Regulatory AlertsRegulation on Guarantee Business Units in General Insurance and Sharia General Insurance Companies
The Otoritas Jasa Keuangan issued Regulation No. 39/PADK.05/2025 to establish institutional requirements, licensing, and risk management standards for Guarantee Business Units (UUP) within general and Sharia general insurance companies. The regulation mandates that these units operate under government assignment, maintain executive leadership, and adhere to prudential principles including claim reserves and reinsurance. Compliance obligations, such as asset transfers and monthly reporting, commence with the June 2026 reporting period, while existing agreements remain valid until expiration.
Regulation of the Board of Commissioners Number 39/PADK.05/2025 regarding Guarantee Business Units in General Insurance Companies and Sharia General Insurance Companies
Abstract: The background for drafting this Regulation of the Board of Commissioners is to implement the mandate in Article 6 paragraph (4) of Financial Services Authority Regulation (POJK) Number 69/POJK.05/2016 concerning the Conduct of Business by Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies, as amended by POJK Number 36 of 2024 concerning Amendments to POJK Number 69/POJK.05/2016 concerning the Conduct of Business by Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies. It is necessary to regulate institutional requirements and the establishment of guarantee business units, the application of prudent principles, and adequate risk management for general insurance companies and Sharia general insurance companies that expand their business scope to include guarantees based on government assignment.
The substantive regulations include: a. General provisions; b. Establishment and licensing of the Guarantee Business Unit (UUP); c. Organizational structure and supporting resources of the UUP; d. Guarantee and Sharia guarantee business activities conducted by the UUP; and e. Format, structure, and composition of UUP reports.
The UUP may only conduct business activities after obtaining a UUP establishment license from the Financial Services Authority (OJK).
General insurance companies and Sharia general insurance companies that expand their business scope to include guarantees based on government assignment and have obtained a UUP establishment license must transfer the guarantee assets, liabilities, and equity based on government assignment previously held by the Company before this OJK Board of Commissioners Regulation takes effect.
The UUP must be led by a UUP Head who is an executive official, responsible: a. for all operational activities of the UUP; and b. to the Board of Directors that oversees the function of organizing UUP business activities.
The scope of UUP business activities is guarantee business based on government assignment.
The legal basis for this Regulation of the Board of Commissioners is: POJK No. 69/POJK.05/2016 as amended by POJK No. 36 of 2024.
In conducting business activities, the UUP applies prudent principles and adequate risk management, conducted at least by: a. establishing claim reserves; b. establishing general reserves; c. reinsuring Guarantees/Sharia Guarantees; d. having own retention for each Guarantee/Sharia Guarantee; and e. optimizing the capacity of Guarantees/Sharia Guarantees.
Note: This Regulation of the Board of Commissioners takes effect on the date of establishment. This Regulation of the Board of Commissioners was established on December 8, 2025. Guarantee agreements issued by general insurance companies or Sharia general insurance companies that expanded their business scope to include guarantees based on government assignment before this Financial Services Authority Board of Commissioners Regulation takes effect are declared to remain valid until the end of their guarantee period. Extensions of guarantee agreements conducted after this Financial Services Authority Board of Commissioners Regulation takes effect must comply with this Financial Services Authority Board of Commissioners Regulation. Cooperation agreements for guarantees between general insurance companies or Sharia general insurance companies that expanded their business scope to include guarantees based on government assignment with guarantee recipients, which were conducted before this Financial Services Authority Board of Commissioners Regulation takes effect, must be adjusted to this Financial Services Authority Board of Commissioners Regulation. The obligation of the guarantee business unit in general insurance companies and Sharia general insurance companies that expanded their business scope to include guarantees based on government assignment to submit monthly reports according to the format, structure, and submission procedures regulated in this Financial Services Authority Board of Commissioners Regulation begins for the first time for the June 2026 reporting period.