“We have conducted an audit into AJBB’s system and management; the company is ready to run again,” Financial Services Authority (OJK) chairman Wimboh Santoso said in a press conference on Thursday.

Starting Friday, he said, the insurance company would issue new policies again.

The OJK appointed a statutory management in October 2016 to replace Bumiputera’s board of directors, as the insurer’s financial condition went bad. The 106-year-old company had trouble paying out funds on expired policies.

The statutory management was tasked with restructuring AJBB’s assets, seeking new investors, ensuring the insurance company could meet its liabilities and changing the company’s status to that of a limited liability entity. AJBB is a mutual insurance company, meaning it is owned by its policyholders.

Then OJK commissioner for non-bank supervision, Firdaus Djaelani, believed that, as a mutual insurance company, AJJB would have difficulties growing, as it would have trouble adding more capital. As a limited liability company, the authority could easily ask the main shareholders to add capital if needed.

The statutory management in 2017 made an agreement with investors under PT Evergreen Invesco Tbk to establish a new insurance entity called PT Asuransi Jiwa Bumiputera (PT AJB).

After that, the name, operating license and 1,100 of the 3,200 staff members were transferred from AJBB to PT AJB. In return, PT AJB would give 40 percent of its profit to AJBB.

The agreement rendered AJBB inactive, in as much as it was no longer issuing new policies. It used its profit share to pay out funds on the expired policies, which also depleted its equity and finally would lead to its closure after all policies were paid.

Under the agreement, the investors had to pay Rp 2 trillion (US$140 million) in paid-in capital. The investors only paid Rp 536 billion in June 2017 and issued a promissory note to the statutory management.

However, the plan did not go through as expected.

Statutory manager for communication affairs Adhie Massardi previously said that PT AJB was only able to collect Rp 700 billion in revenue in 2017 instead of the targeted Rp 2 trillion.

Wimboh said the OJK had decided to terminate the agreement and unwind the process. AJBB’s management returned Rp 436 billion of the Rp 536 billion paid by the investors, the remaining Rp 100 billion were retained for paid-in capital, as the investor now continued the business and changed the name from PT AJB to PT Bhinneka Life.

“To pay the Rp 436 billion, AJBB has to cash in some of its securities and mutual funds. It has not sold any fixed assets and still liquid enough to operate,” he said.

In February, the OJK issued a new rule, POJK No. 1/2018 regarding mutual insurance companies, which forms the legal basis for mutual insurance.

“Insurance companies now can operate under a mutual structure, and currently we are preparing a government regulation with the Finance Ministry to strengthen the legal basis,” Wimboh said.

He added that the authority was committed to supervising mutual insurance companies, which had other capital requirements than their limited liability counterparts.

OJK commissioner for non-bank supervision Riswinandi said that, with the reactivation of AJBB, the tenure of the statutory managers would end soon. The members’ representative body (BPA) as the representative of policyholders would have to appoint new directors.

“The BPA will have to hold a meeting and propose candidates as new directors to us,” he said.

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