OJK Exempts Insurance Broker Global Insurance Broker from PKU Sanctions
The Financial Services Authority (OJK) recently made a significant decision by lifting the business activity restriction (PKU) sanctions previously imposed on PT Global Insurance Broker. This announcement arrived on October 16 2023 after official letter Number S-12/PD.1/2023 which was issued on September 29 2023. PT Global Insurance Broker, located at Jalan Senopati Number 21, Senayan Village, Kebayoran Baru District, South Jakarta , are now permitted to continue their insurance brokerage services.
The decision to revoke the PKU sanctions was conveyed by the Deputy Commissioner for Supervision of Insurance, Guarantees and Pension Funds at the OJK, Iwan Pasila. The revocation is based on the fulfillment of two important provisions. First, in accordance with Article 46 paragraph (1) of OJK Regulation (POJK) Number 68/POJK.05/2016 concerning Business and Institutional Licensing of Insurance Broker Companies, companies must obtain approval from the OJK before making a change in ownership. Second, based on Article 2 paragraph (1) of the Financial Services Authority Regulation Number 27/POJK.03/2016 concerning Fit and Proper Test for Main Parties of Financial Services Institutions, prospective main parties must obtain approval from the OJK before carrying out their actions, duties and functions as main party.
The lifting of PKU sanctions allows PT Global Insurance Brokers to return to providing insurance brokerage services. Previously, OJK imposed sanctions to limit business activities on Global Insurance Brokers through letter Number S-28/NB.1/2021 which was implemented on November 22 2022 and lasted for three months. At that time, OJK claimed that the PKU sanctions were applied because PT Global Insurance Broker violated the provisions of Article 46 paragraph (1) POJK Number 68/POJK.05/2016 and Article 2 paragraph (1) POJK Number 27/POJK.03/2016. “The Chief Executive of the Supervision of Insurance, Pension Funds, Financing Institutions and Other Financial Services Institutions, who also serves as Acting Deputy Commissioner for Supervision of IKNB I OJK, Ogi Prastomiyono, explained the reasons behind the PKU sanctions.”
Generali Indonesia Reviews Its Investment Strategy After BI Rate Increase to 6%
PT Asuransi Jiwa Generali Indonesia (Generali Indonesia) has responded to Bank Indonesia’s (BI) move to increase the benchmark interest rate, the BI rate, to 6%. This decision was taken after the BI Board of Governors (RDG) Meeting on 18-19 October 2023, which raised the BI 7-Day Reverse Repo Rate (BI7DRR) by 25 basis points (bps) to strengthen rupiah stability and respond to high global uncertainty and its potential impacts. against inflation of imported goods. Generali Indonesia sees the increase in the BI rate as a step aimed at maintaining rupiah stability and macroeconomic stability.
Head of Investment Generali Indonesia, Ignatius Philip, emphasized the importance of macroeconomic stability as a supporting factor for industrial growth, including the insurance industry. He noted that investment is always in flux, influenced by various socio-economic and other factors. In facing these changes, Generali Indonesia is committed to adjusting its investment strategy and investment portfolio allocation in order to improve investment performance in a sustainable manner.
Ignatius explained that Generali Indonesia adheres to the principles of Good Corporate Governance (GCG) in the allocation and management of its investment portfolio. They also have a strict oversight process, including through investment committees, both at regional and group levels. Investment allocation management is carried out using various strategies that consider short, medium and long term aspects.
Generali Indonesia also includes various instruments in its investment portfolio, with ownership of blue chip shares, large capitalization shares (big cap), and small capitalization shares (small cap). Ignatius reminded that share values can fluctuate due to various factors such as market sentiment and changes in interest rates. Generali Indonesia remains committed to maintaining its investment performance amidst changing market dynamics.
Insurance Premium Income Soars to IDR 228.51 Trillion in Quarter III/2023 According to OJK
The Financial Services Authority (OJK) has released data regarding accumulated insurance premium income during the period January to September 2023, reaching a large figure of IDR 228.51 trillion. Although this number shows a decrease of 1.57% when compared to the same period the previous year, namely September 2022, when insurance premium income reached IDR 232.16 trillion with growth of around 2.93% on an annual basis.
Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervisor, Ogi Prastomiyono, explained that although life insurance premium income was still experiencing a contraction of 7.93% on an annual basis with a total of IDR 132 trillion in September 2023, there was visible improvement, especially in the PAYDI business line ( unit-linked).
On the other hand, OJK noted that accumulated general insurance and reinsurance premiums continued to show positive growth of 8.71% on an annual basis, increasing from IDR 88.74 trillion in September 2022 to IDR 96.47 trillion.
OJK also provides information regarding insurance capital as measured through the risk-based capital (RBC) indicator, which remains in good condition. General insurance and reinsurance, as well as life insurance, recorded RBC above the 120% threshold. Detailed data shows that RBC for general insurance and reinsurance reached 308.97%, while RBC for life insurance reached 451.23% in September 2023.
Apart from that, OJK also provides information regarding social insurance in Indonesia. BPJS Health’s total assets reached IDR 117.29 trillion in September 2023, growing around 8.84% annually from IDR 112.89 trillion. During the same period, BPJS Employment’s total assets reached IDR 709.87 trillion, experiencing growth of around 12.98% on an annual basis from previously only IDR 645.06 trillion.
This data provides an overview of the dynamics of the insurance industry in Indonesia, describing the challenges and opportunities faced as well as the growth potential that is still well maintained.
Latest OJK Decision: Banks Bear 25% Risk in Credit Insurance
The Financial Services Authority (OJK) has revealed a number of important points in the OJK Regulatory Plan (RPOJK) regarding credit insurance which is currently being prepared. OJK aims to replace Minister of Finance Regulation (PMK) Number 124/PMK.010/2008 which regulates the Implementation of Credit Insurance and Suretyship Business Lines.
One of the main points in the POJK credit insurance is risk sharing between banks and insurance companies. In this regulation, the bank will be responsible for 25% of the risk, with the remaining 75% transferred to the insurance company.
OJK also updated the provisions regarding subrogation, limiting acquisition costs to a maximum of 10% (previously 20%), and regulating that the maximum coverage period is only 5 years, even if the insured credit has a longer term.
In addition, the credit insurance POJK clarifies that general insurance cannot provide coverage for life insurance, limits the claims that can be submitted by banks, and gives insurance companies access to data related to credit and insured debtors.
This is part of a series of POJK that will be issued by the OJK as derivative regulations from the Law on Development and Strengthening of the Banking System (UU PPSK). This OJK decision has given rise to debate about the portion of risk sharing between banks and insurance companies, as well as its impact on credit insurance premiums.
With a series of new regulations to be issued by the OJK, the insurance and banking industry in Indonesia will face significant changes in the regulations governing credit insurance.
Reasons Behind Bank Mandiri Director’s Decision to Divest AXA Insurance Shares
PT Bank Mandiri (Persero) Tbk. (BMRI) recently announced that they had sold all their shares, as much as 20 percent, in PT AXA Insurance Indonesia, which was previously known as PT Mandiri AXA General Insurance (MAGI). Bank Mandiri’s Director of Finance and Strategy, Sigit Prastowo, explained the reasons behind this decision.
Sigit Prastowo explained that this step was part of the company’s strategy to strengthen business focus and optimize capital. Even though this decision has been taken, Sigit stated that divestment in AXA Insurance Indonesia will not have a significant impact on Bank Mandiri’s profits, considering that MAGI’s contribution to the company is not significant.
Despite releasing shares in AXA Insurance Indonesia, Bank Mandiri will continue to collaborate with AXA through AXA Mandiri Financial Services (AMFS) in the life insurance sector. Bank Mandiri will continue to develop business potential in this sector.
Meanwhile, Bank Mandiri overall recorded good performance, with net profit growing by 31.5% on an annual basis, reaching IDR 7.9 trillion in the third quarter of 2023. Bank Mandiri plans to maximize synergy and collaboration within the Mandiri Group to provide comprehensive financial services ecosystem services to more than 30 million customers.
The release of AXA Insurance Indonesia shares was carried out through the transfer of 138,000 shares or 20 percent ownership to Anil Panjwani and Manoj Ramkrashin Tolani in October 2023. After this transaction, Bank Mandiri no longer has shares in AXA Insurance Indonesia.
This transaction does not meet the criteria as a material transaction, affiliate transaction, or conflict of interest transaction based on Financial Services Authority (OJK) regulations. The decision to divest AXA Insurance Indonesia shares is part of a strategy to strengthen the consolidation of subsidiary companies within the Bank Mandiri Group and achieve optimal investment results.
Apart from that, this transaction will not affect the bancassurance collaboration between Bank Mandiri and AXA Insurance Indonesia through PT AXA Mandiri Financial Services.
Igloo’s Strategic Efforts to Encourage Microinsurance Penetration
Insurance technology company (insurtech) Igloo has taken a collaborative approach with Bukalapak and Dana to market micro-insurance products to the Indonesian public. According to Igloo Indonesia Country Manager, Henry Mixson, this product includes insurance for cellphones, and Igloo has collaborated with Bukalapak and Dana to integrate insurance products with the products they sell. For example, when someone buys a cell phone, they can also buy insurance for their gadget. In collaboration with Dana, Igloo also offers food protection insurance, which allows users to buy insurance when purchasing food through DANA, so that they get protection if they experience food poisoning.
Henry revealed that by easily purchasing microinsurance products through e-commerce platforms and applications, people can become more familiar with the concept of insurance. Igloo hopes that after people become familiar with insurance with small products, they will be more confident and tend to buy larger insurance products, such as vehicle insurance.
Henry also noted that insurance penetration in Indonesia is still very low, especially when compared to other Southeast Asian countries. He revealed that the insurance penetration rate in Indonesia in 2022 will only reach 2.27%, while countries like Singapore have a penetration rate of 9.5%. Henry highlighted that this figure also includes social insurance such as BPJS Health and Jasa Raharja insurance, so the penetration rate of general insurance is still lower.
Apart from supporting insurance penetration, Igloo has a target to increase the Gross Written Premiums (GWP) they book by three times. Igloo also has the ambition to reach millions of policies per month and increase the number of business partners to 50,000.
The Financial Services Authority (OJK) is also pushing for a mandatory insurance program in Indonesia, which will require insurance for activities involving many people such as concerts and sporting events, as well as third party liability vehicle insurance. OJK has set a target to increase the insurance penetration rate in Indonesia to 3.2% with insurance density reaching IDR 2.4 million per resident in the 2023-2027 Insurance Roadmap.
OJK Announces Two Sharia Insurance Companies Have Stopped Operating
The Financial Services Authority (OJK) revealed that two insurance companies plan to stop their sharia business operations due to the obligation to separate business units. Ogi Prastomiyono, Chief Executive of the OJK Insurance, Guarantee and Pension Fund Supervisor, stated that the decision not to continue the sharia business was taken because the business volume in the company’s sharia unit was considered still small.
“The two companies intend to stop sharia insurance operations because the business scale in their sharia units is considered minimal,” said Ogi in a written answer during the press conference for the Monthly Board of Commissioners Meeting (RDKB) which was held recently on October 30, 2023.
Unfortunately, OJK did not reveal the names of insurance companies (UUS) that had stated their intention to leave the sharia insurance industry. Furthermore, Ogi said that to date, no company has submitted changes to the Sharia Unit Separation Work Plan (RKPUS) to the OJK.
It should be noted that, regarding the separation mechanism, changes to the RKPUS must be implemented no later than December 31 2023. “So we do not yet know the number of companies that will continue or stop the sharia insurance business, along with the implementation period,” he added.
Previously, OJK Deputy Commissioner for Supervision of Insurance, Guarantees and Pension Funds, Iwan Pasila, explained that currently the regulator is asking insurance companies with UUS to submit RKPUS. They are required to submit a separation plan no later than the end of December 2023. Iwan explained that one of the RKPUS components must include a timeline or time span for the UUS separation. Or, alternatively, the company plans to sell its sharia business unit.
“For example, if they want to sell or if they are not willing to make a separation effort, there are those who have expressed their disagreement. Recently, two companies announced their decision not to continue the separation,” said Iwan at a meeting in Jakarta.
Iwan revealed that several insurance companies had indicated their decision to stop sharia business. “There are already companies that have specified in their RKPUS that they do not want to continue sharia business in the future. So, we will monitor until 2023 or 2024 to see if any of them still apply. If they still exist, we have to determine where they should be moved ,” said Iwan.
This article is brought to you by L&G Insurance Broker.
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