Minister of Finance Tightens the Examination of Insurance Companies

In order to improve the effectiveness of development and supervision of insurance companies in Indonesia, the Minister of Finance recently issued Regulation No. 168/PMK.010/2010 on the Examination of Insurance Companies (‘Regulation’). The Regulation increases the frequency of examination of insurance companies while also introducing a new mechanism of examination. The Minister of Finance intends that the Regulation will improve the protection of policyholders and bring legislation in line with the recent insurance market developments in Indonesia.

The frequency of examination of insurance companies will be increased from the previous once in every five years to at least once a year for Loss Insurance Companies, Life Insurance Companies, Reinsurance Companies and once every three years for Supporting Business Insurance Companies. 

Furthermore, Article 4 provides for a new examination mechanism: (i) examination which is conducted at the office of the insurance company or (ii) at the Insurance Bureau. An examination at the office of the insurance company covers all, or a subset, of the aspects of management (including, among others, systems and procedures, financial management, operational management, and risk management). Meanwhile, an examination at the Insurance Bureau will only cover certain aspects of management based on the specific grounds for the examination. 

Prior to the examination, the staff of the Insurance Bureau (‘Examiner’) has to secure the Examination Order and the Examination Notice (if the examination is being conducted at the insurance company’s office, as per Article 10) or the Examination Notice (if the examination is being conducted at the Insurance Bureau, as per Article 25), otherwise the insurance company can refuse to be examined. Both the Examination Order and the Examination Notice have to be signed by the Head of the Insurance Bureau on behalf of the Head of the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK).

Following the examination, the Examiner must prepare, first, a temporary report and then a final report. Within the specified periods of time, the insurance company can submit its objection to the temporary report. If there is no further objection, the temporary report will become final. The final report consist of the examination result and the conclusion and recommendations for the insurance company. The report must be signed by the Examiner and approved by the Head of the Insurance Bureau on behalf of the Head of Bapepam-LK.

The Regulation repeals its predecessor, Minister of Finance Decision No. 423/KMK.06/2003 on the Examination of Insurance Companies.

The Regulation has been in force since 16 September 2010.