The Government has finally issued Regulation No. 14 of 2018 on the Foreign Ownership of Insurance Companies (“Regulation 14/2018”), as an implementation of Article 7 (3) of Law No. 40 of 2014 on Insurance (“Insurance Law”). Regulation 14/2018 contains several provisions which specifically address the following matters:
1. Scope of foreign ownership;
2. Ownership schemes;
3. Criteria to be met by foreign legal entities;
4. Foreign-ownership cap;
5. Supervisory measures; and
6. Requirements for Boards of Commissioners (“BoC”) and Boards of Directors (“BoD”).
Prior to the issuance Regulation 14/2018, these matters were previously addressed under Government Regulation No. 73 of 1992 on the Organization of Insurance Businesses (“Regulation 73/1992”), as amended from time to time and most recently through the issuance of Regulation of the Government No. 81 of 2008 (“Regulation 81/2008”).
The scope of insurance companies governed under Regulation 14/2018 comprises the following types of companies (“Insurance-Related Companies”)1:
1. Conventional/sharia insurance/reinsurance companies;
2. Insurance/reinsurance broker companies;
3. Insurance loss-appraisal companies.
Meanwhile, foreign ownership deals with the ownership of Insurance-Related Companies by the following foreign parties (“Foreign Parties”)2:
1. Foreign citizens;and
2. Foreign legal entities.
Any foreign legal entities intending to own Insurance-Related Companies through direct investment are required to satisfy the following three criteria3:
Note that compliance with the abovementioned criteria is to be assessed by the OJK in accordance with the prevailing laws and regulations5.
The foreign ownership cap set under Regulation 14/2018 and which relates to Insurance-Related Companies remains the same as it was under Regulation 73/1992, specifically 80% of the total paid-up capital of Insurance-Related Companies. However, the foreign-ownership cap can now be overridden under the following two conditions:
1. If the Insurance-Related Companies are publicly listed 6 or
2. If the foreign ownership of any non-publicly listed Insurance-Related Companies exceeded 80% prior to the enactment of Regulation 14/2018, with a prohibition also being placed on any increase in the percentage of foreign ownership7.
Accordingly, if any exempted, non-publicly listed Insurance-Related Companies add to their total level of paid-up capital, then the following conditions apply8:
1. At least 20% of the additional paid-up capital must be sourced from Domestic Parties; or
2. At least 20% of the additional paid-up capital must be sourced through an Initial Public Offering (IPO) undertaken in Indonesia. This essentially means that Insurance-Related Companies have to be publicly listed9.
Nonetheless, the above provisions will only prevail if the addition of any paid-up capital originates from cash deposits10.
In addition, Regulation 14/2018 no longer incorporates the provision originally set under Article 10A of Regulation 73/1992, which allowed for the total percentage of any Domestic-Party ownership to be diluted.
The OJK will supervise the implementation of the foreign ownership of Insurance-Related Companies11. Note that Insurance-Related Companies are required to identify and report any foreign ownership to the OJK, as well as supply data proving the fulfilment of the criteria for foreign legal entities12. Details on the relevant reporting obligations are to be further regulated under an OJK Regulation 13.
The previous framework, as set out under Regulation 73/1992, mandated that Indonesian nationals should be included as BoC and BoD members of any foreign-owned Insurance- Related Companies. However, Regulation 14/2018 does not include this specific requirement.
For further inquiries, please contact :
Setyawati F. Anggraeni – Managing Partner firstname.lastname@example.org
Tanya Widjaja Kusumah – Associate email@example.com
The information in this review is not intended to serve as the legal opinion or view of Anggraeni and Partners or view of Anggraeni and Partners law firm about certain legal issues.
No reader may consider that they have to act or refrain from acting or choose to act in regards to a certain issue based on this information without first seeking consultation from professional at law in accordance with the specific facts and circumstances encountered.
1 Article 1 (3), Regulation 14/2018. 2Article 1 (1), Regulation 14/2018. 3Article 4 (1) and (2), Regulation 14/2018. 4Elucidation of Art. 4 (1c), Regulation 14/2018. 5Article 4 (3), Regulation 14/2018,6Article 5 (2), Regulation 14/2018. 7Article 6 (1), Regulation 14/2018. 8Article 6 (2) and (3), Regulation 14/2018. 9Elucidation of Art. 6 (2b), Regulation 14/2018. 10Article 6 (2), Regulation 14/2018. 11Article 7, Regulation 14/2018. 12Article 8 (1), Regulation 14/2018. 13Article 8 (2), Regulation 14/2018.
8 Mei 2018 004/AP-LH/V/2018 -TWK-