JAKARTA. The government plans to limit the foreign investors’ ownership in a local insurance company maximum at 80%. The plan is included in the revision of a government regulation, which has been being discussed.
This regulation is the derivative of the Law No 40/2014 on the Insurance. As comparison, the existing regulation, namely the Government Regulation No 63/1999 on the Insurance Business does not specify the limit for the foreign investment in insurance business.
The Minister of Finance Sri Mulyani said, the limitation of foreign investments will be applied to the new insurance companies, as well as the existing insurance companies. Therefore, the foreign investors with an ownership in insurance companies of more than 80% have to divest a part of their shares to comply with the regulation.
According to Sri Mulyani, during the crisis in 1997-1998, many insurance companies failed to inject new capitals to their respective companies. Under this situation, some foreign companies injected an amount of new capitals to the local insurance companies.
The data show that as of December 2016, there are 19 insurance companies with a more than 80% of foreign investors’ ownerships. Those companies are not listed on the Indonesia Stock Exchange, such as PT Asuransi Allianz Life Indonesia, of which 99.76% of its shares are owned by Allianz of Asia Pacific & Africa GmbH.
The Expert Staff of Financial Service and Capital Market Affairs at Ministry of Finance Isa Rachmatarwata proposes some points related to the restriction on foreigners’ ownerships. First, a legal entity should have similar business or should be a subsidiary of a company with the similar business to be allowed to have ownership in a local insurance company.
Second, that legal entity should have an amount of capitals of at least five times greater than the direct investments in insurance companies. Third, the legal entity should comply with the technical requirements set by the OJK (Financial Services Authority or FSA).
According to Isa, the ownership quota can be adjusted in a gradual manner. If the domestic investors cannot afford to acquire the shares of an insurance company, the shares can be released in the stock exchange.
Executive Director of Indonesia’s Life Insurances Association (AAJI) Togar Pasaribu, said, the organization will comply with the government regulation.
Previously, an insurance company PT Hanwha Life Insurance has decided to conduct the initial public offering (IPO) if the government implements this policy.
(Muhammad Farid)
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