This article was written on Kupasi.id with the title “Ngopi Kupasi Period of Turbulence in the Insurance Industry Urgent Equity Increase (https://kupasi.org/2023/07/20/ngopi-kupasi-period-turbulensi-industri-insur-peningkatan- equity-urgent/)
Liga Asuransi – In an atmosphere fraught with change and challenges, the insurance industry in Indonesia is undergoing a significant transformation. The Financial Services Authority (OJK) takes the lead in designing plans to restructure the insurance business, and these new policies are expected to bring about profound changes.
The “Ngobrolin Opini (NGOPI) Saling Silang Permodalan Asuransi” discussion, organized by the Indonesian Insurance Writers Community, serves as a crucial forum for stakeholders to explore the impacts and implications of OJK’s initiatives. This article encapsulates the essence of that discussion, delving into the core debates surrounding equity enhancement, restructuring plans, and the challenges faced by the nation’s insurance industry.
Explore expert perspectives, in-depth analyses, and insights reflecting the dynamics of this industry, aiming to provide a comprehensive understanding of the direction the Indonesian insurance industry is heading. Enjoy the read, and let’s embark on this promising future together!
The rapid implementation of OJK’s insurance business restructuring plan is predicted to create turbulence in the industry, at least for the next four years. This revelation surfaced during the “Ngobrolin Opini (NGOPI) Saling Silang Permodalan Asuransi” discussion held by the Indonesian Insurance Writers Community on Friday, July 14, 2023.
The 2-hour-and-45-minute event, moderated by Kupasi’s Vice Chairman, Azuarini Diah P., featured key speaker Budi Herawan – Chairman of AAUI, and keynote speaker Djonieri, Head of the Regulatory and Development Department for IKNB at OJK. Panelists included Irfan Rahardjo – Chairman of the Supervisory Board of Kupasi, Kapler Marpaung – Lecturer of the MM-FEB Program at UGM, Yasril Rasyid – Insurance Observer, Tri Joko Santoso – Financial Analyst, and Mucharor Djalil – Senior Journalist.
The discussion centered around OJK’s publicly announced plans, expected to fundamentally transform the insurance industry. Five major transformations were highlighted, ranging from the simultaneous implementation of IFRS 17 on January 1, 2025, the obligation to have internal actuaries, emphasized separation of Sharia business units, insurance clustering based on equity, to OJK’s gradual capital increase plan.
In the early stages of the discussion, it was disclosed that insurance company capital is expected to reach IDR 1 trillion by 2028, within a 5-year timeframe. Firdaus Djaelani, Chairman of the Board of Directors of the Indonesian Insurance Writers Community (Kupasi), expressed that with this regulatory plan sequence, the insurance industry is anticipated to face turbulence within the next 3 to 4 years.
“This [consecutive business transformation] is very challenging, especially for shareholders,” stated Firdaus during the “Ngobrolin Opini (Ngopi) Saling Silang Permodalan Asuransi” event hosted by Kupasi on Friday, July 14, 2023. Firdaus, who previously served as the Executive Head of Non-Bank Financial Industry Supervision at OJK from 2012 to 2017, emphasized that industry players must prepare for a changed business landscape.
Impact, especially related to capital, is the main highlight. According to him, one logical option for shareholders is through a merger, as done by Bank Syariah Indonesia (BRIS).
In the same forum, Head of the Regulatory and Development Department for IKNB at OJK, Djonieri, stated that capital and insurance classification issues related to capital are efforts to give a larger role to the insurance industry in the region. Djonieri likened small-capital insurance companies to pontoon boats, while insurance companies with large equity were compared to cruise ships. With this capacity difference, he emphasized that the distance or business absorbable between them is significant.
Discussion about the Otoritas Jasa Keuangan (OJK) insurance business restructuring plan in a short time is expected to create turbulence in the industry, at least for the next four years. This was revealed in the event “Ngobrolin Opini (NGOPI) Saling Silang Permodalan Asuransi” organized by the Indonesian Insurance Writers Community on Friday, July 14, 2023.
The 2-hour-and-45-minute event was led by Kupasi’s Vice Chairman, Azuarini Diah P., and involved key speakers Budi Herawan – Chairman of AAUI, and keynote speaker Djonieri, Head of the Regulatory and Development Department for IKNB at OJK. Panelists in this discussion included Irfan Rahardjo – Chairman of the Kupasi Supervisory Board, Kapler Marpaung – Lecturer of the MM-FEB Program at UGM, Yasril Rasyid – Insurance Observer, Tri Joko Santoso – Financial Analyst, and Mucharor Djalil – Senior Journalist.
The discussion covered OJK’s publicly announced plans, expected to fundamentally transform the insurance industry. There are five major transformations that will significantly alter the industry landscape, starting from the simultaneous implementation of IFRS 17 on January 1, 2025, the obligation to have internal actuaries, emphasized separation of Sharia business units, insurance clustering based on equity, to OJK’s plan to gradually increase capital.
In the early stages of the discussion, it was revealed that insurance company capital is expected to reach IDR 1 trillion by 2028, within a 5-year timeframe. Firdaus Djaelani, Chairman of the Board of Directors of the Indonesian Insurance Writers Community (Kupasi), expressed that with this regulator’s plan sequence, the insurance industry is estimated to experience turbulence within the next 3 to 4 years.
“This [consecutive business transformation] is very challenging, especially for shareholders,” said Firdaus during the “Ngobrolin Opini (Ngopi) Saling Silang Permodalan Asuransi” event hosted by Kupasi on Friday, July 14, 2023. Firdaus, who previously served as the Executive Head of Non-Bank Financial Industry Supervision at OJK from 2012 to 2017, emphasized that industry players must prepare for a changed business landscape.
Impact, especially related to capital, becomes the main focus. According to him, one logical option for shareholders is through a merger, as done by Bank Syariah Indonesia (BRIS).
In the same forum, Head of the Regulatory and Development Department for IKNB at OJK, Djonieri, stated that capital and insurance classification issues related to capital are efforts to give a larger role to the insurance industry in the region. Djonieri likened small-capital insurance companies to pontoon boats, while insurance companies with large equity were compared to cruise ships. With this capacity difference, he emphasized that the distance or business absorbable between them is significant.
In this context, Djoneri highlights the business model of insurance companies with relatively limited capital that relies on investment income rather than premium results. However, insurance is a risk management business with policy sales as its main product to generate premiums.
According to the regulator’s calculation, this issue can be addressed by increasing the business capacity of insurance companies, ultimately requiring an increase in the company’s equity. Djoneri stated that the “roadmap for the insurance industry will be launched this August after being presented at the OJK board,” and this roadmap contains various solutions to strengthen the insurance industry in Indonesia.
This roadmap also involves input from global insurance companies operating in Indonesia and financial consultants affiliated with the big four. OJK even requested support from the World Bank to assess the insurance industry in the country.
Still within the context of the roadmap, OJK will regulate equity to perform product marketing clustering, in addition to considering minimum capital. Djonieri stated that OJK still supports healthy small insurance companies, and “This equity will divide insurance companies into 2 groups, Tier 1 and Tier 2. Tier 1, for example in 2026, has a minimum equity of IDR 500 billion, and in 2028, it becomes IDR 1 trillion.”
Budi Herawan, Chairman of the General Insurance Association of Indonesia (AAUI), in the same discussion mentioned that the draft roadmap being prepared by the regulator for the insurance industry in the country looks quite good. According to him, the strengthening steps that need to be taken have been included in the soon-to-be-established roadmap.
“We [at AAUI] are in line [with OJK’s plan] in formulating mechanisms and policies for the benefit of policyholders in the future,” he said.
Nevertheless, Budi also hopes that the regulator opens up a discussion space with the industry for the good of the industry in the future.
Irvan Rahardjo, one of the founders of Kupasi, mentioned that although the industry is not yet entirely healthy, capital is not the only solution. He reminded that there are insurance companies in the country that have been operating for hundreds of years without contributing capital, namely AJB Bumiputera 1912. At the same time, a state-owned insurance company with a very large capital also experienced failure, namely PT Asuransi Jiwasraya (Persero).
Irvan also pointed out foreign insurance companies operating in Indonesia initially did not bring large capital but offered best practices, Good Corporate Governance (GCG), Asset and Liability Management (ALM), risk management, to compliance.
“So in 10 years, they could surpass Jiwasraya which has been around for 100 years,” he said.
The founder of Kupasi, who is also a lecturer in the MM Program at the Faculty of Economics and Business, Gadjah Mada University (UGM), Kapler Marpaung, reminded the reality of increasing capital in insurance companies is not an instant journey.
“The increase in capital must be well planned, and the process is not easy, not instant,” he said.
He considered, there is no need for each company to have a large capital, the important thing is how the company manages the business well. The need to strengthen management is also echoed by Yasril Rasyid, an insurance observer.
“The main problem is not capital, but how to manage the company. There are those who have a lot of capital, but the management is bad, in the end, the capital is eroded,” said Yasril.
The discussion presented various opinions, one of which was delivered by Budi Herawan who encouraged that there must be an integration of the entire insurance ecosystem in Indonesia, both conventional and Islamic insurance.
“If this is not done, the sharia insurance industry will be overtaken by the conventional one,” he said.
Overall, the industry must be adaptive and transform. Each stakeholder must support one another so that the plan to strengthen the insurance industry is successful. To this end, the role of the regulator, in this case, OJK, is crucial in providing direction and facilitating cooperation between stakeholders.
Conclusion:
Reflecting on the intensive discussion of “Ngobrolin Opini (NGOPI) Saling Silang Permodalan Asuransi,” we witnessed the landscape of the Indonesian insurance industry facing extraordinary challenges and undergoing dramatic changes. The business planning steps by the Financial Services Authority (OJK) to restructure and enhance the equity of insurance companies became the main focus of conversation. In this context, capital increase emerges as the primary path, with projections reaching IDR 1 trillion by 2028.
The importance of increasing equity is emphasized by stakeholders, while concerns about its impact on the industry, especially for small insurance companies, spark heated debates. Although recognized that increasing capital can bring stability, questions about its implementation and its impact on shareholders are in the spotlight. The discussion also details five major transformations, including the simultaneous implementation of IFRS 17, the requirement for internal actuaries, the emphasized separation of Sharia business units, insurance clustering based on equity, and OJK’s plan for gradual capital increase.
While history shows that increasing capital is not a short journey, industry players, regulators, and stakeholders must unite to find the best solutions. Looking at the soon-to-be-launched insurance industry roadmap, a holistic solution is expected, encompassing strengthened capital, good governance, and learning from past experiences. Through this collaboration, the Indonesian insurance industry is expected to enter a new era that is robust, adaptive, and highly competitive.
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This article will be published in book form The Rise of Our Insurance. Foreword by Prof. Muhammad Edhi Purnawan Member of the OJK Supervision Board. February 2024 296 pages + xiv ISBN Publisher IPB Press
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Lebih dari 40 tahun berkecimpung di dunia asuransi dimulai dari asuransi joint venture hingga pernah menjadi Direksi Asuransi BUMN ; Komisaris Independen AJB Bumiputera 1912 dan Asuransi SOMPO Indonesia. Saat ini menjabat sebagai Komisaris Utama di L&G Risk Insurance Broker.
