipulated in POJK 68/2016 (see
above).

The OJK provides an online system to apply for an insurance
service providers business licence, as regulated under SE OJK
9/2018 and SE OJK 10/2018. The online OJK system – through
which insurance service provider companies apply for licences and
provide the necessary information and documents – also
provides for the submission of self-assessment forms with all the
background information on the company that must be submitted
together with the licence application and other documents.

5.3 What is the procedure for obtaining authorisation? How long
does this typically take?

The business licence application must be submitted to the OJK
along with supporting documents as discussed in question 5.2.
Theoretically, the OJK will approve the application, request any
missing documents or reject the application within 20 working days
of receipt of the application. However, in practice, it may take up
to two to three months from receipt of a complete application for
the OJK to issue the licence.

6 Regulatory capital and liquidity

6.1 What minimum capital requirements apply to insurance
companies in your jurisdiction?

POJK 67/2016 and POJK 68/2016 specify minimum paid-up capital
requirements for insurance companies as follows:

• Conventional life/general insurance company: IDR 150
  billion




• Sharia life/general insurance company: IDR 100
  billion




• Conventional reinsurance company: IDR 300 billion




• Sharia reinsurance company: IDR 175 billion




• Insurance broker company: IDR 3 billion




• Reinsurance broker company: IDR 5 billion




• Insurance loss appraiser company: IDR 500 million

6.2 What liquidity requirements apply to insurance companies in
your jurisdiction?

Under POJK 71/2016, conventional insurance/reinsurance companies
must fulfil the following financial soundness requirements:

• solvency level at a minimum of 100% of the risk-based minimum
  capital;




• technical reserves;




• investment adequacy – that is, permitted assets in the
  form of investment and non-investment of the company must be at
  least in an amount of self-retention technical reserve in addition
  to payment liabilities of self-retention claims and other
  liabilities to policyholders or insured;




• equity of:

• no less than IDR 100 billion for insurance companies; and




• no less than IDR 200 billion for reinsurance companies;

• a guarantee fund at a minimum of 20% of the required minimum
  equity; and




• other provisions on financial soundness.

Under POJK 72/2016, Sharia insurance/reinsurance
companies must fulfil the following financial soundness
requirements:

• solvency level of the tabarru‘ fund and the
  tanahud fund at a minimum of 100% of the risk-based
  minimum tabarru‘ fund and tanahud fund;




• solvency level of the company fund at a minimum of 100% of the
  risk-based minimum capital;




• technical reserves;




• investment adequacy – that is, permitted assets in the
  form of investment and non-investment of the company must be at
  least in an amount of own retention of the tabarru‘
  fund and tanahud fund technical reserve in addition to
  payment liabilities of own retention claims and other liabilities
  to policyholders or insured;




• equity of:




• • no less than IDR 50 billion for Sharia insurance
    companies;

  
  

  • no less than IDR 100 billion for Sharia reinsurance
    companies;

  
  

  • no less than IDR 25 billion for Sharia units in
    insurance companies; and

  
  

  • no less than IDR 50 billion for Sharia unit in
    reinsurance companies;




• a guarantee fund in a minimum of 20% of the required minimum
  equity; and




• other provisions on financial soundness.

7 Supervision of insurance groups

7.1 What requirements apply with regard to the supervision of
insurance groups in your jurisdiction?

All insurance business in Indonesia, including that of insurance
groups, falls under the supervision of the Financial Services
Authority (OJK).

In terms of marketing group insurance, POJK 23/2015 provides
that insurance companies must issue a master insurance policy
listing:

• the names of the insured or participants; and




• the coverage period for the respective insured or
  participants.

They must also issue evidence of membership to each of the
insured or participant.

8 Reporting, governance and risk management

8.1 What key disclosure requirements apply to insurance
companies in your jurisdiction?

Please see question 8.2.

8.2 What key reporting requirements apply to insurance
companies in your jurisdiction?

POJK 55/2017 obliges insurance or reinsurance companies to
prepare and submit the following periodical reports to the
Financial Services Authority:

• monthly reports;




• quarterly reports;




• annual reports, consisting of financial and management reports;
  and




• other reports, such as:




• • reports covering corporate and business plans;

  
  

  • reports on reinsurance programme/automatic retrocession;

  
  

  • reports on the implementation of financial literacy education
    for consumers and/or the public;

  
  

  • reports on consumer complaints, follow-up customer service and
    settlement;

  
  

  • assessment reports on the implementation of integrated
    governance;

  
  

  • annual reports on the implementation of integrated
    governance;

  
  

  • integrated risk profile reports;

  
  

  • integrated capital adequacy reports;

  
  

  • reports on data updating activity plans and reports on the
    realisation of data updating.

Insurance or reinsurance brokerage companies must prepare and
submit semester reports and annual reports. Insurance loss
appraiser companies must prepare and submit annual reports.

8.3 What key governance requirements apply to insurance
companies in your jurisdiction?

POJK 73/2016 obliges insurance companies to implement the
following good corporate governance principles:

• transparency in the decision-making process and in the
  disclosure and provision of relevant information on the company,
  with such information easily accessible by stakeholders in
  accordance with the provisions of law and regulations in the
  insurance sector, as well as the standards, principles and
  practices of sound insurance business;




• accountability – that is, clarity of functions and the
  implementation of the responsibilities of the organs of the company
  so that the company can perform in a transparent, fair, effective
  and efficient manner;




• responsibility – that is, the conformity of the
  company’s management with the provisions of laws and
  regulations in the insurance sector and ethical values and
  standards, principles and practices of the implementation of sound
  insurance business;




• independence – that is, the condition in which the
  insurance company is managed independently and professionally, free
  from conflict of interest and the influence or pressure from any
  party that is not in accordance with the provisions of laws and
  regulations in the insurance sector and ethical values, standards
  and principles, and the implementation of sound insurance business
  practices; and




• fairness – that is, equality, equity and justice in
  fulfilling the rights of stakeholders arising under the agreement,
  the provisions of laws and regulations in the insurance sector,
  ethical values, standards and principles, and the implementation of
  sound insurance business practices.

8.4 What key risk management requirements apply to insurance
companies in your jurisdiction?

POJK 73/2016 obliges insurance companies to implement risk
management in accordance with the purpose, business policy, size
and complexity of their business, as well as their capabilities.
Insurance companies must have in place risk management functions
for supervising the implementation of such risk management. The
implementation of risk management must also include internal
control systems and the implementation of information technology
governance.

Internal control systems must at least include the
following:

• a disciplined and structured internal control environment;




• assessment and management of business risks;




• controlling activities;




• an information and communication system;




• monitoring procedures; and




• a reporting mechanism in the event of any deviation in the
  quality of the internal control systems, including the internal
  audit function.

The implementation of risk management for the use of information
technology in the insurance sector is regulated under POJK 4/2021.
Such implementation of risk management must at least include the
following:

• active supervision by the board of directors and board of
  commissioners;




• adequate policies and procedures for the use of information
  technology;




• adequate risk identification, measurement, control and
  monitoring processes in the use of information technology; and




• internal control system for the use of information
  technology.

9 Senior management

9.1 What requirements apply with regard to the management
structure of insurance companies in your jurisdiction?

The requirements and restrictions with respect to the management
structure in an insurance company are provided under POJK
73/2016.

Insurance/reinsurance companies must have at least three members
on the board of directors, while insurance/reinsurance brokerage
companies must have at least two board of directors members. All
directors must be knowledgeable about the business line of the
company as relevant to their position. In addition,
insurance/reinsurance companies must have a compliance director,
who is prohibited from serving any other function.

POJK 73/2016 provides certain restrictions with respect to the
board of directors of insurance companies, including the
following:

• The board of directors of foreign-owned insurance companies
  must consist wholly of Indonesian individuals or a combination of
  Indonesian and foreign individuals;




• Members of the board of directors are prohibited from holding
  any position in any other company, except as a member of the board
  of commissioners of another insurance company with a different
  business line;




• Directors, except for president directors responsible for
  supervising investment in the insurance company’s subsidiary,
  may serve on the board of commissioners of such subsidiary,
  provided that such double position does not result in the
  negligence of his or her duties and authorities as a director;
  and




• The president director is prohibited from holding a double
  position as a member of the board of commissioners of the
  subsidiary of the insurance company for which he or she serves as
  president director.

Insurance/reinsurance companies must have at least three members
on their board of commissioners, half of whom must be independent
commissioners; while insurance/reinsurance brokerage companies must
have at least two board of commissioners members. At least half the
members of the board of commissioners must be domiciled in
Indonesia. Members of the board of commissioners are prohibited
from serving on the board of commissioners, the board of directors
or the Sharia supervisory board of any other insurance
company with a similar business line.

Sharia-based insurance companies must have a
Sharia supervisory board consisting of one or more
Sharia experts. At least half of the members of the
Sharia supervisory board must be domiciled in Indonesia.
The members of the Sharia supervisory board are prohibited
from serving on the board of directors or board of commissioners of
the same insurance company. Sharia supervisory board
members may serve on the board of directors, board of commissioners
or Sharia supervisory board of a maximum of four other
financial service institutions.

Under POJK 67/2016, insurance/reinsurance companies must
also:

• designate at least one controller;




• employ at least one expert (for general or life insurance
  companies);




• appoint one actuary as the appointed actuary and employ a
  sufficient number of actuaries in accordance with the type, line
  and complexity of business; and




• have an internal audit unit chaired by an internal
  auditor.

All the above parties are subject to a fit and proper test
administered by the Financial Services Authority (OJK) under POJK
27/2016.

9.2 How are directors and senior executives appointed and
removed? What selection criteria apply in this regard?

In accordance with the Company Law, members of the board of
directors or board of commissioners shall be appointed and removed
by the general meeting of shareholders.

POJK 73/2016 regulates the criteria applicable for the
management of insurance companies.

Members of the board of directors must meet the following
criteria:

• have obtained approval from the OJK;




• be domiciled in Indonesia;




• be able to act in good faith, honestly and in a professional
  manner;




• be able to act on behalf of the insurance company and
  policyholders, the insured, participants, and/or parties entitled
  to benefits;




• prioritise the interests of the insurance company and
  policyholders, the insured, participants and/or parties entitled to
  benefits over personal interests;




• be able to make decisions based on independent and objective
  assessments for the interest of the insurance company and
  policyholders, the insured, participants, and/or parties entitled
  to benefits; and




• be able to avoid abuse of authority to gain undue personal
  benefit or cause loss to the insurance company.

Members of the board of commissioners must meet the following
criteria:

• have obtained approval from the OJK;




• have knowledge in accordance with the business line of the
  company which is relevant to his or her position;




• be able to act in good faith, honestly and in a professional
  manner;




• be able to act on behalf of the insurance company and
  policyholders, the insured, participants and/or parties entitled to
  benefits;




• prioritise the interests of the insurance company and
  policyholders, the insured, participants and/or parties entitled to
  benefits over personal interests;




• be able to make decisions based on independent and objective
  assessments for the interest of the insurance company and
  policyholders, the insured, participants and/or parties entitled to
  benefits; and




• be able to avoid abuse of authority to gain undue personal
  benefit or cause loss to the insurance company.

Members of the Sharia supervisory board are appointed
by the general meeting of shareholders based on a recommendation
from the National Sharia Board of the Indonesian Ulema
Council. Members of the Sharia supervisory board must meet
the following criteria:

• have obtained approval from the OJK;




• be able to act in good faith, honestly and a professional
  manner;




• be able to act on behalf of the Sharia insurance
  company and policyholders, the insured, participants and/or parties
  entitled to benefits;




• prioritise the interests of the Sharia insurance
  company and policyholders, the insured, participants and/or parties
  entitled to benefits over personal interests;




• be able to make decisions based on independent and objective
  assessments for the interest of the Sharia insurance
  company and policyholders, the insured, participants, and/or
  parties entitled to benefits; and




• be able to avoid abuse of authority to gain undue personal
  benefit or cause loss to the Sharia insurance
  company.

9.3 What are the legal duties of directors and senior
executives of insurance companies?

Generally, the main duty of the board of directors under the
Company Law is to carry out the management of the company for the
interest of the company in accordance with the purpose and
objective of the company. The main duty of the board of
commissioners under the Company Law is to supervise the management
policies and general management performance of the board of
directors, and to provide advice to the board of directors.

The duties of the management positions of insurance companies
are specifically governed under POJK 73/2016.

The board of directors of insurance companies must:

• ensure effective, prompt and quick decision making;




• be able to act independently;




• have no interests which may interfere with its ability to
  perform its duties independently;




• possess critical thinking;




• comply with the provisions of laws and regulations, and the
  articles of association and other internal regulations of the
  insurance company in performing its duties;




• manage the insurance company in accordance with its authorities
  and responsibilities;




• ensure the execution and implementation of good corporate
  governance;




• be responsible for the performance of its duties to the general
  meeting of shareholders;




• ensure the insurance company acknowledges the interests of all
  parties, especially those of policyholders, the insured,
  participants and/or parties entitled to benefits;




• ensure that the information regarding the insurance company is
  given to the board of commissioners and the Sharia
  supervisory board (if applicable) in a timely and complete manner;
  and




• if applicable, assist in meeting the needs of the
  Sharia supervisory board in engaging the members of the
  investment committees, the company’s employees and professional
  experts whose organisational structure is under the board of
  directors.

The board of commissioners of insurance companies must:

• ensure effective, prompt and quick decision making;




• be able to act independently;




• have no interests which may interfere with its ability to
  perform its duties independently;




• possess critical thinking;




• carry out supervisory duties and provide advice to the board of
  directors;




• supervise the board of directors in balancing the interests of
  all parties, particularly the interests of policyholders, the
  insured, participants, and/or parties entitled to benefits;




• prepare a report on the activities of the board of
  commissioners that will be included in the report on the
  implementation of good corporate governance;




• monitor the effectiveness of the implementation of good
  corporate governance; and




• if applicable, assist in meeting the needs of the
  Sharia supervisory board in engaging committee members
  whose organisational structure is under the board of
  commissioners.

The Sharia supervisory board must:

• ensure effective, prompt and quick decision making;




• be able to act independently;




• have no interest which may interfere with its ability to
  perform its duties independently;




• possess critical thinking; and




• perform supervision duties and provide advice to the board of
  directors so that the company’s business activities are in
  accordance with Sharia principles.

9.4 How is executive compensation regulated in your
jurisdiction?

Compensation or remuneration for members of the board of
directors, the board of commissioners and/or the Sharia
supervisory board will be determined by virtue of a general meeting
of shareholders’ resolution.

POJK 73/2016 provides that insurance companies must implement a
remuneration policy which encourages prudent behaviour in line with
the company’s long-term interests and fair treatment of
policyholders, the insured and/or parties entitled to benefits,
which at least must consider the following:

• the financial performance and obligations of the insurance
  company as regulated under provisions of applicable laws and
  regulations;




• individual work performance;




• fairness with peer group; and




• consideration of the company’s long-term goals and
  strategies.

10 Change of control and transfers of insurance companies

10.1 How are the assets and liabilities of insurance companies
typically transferred in your jurisdiction?

Generally, the assets and liabilities of an insurance company
may be transferred by means of a merger, acquisition, consolidation
or spin-off. A merger or consolidation may only be carried out
between or among insurance or reinsurance companies that are in the
same form of legal entity and have similar business lines. In
addition, insurance or reinsurance companies with Sharia
units are obliged by the Insurance Law and POJK 67/2016 to be spun
off by no later than 17 October 2024.

10.2 What requirements must be met in the event of a change of
control?

Any change of control of an insurance company (ie, by virtue of
acquisition) must be approved by the Financial Services Authority
(OJK). POJK 67/2016 provides that an application for approval must
be submitted to the OJK along with the following supporting
documents:

• a list of planned ownership;




• data on prospective shareholders, in any event of new
  shareholders;




• a draft deed of minutes of general meeting of
  shareholders;




• a draft deed of transfer of shares;




• photocopies of tax returns for the past two years and other
  documents showing the financial capability and funding sources of
  prospective individual shareholders;




• photocopies of financial statements audited by public
  accountants prior to the addition of the paid-up capital, in the
  event that the change in ownership is caused by the addition of
  paid-up capital and will be conducted by the transfer of retained
  earnings, transfer of loans, and/or shares dividends; and




• a photocopy of the cooperation agreement between foreign entity
  shareholders and any Indonesian shareholders, in any event of new
  foreign entity shareholders.

Theoretically, the OJK will approve the application, request any
missing documents or reject the application within 20 business days
from the receipt of the application. However, in practice, it may
take up to one to two months from the receipt of a complete
application for the OJK to issue its approval.

Upon receipt of OJK approval, the insurance company must report
the execution of the change of control to the OJK within 15
business days as of the issuance of the approval and/or
acknowledgement from the minister of law and human rights.

11 Consumer protection

11.1 What requirements must insurance companies comply with to
protect consumers in your jurisdiction?

Consumer protection provisions are generally governed under the
Consumer Protection Law (8/1999). The Consumer Protection Law
provides, among other things, for:

• the right of consumers to receive correct, clear and honest
  information on goods and services;




• the right to have their opinions and complaints listened to;
  and




• the right to the appropriate settlement of consumer protection
  disputes.

The Financial Services Authority (OJK) has issued several
regulations specifically dealing with consumer protection in the
financial services sector, including insurance companies. These
regulations are:

• OJK Regulation 6/POJK.07/2022 of 2022 regarding Consumer
  Protection in the Financial Services Sector (‘POJK
  6/2022’);




• OJK Regulation 18/POJK.07/2018 of 2018 regarding Consumer
  Complaint Service in the Financial Services Sector; and




• OJK Regulation 31/POJK.07/2020 of 2020 regarding the
  Organisation of Consumer and Public Services in the Financial
  Service Sector by the OJK.

Pursuant to POJK 6/2022, insurance companies must, among other
things:

• provide accurate, truthful, clear and non-misleading
  information regarding insurance products;




• use simple, easy-to-understand terms, phrases and sentences in
  the Indonesian language (which may be used in conjunction with
  another language as necessary) in all documents that:




• • set out the rights and obligations of consumers;

  
  

  • may be used by consumers to make a decision; and

  
  

  • may legally bind consumers;




• provide an explanation of any terms, phrases, sentences,
  symbols, diagrams and signs that are not understood by the
  consumer;




• provide a summary of its products in writing and set out the
  benefits, risks, main features, conditions and procedures under
  which the products are offered;




• provide documents containing the terms and conditions of the
  products during the marketing and before the consumer enters into
  an agreement to purchase such products;




• inform consumers of any change in the conditions of products;
  and




• include the company’s name and/or logo on any offering of
  its products, together with a statement that the company is
  registered and supervised by the OJK.

POJK 23/2015 provides the following requirements in relation to
customer protection:

• Insurance companies must provide accurate, clear, correct and
  non-misleading information on insurance products to prospective
  policyholders, insured or participants;




• Insurance companies marketing unit-linked insurance must
  implement customer risk profile assessments;




• Insurance companies must settle any complaints related to
  insurance products; and




• Insurance companies must provide insurance policies to
  policyholders, insured or participants in hardcopy or
  digital/electronic form.

POJK 69/2016 provides the following requirements in relation to
the advertising of insurance products:

• Insurance companies must ensure that the information provided
  in marketing materials or advertisements is accurate, clear and
  non-misleading, and must withdraw any advertisement that does not
  fulfil those criteria; and




• Information provided in marketing materials or advertisements
  in the form of brochures or leaflets must fulfil the following
  criteria:




• • be easy to understand;

  
  

  • set out the benefits of the offered products;

  
  

  • set out the payment process for a claim;

  
  

  • set out the exceptions that will affect the process of claim
    approval and payment;

  
  

  • not conceal, reduce or eliminate important information;
    and

  
  

  • set out the applicable terms and conditions.

  
  

  11.2 What other measures has the state implemented to protect
  consumers in the insurance sector?

  
  

  In practice, there have been issues around investment-related
  insurance products, known as unit-linked insurance products, in
  Indonesia, with many customers suffering losses as a result of
  misleading information or misunderstanding over these types of
  insurance products. To mitigate the risk, OJK issued SE OJK 5/2022,
  which specifically governs the marketing of unit-linked insurance
  products.

  
  

  In the marketing of unit-linked insurance products, insurance
  companies must ensure:

  
  

  • conformity of unit-linked insurance products and sub-funds with
    the needs, abilities, and risk profiles of prospective
    policyholders, insured parties or participants;

  
  

  • the understanding of prospective policyholders, insured parties
    or participants regarding the unit-linked insurance products being
    marketed; and

  
  

  • the adequacy of data, information and documents required for
    the underwriting process.

  
  

  Explanations by insurance companies regarding the benefits,
  costs and risks of the offered unit-linked insurance products, and
  any additional features, along with the statement of understanding
  of the prospective policyholder, must be properly documented in the
  form of video and/or audio recordings.

  
  

  Any statement, data and information provided in advertisements
  for the marketing of unit-linked insurance products must be
  accurate, honest, clear and non-misleading. Such advertisements
  must include a warning statement related to the investment
  component of the insurance products.

  
  

  Unit-linked insurance products must be reported to the OJK.

  
  

  12 Data security and cybersecurity

  
  

  12.1 What is the applicable data protection regime in your
  jurisdiction and what specific implications does this have for
  insurance companies?

  
  

  As of the time of writing, Indonesia does not have a single
  comprehensive law governing personal data protection. The existing
  provisions on data protection in Indonesia are spread across
  various laws and regulations (collectively, the ‘PDP
  Regulations’) – namely:

  
  

  • the Law on Electronic Information and Transactions (11/2008),
    as amended;

  
  

  • Government Regulation (71/2019) regarding the Provision of
    Electronic Systems and Transactions;

  
  

  • Minister of Communication and Informatics Regulation 20/2016
    regarding the Protection of Personal Data in Electronic Systems;
    and

  
  

  • Minister of Communication and Informatics Regulation 5/2020
    regarding Private Electronic Systems Providers, as amended,

  
  

  The key implication of the PDP Regulations for insurance
  companies is that any use of the data of policyholders, insured or
  participants must accord with the intended purpose and take place
  as consented to by the data owner. The Indonesian Parliament is
  currently discussing the Personal Data Protection Bill (‘PDP
  Bill’). While the PDP Regulations principally apply to all
  personal data in an electronic system, the latest publicly
  available draft of the PDP Bill indicates that it will affect
  personal data irrespective of whether it is processed by electronic
  or non-electronic means. If enacted, it is widely expected that the
  PDP Bill may amend or revoke certain provisions under the PDP
  Regulations. However, there is no certainty as yet as to when the
  PDP Bill will be enacted into law.

  
  

  Specifically in the financial services sector, the Financial
  Services Authority (OJK) has issued OJK Circular Letter
  14/SEOJK.07/2014 regarding Confidentiality and Security of Consumer
  Data and/or Personal Information (‘SE OJK 14/2014’). SE OJK
  14/2014 principally prohibits any financial service providers,
  including insurance companies, from providing data and/or personal
  information about their consumers by any means to any third
  parties, except with the consent of the consumers or as required by
  applicable laws and regulations.

  
  

  POJK 4/2021 requires insurance companies, in implementing
  information technology, to ensure the following:

  
  

  • The obtainment, processing, utilisation, storage, renewal
    and/or disclosure of consumers’ personal data are carried out
    based on the consent of the consumer concerned, unless stipulated
    otherwise by the provisions of laws and regulations; and

  
  

  • The utilisation or disclosure of consumers’ personal data
    accords with the purposes communicated to consumers at the time of
    the data collection.

  
  

  POJK 4/2021 also requires insurance companies with total assets
  of between IDR 500 billion and IDR 1 trillion or more than IDR 1
  trillion to set up their own data centre in Indonesia. (The use of
  an overseas data centre is allowed only for certain purposes and is
  subject to OJK approval.) Insurance companies with total assets of
  up to IDR 500 billion might also be asked to set up a data centre
  if there is a need to improve the implementation of risk management
  during the use of information technology.

  
  

  12.2 What is the applicable cybersecurity regime in your
  jurisdiction and what specific implications does this have for
  insurance companies?

  
  

  As of the time of writing, Indonesia does not have a
  comprehensive law on cybersecurity. The Indonesian Parliament is
  working on a Cyber Security and Resilience Bill, but there is no
  estimate on when this might be enacted into law.

  
  

  Under POJK 4/2021, insurance companies must ensure that
  information security is effectively implemented by taking into
  account the following:

  
  

  • information security aimed at effectively and efficiently
    maintaining the confidentiality, integrity and availability of
    managed information with due observance of the provisions of laws
    and regulations;

  
  

  • maintenance of information security in the use of information
    technology for human resources, technology and other
    processes;

  
  

  • information security based on the risk assessment of the
    information; and

  
  

  • availability of incident handling management in information
    security.

  
  

  Insurance companies must report to the OJK any critical
  incidents, abuses or crimes related to their information technology
  operations that may or have resulted in significant financial loss
  and/or disruptions to the smooth operation of the insurance
  companies.

  
  

  13 Financial crime

  
  

  13.1 What provisions govern money laundering and other forms of
  financial crime in your jurisdiction and what specific implications
  do these have for insurance companies?

  
  

  Generally, provisions on money laundering are found in the Law
  regarding the Prevention and Eradication of the Crime of Money
  Laundering (8/2010). Any violation of this law may subject
  insurance companies to the sanctions set out in the law,
  including:

  
  

  • imprisonment;

  
  

  • fines;

  
  

  • suspension of business; and

  
  

  • revocation of a business licence.

  
  

  The Financial Services Authority has issued POJK 12/2017, which
  specifically governs the implementation of anti-money laundering
  and prevention of terrorism funding programmes in the financial
  services sector. The obligations of insurance companies under POJK
  12/2017 include the following:

  
  

  • Identify, assess and understand the risk of money laundering
    and/or terrorism financing in relation to their customers, country
    or geographical area, products, services, transactions and delivery
    channels;

  
  

  • Have in place a policy and procedures, including supervision of
    their implementation, for the management and mitigation of
    money-laundering and terrorism funding risks;

  
  

  • Implement anti-money laundering and prevention of terrorism
    funding programmes;

  
  

  • Categorise prospective customers and customers based on money
    laundering and/or terrorism financing risk levels; and

  
  

  • conduct customer due diligence and/or enhanced due diligence in
    accordance with the provisions under laws and regulations.

  
  

  14 Competition

  
  

  14.1 What specific challenges or concerns does the insurance
  sector present from a competition perspective? Are there any
  pro-competition measures that are targeted specifically at
  insurance companies?

  
  

  We do not see any specific concerns pertaining to the insurance
  sector from the perspective of competition law, at least as of the
  time of writing. This may be because of the large number of market
  players in the insurance sector; and because it is a highly
  regulated sector under the supervision of the Financial Services
  Authority. While there are no specific competition measures for the
  insurance sector, the insurance business in Indonesia must be
  carried out in compliance with the Law on the Prohibition of
  Monopolistic Practices and Unfair Business Competition (5/1999), as
  amended, as the primary law governing business competition in
  Indonesia.

  
  

  15 Restructuring and insolvency

  
  

  15.1 What provisions govern insolvency in your jurisdiction and
  what specific implications do these have for insurance
  companies?

  
  

  The Insurance Law provides that any petition for the declaration
  of bankruptcy of an insurance company may only be filed by the
  Financial Services Authority (OJK). Creditors may submit an
  application to the OJK asking it to file a petition to the
  commercial court. The OJK will theoretically approve or reject the
  application within 30 days of receipt of a complete application.
  The OJK will refer to the procedures and requirements under the Law
  on Bankruptcy and Suspension of Payment (37/2004), as partially
  revoked, in filing the petition.

  
  

  If the insurance company is declared bankrupt, the
  policyholders, insured and participants will have preferred rights
  over any other parties for the distribution of bankruptcy assets.
  Insurance funds will be prioritised for the fulfilment of
  obligations to policyholders, insured or other parties entitled to
  the insurance benefits. Tabarru’ funds and investment
  funds in Sharia-based insurance companies may not be used
  to fulfil the obligations to any other parties except the
  participants.

  
  

  16 Trends and predictions

  
  

  16.1 How would you describe the current insurance landscape and
  prevailing trends in your jurisdiction? Are any new developments
  anticipated in the next 12 months, including any proposed
  legislative reforms?

  
  

  The prevailing trend in the Indonesian insurance market is the
  growth in life insurance supported by the development of
  digital-based insurance products, known as insurance technology or
  ‘insurtech’. Insurtech basically utilises technology to
  innovate and increase efficiency and cost savings in the insurance
  industry. The current legal framework for insurtech is found in
  Financial Services Authority (OJK) Regulation 13/POJK.022/2018
  regarding Digital Finance Innovation in the Financial Services
  Sector. The development of insurtech is expected to promote the use
  of insurance products by allowing companies to provide simple and
  integrated micro-insurance products through e-commerce platforms
  that will enable more consumers to access them.

  
  

  There are various kinds of insurtech business, depending on the
  products and services offered. For instance:

  
  

  • insurance companies may market their products through insurtech
    aggregators serving as the platform/marketplace; and

  
  

  • licensed brokerage companies might sell insurtech products
    electronically (insurtech intermediaries).

  
  

  Some insurance companies have established their own digital
  platforms for the marketing, sales, risk analysis, closing and
  claims of insurtech products.

  
  

  The OJK recorded a total of IDR 6 trillion of insurance premiums
  distributed digitally in 2021 as of July 2021. It is reasonable to
  assume that we will continue to see the growing utilisation of
  technology to conduct business, particularly insurtech.

  
  

  Another development we are seeing, and expect to continue to see
  in the coming years, is the spin-off of Sharia units from
  conventional insurance companies. While it is not a new policy, the
  Insurance Law and POJK 67/2016 mandate that Sharia units
  be spun off by no later than 17 October 2024.

  
  

  17 Tips and traps

  
  

  17.1 What are your top tips for insurance companies operating
  in your jurisdiction and what potential sticking points would you
  highlight?

  
  

  Noting the rapid development of technology, and considering the
  growth in insurtech business as discussed in question 16.1,
  insurance companies are advised to make themselves aware of the
  growth of the insurtech sector. Insurance companies should consider
  utilising the benefits of technology by either:

  
  

  • marketing their products through existing digital marketplaces;
    or

  
  

  • establishing their own digital platforms for comprehensive
    control of their business.

  
  

  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.