T

he Financial Services Authority (OJK) will soon issue a regulation on foreign ownership in the country'€™s insurance industry as mandated by a revised law on insurance.

OJK commissioner for the non-banking financial industry Firdaus Djaelani said in Jakarta on Monday the upcoming government regulation would stipulate details about foreign ownership of insurance firms, which was unspecified in the 2014 Law on Insurance Business that revised previous legislation.

Legislators have called on the agency to lower the foreign ownership cap to 49 percent from the current 80 percent. But Firdaus said that no decision on the foreign ownership threshold had been made.

As the new policy is under preparation, Firdaus said foreign shareholders in the insurance industry were currently still allowed to own stakes of up to 80 percent in accordance with a 2008 government regulation on the insurance business.

'€œForeign shareholders are still allowed to own a maximum 80 percent stake in insurance firms until the government issues the regulation, which will be signed by the president,'€ he said after a press conference in Jakarta on Monday.

The OJK has already sent circular letters to the insurance companies with major foreign shareholders informing them about the new foreign ownership cap.

The agency has also previously suggested that foreign shareholders might choose to divest their shares through an initial public offering (IPO), or by directly seeking local strategic investors.

However, Firdaus acknowledged that many insurance companies owned by foreign shareholders, including those that have had large assets and significant operations in Indonesia for decades, were expecting that there would be no ownership cap in the upcoming policy.

He said there were at least six insurance companies that were more than 80 percent controlled by major foreign shareholders at present, adding that '€œthey entered Indonesia decades ago when we were in the 1998 financial crisis.'€

Most foreign shareholders that entered domestic insurance firms post-crisis already had a stake of less than 50 percent, making them minority shareholders, Firdaus said.

 '€œWe have given input to the government from those existing insurance firms that hope that they will be given an exemption and be allowed to remain more than 80 percent foreign owned,'€ he said.

However, Firdaus said the government would make the final decision about whether those companies would be allowed to maintain their existing ownership structure.

The House of Representatives previously dropped its plan to include the foreign ownership cap on local insurance firms in the new 2014 Law on Insurance Business.

Prior to that, lawmakers had stated their intention to cap foreign ownership in local insurance firms to a maximum 49 percent, effectively limiting foreigners from becoming controlling shareholders.

In the domestic life insurance business, the 10 largest firms based on their total premiums are dominated by joint ventures backed by multinational firms, such as the UK'€™s Prudential plc, Canada'€™s Manulife Financial and Germany'€™s Allianz. State-owned Jiwasraya is the only local company competing in the top tier.

In addition to that, Firdaus said the OJK would also invite insurance firms to discuss a new stipulation regarding a '€œsingle presence policy'€ in the 2014 law that required two sister insurance firms owned by a single holding company to be merged into one.

'€œWe will discuss the issue next month with the industry, especially firms that might have two insurance subsidiaries,'€ he said.