OJK to Issue Regulation on Controlling Shareholders of Insurance Company

 
Christina Desy, Fathan Qorib
 
Aiming to strengthen Indonesia’s financial sector, the Financial Services Authority (Otoritas Jasa Keuangan – OJK) has issued a series of regulations on both banking and non-banking financial institutions. In the last quarter of 2014 alone, the OJK issued 20 regulations on banking, capital markets, as well as financing companies and microfinance institutions.
 
Entering 2015, the OJK has continued these efforts and has prepared additional regulations on the insurance and reinsurance sector. According to Yusman, OJK’s Director of Research and Development on Non-Bank Financial Industries (Industri Keuangan Non-Bank - IKNB), the OJK is currently discussing a regulation on controlling shareholders in insurance and reinsurance companies to implement certain provisionsof the Insurance Law.
 
“The regulation will at least cover provisions on the required share holding of controlling shareholders and relations between shareholders,” said Mr. Yusmanon Monday.
 
In this regard, Mr. Yusman said that the OJK is yet to determine a minimum threshold to be categorized as a controlling shareholder and added that the amount may either be 25 percent, 50 percent, or even 75 percent. Mr. Yusman further explained that the provisions on shareholder relations are to ensure the monitoring of controlling shareholders in the case of affiliations amongst the shareholders of an insurance or reinsurance company.
 
Mr. Yusman’s emphasized that this regulation is important to clarify the responsibility of controlling shareholders, as they are responsible for any losses suffered by the company. To that extent, Mr. Yusman added that parties may also be subject to such responsibilities if they deemed to be in a controlling position.
 
Despite some urgency, Mr. Yusman cannot yet provide an exact date when this regulation will be issued. In any case, Mr. Yusman explained that the regulation may not be immediately effective due to the three-year transition period.
 
Further explaining the upcoming regulation, Firdaus Djaelani, OJK’s Executive Head of IKNB Monitoring, stated that the transition period has been provided to insurance and reinsurance companies to adjust to new provisions that were not included in the previous insurance law.
 
One such provision is the prohibition on a party being a controlling shareholder in more than one insurance or reinsurance company with the same core business. During the transition period, parties that find themselves in such a position can make adjustments to comply with the new insurance law.
 
For further discussion on the Insurance Law, see ILB No. 2485 and ILD No. 377
 
(hot/kc)