The Jakarta Post
Deliberations on a foreign ownership cap for insurance companies are almost complete for the insurance bill, which is expected to be passed into law before the current administration ends its term in October, an official at the Financial Services Authority (OJK) has said.
The OJK's deputy commissioner for the non-banking industry, Ngalim Sawega, said Thursday that the government and lawmakers at the House of Representatives were close to reaching consensus on the limit.
'It [the foreign ownership issue] is everyone's concern. We have a mutual perception that it needs to be limited,' he told reporters during a press briefing.
At the moment, according to Ngalim, foreign investors were permitted to own more than 90 percent of both life and general insurance companies in Indonesia, but the regulator, government and lawmakers are looking to reduce the scale.
Indonesia's commitments under the World Trade Organization (WTO) was to allow foreign ownership to reach between 49 and 50 percent, he said, adding that the limit may be reduced to that range later.
The OJK, however, will first have to consider the current situation and the need for insurance within society before setting the cap at a specific percentage. 'We have to make sure that local companies can fill the gap that may arise as a consequence of the cap,' he said.
There are currently 51 life insurance firms and 86 general insurance and reinsurance companies operating nationwide. A majority of them are joint ventures between local and international entities.
In life insurance, the 10 largest firms according to premiums are dominated by joint ventures backed by multinational firms, namely the UK's Prudential plc, Canada's Manulife Financial, Germany's Allianz SE and Japan's Mitsui Sumitomo Insurance Group. State-owned Jiwasraya is the only local company competing in the top league.
In contrast to life insurance, the big joint venture players in general insurance consist of names such as state-controlled Jasindo and Askrindo.
All life insurers had Rp 306.36 trillion (US$25.96 billion) in combined assets in the first half of 2014, according to the latest data from the OJK. Meanwhile, general insurance and reinsurance companies recorded assets of Rp 106.04 trillion for the same period.
Contacted separately, Manulife Indonesia president director Chris Bendl said he hoped that the reduction would not be implemented retroactively to existing life insurers. Canadian Manulife currently has majority ownership in its Indonesian subsidiary of 95 percent stake.
'An investor needs to own a big enough stake to have control in the company, otherwise things will not go the way the investor wants and the practices will not be carried out accordingly,' Bendl said.
Moreover, he added, the investor would not be able to consolidate any financial achievements by the subsidiary within its own.
Joachim Wessling, Allianz Indonesia CEO and country manager, voiced a similar opinion.
'You wouldn't want to have less than a 51 percent stake because then your investment would be subject to someone else's control. By having majority control, you can elect your CEO and finance director, and make sure your business runs smoothly,' he said.
Allianz has more than 90 percent stakes in both Allianz Life Indonesia and Asuransi Allianz Utama.
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