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Relaxed foreign ownership rule for insurers could save Jiwasraya: Experts
The new regulation allows foreign investors to purchase a more than 80 percent stake in local insurers if they wish to add paid-up capital, but only through initial public offerings via the Indonesia Stock Exchange (IDX) and only if no domestic investors are interested.
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Office of state-owned insurance company PT Asuransi Jiwasraya in Jakarta (kontan.co.id/Cheppy A Muchlis)
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oreign investors can now own a more than 80 percent stake in Indonesian insurance companies after the authorities that oversee the industry currently embroiled in cases of financial mismanagement committed to making regulatory reforms and tightening oversight in an effort to restore public trust.
Government Regulation No. 3/2020 on the insurance industry, signed by President Joko “Jokowi” Widodo on Jan. 16, revises an earlier rule that caps foreign ownership in local insurers at 80 percent.
The new regulation allows foreign investors to purchase a more than 80 percent stake in local insurers if they wish to add paid-up capital, but only through initial public offerings via the Indonesia Stock Exchange (IDX) and only if no domestic investors are interested.
Indonesia Insurance Council (DAI) chairman Dadang Sukresna said the regulatory relaxation would provide leeway to attract foreign investors to help save troubled state insurer Asuransi Jiwasraya. The government is opening up bids for investors to buy Jiwasraya’s subsidiary Jiwasraya Putra to rescue the state insurer, which has failed to pay Rp 12.4 trillion ($US908 million) in matured policies to its customers. The government also plans to inject state funds into Jiwasraya Putra.
Read also: Government readies insurance holding company to save Jiwasraya by February
“I do not see this regulation as being intended to save Jiwasraya, but it could be a way to attract foreign investors to buy some of Jiwasraya Putra’s shares and inject money into the insurer,” Dadang said after a meeting with House of Representatives’ Commission VI overseeing state-owned enterprises.
Indonesia’s insurance industry is in turmoil with the Attorney General’s Office (AGO) and the Supreme Audit Agency (BPK) investigating corruption allegations implicating former Jiwasraya executives and two business tycoons, which BPK warns has the potential to cause systemic risk in the financial sector.
