Amendment to Financial Health Regulations for Insurance and Reinsurance Companies

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 27/POJK.05/2018
CONCERNING
AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 71/POJK.05/2016 CONCERNING FINANCIAL HEALTH OF INSURANCE COMPANIES AND REINSURANCE COMPANIES BY THE GRACE OF THE ALMIGHTY GOD, THE COMMISSIONER COUNCIL OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in providing alternative investment instrument choices to insurance and reinsurance companies without ignoring the prudence aspect, suitability with the liability characteristics of insurance and reinsurance companies and the returns obtained, as well as increasing the role of domestic investors in supporting infrastructure development, it is necessary to refine the Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance Companies and Reinsurance Companies; b. that based on the considerations as mentioned in letter a, it is necessary to establish a Financial Services Authority Regulation concerning the Amendment to Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance Companies and Reinsurance Companies; Recalling:

1. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
2. Law Number 40 of 2014 concerning Insurance (State Gazette of the Republic of Indonesia Year 2014 Number 337, Supplement to the State Gazette of the Republic of Indonesia Number 5618);
3. Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance Companies and Reinsurance Companies (State Gazette of the Republic of Indonesia Year 2016 Number 304, Supplement to the State Gazette of the Republic of Indonesia Number 5994);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 71/POJK.05/2016 CONCERNING FINANCIAL HEALTH OF INSURANCE COMPANIES AND REINSURANCE COMPANIES.

Article I
Several provisions in the Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance Companies and Reinsurance Companies (State Gazette of the Republic of Indonesia Year 2016 Number 304, Supplement to the State Gazette of the Republic of Indonesia Number 5994) are amended as follows:

1. The provision of paragraph (2) of Article 5 is amended, so that Article 5 reads as follows:
   Article 5
   (1) Companies must apply prudence principles in investment placement.
   (2) Permitted Assets in the form of investments must be placed in the following types:
   a. time deposits at Banks, Rural Banks (BPR), and Islamic Rural Banks (BPRS), including deposit on call and time deposits with a term of less than or equal to 1 (one) month; b. deposit certificates at Banks;
   c. stocks listed on the stock exchange;
   d. corporate bonds listed on the stock exchange; e. MTN (Medium Term Notes); f. securities issued by the Republic of Indonesia; g. securities issued by countries other than the Republic of Indonesia; h. securities issued by Bank Indonesia;
   i. securities issued by multinational institutions of which the Republic of Indonesia is a member or shareholder;
   j. mutual funds; k. asset-backed securities;
   l. real estate investment funds in the form of collective investment contracts;
   m. securities transactions through repurchase agreement (REPO); n. direct participation in limited liability companies whose stocks are not listed on the stock exchange; o. land, buildings with strata title (strata title), or land with buildings, for investment; p. financing through cooperation mechanisms with other Parties in the form of credit provision cooperation (executing); q. pure gold; r. loans secured by land title rights; s. policy loans; t. regional bonds; and/or u. infrastructure investment funds in the form of collective investment contracts. (3) Permitted Assets in the form of investments as referred to in paragraph (2) that can be placed abroad must be in the following types:
   a. stocks listed on the stock exchange; b. corporate bonds listed on the stock exchange;
   c. securities issued by countries other than the Republic of Indonesia;
   d. securities issued by multinational institutions of which the Republic of Indonesia is a member or shareholder; e. mutual funds; and/or f. direct participation in companies whose stocks are not listed on the stock exchange. (4) Investment types as referred to in paragraph (2) and paragraph (3) also include investment types using Sharia principles. (5) Provisions regarding the valuation basis for each type of investment as referred to in paragraph (2) through paragraph (4) are regulated in an OJK Circular.

2. Between Article 5 and Article 6, 2 (two) articles are inserted, namely Article 5A and Article 5B, so that they read as follows:
   Article 5A
   (1) Placement of Permitted Assets in the form of investments in regional bonds as referred to in Article 5 paragraph (2) letter t must meet the following provisions:
   a. have received an effective statement from OJK; and b. have an investment grade rating from an effect rating company recognized by OJK.
   (2) Placement of Permitted Assets in the form of investments in infrastructure investment funds in the form of collective investment contracts as referred to in Article 5 paragraph (2) letter u must meet the following provisions:
   a. for infrastructure investment funds in the form of collective investment contracts issued through a public offering, have received an effective statement from OJK; b. for infrastructure investment funds in the form of collective investment contracts issued not through a public offering, have been registered with OJK;
   c. have an investment grade rating from an effect rating company recognized by OJK; and
   d. one of the portfolio investments of the infrastructure investment funds in the form of collective investment contracts in the form of infrastructure assets has generated income.

Article 5B
(1) Provisions regarding the calculation of the Minimum Risk-Based Capital (MMBR) amount for Companies that place Permitted Assets in the form of investments in:
a. regional bonds as referred to in Article 5 paragraph (2) letter t follow the provisions for calculating the MMBR amount for placements of Permitted Assets in the form of investments in corporate bonds listed on the stock exchange as referred to in Article 5 paragraph (2) letter d; and b. infrastructure investment funds in the form of collective investment contracts as referred to in Article 5 paragraph (2) letter u follow the provisions for calculating the MMBR amount for placements of Permitted Assets in the form of investments in real estate investment funds in the form of collective investment contracts as referred to in Article 5 paragraph (2) letter l. (2) Provisions regarding the valuation basis for placements of Permitted Assets in the form of investments in:
a. regional bonds as referred to in Article 5 paragraph (2) letter t follow the provisions regarding the valuation basis for corporate bonds listed on the stock exchange as referred to in Article 5 paragraph (2) letter d; and b. infrastructure investment funds in the form of collective investment contracts as referred to in Article 5 paragraph (2) letter u follow the provisions regarding the valuation basis for real estate investment funds in the form of collective investment contracts as referred to in Article 5 paragraph (2) letter l that are not traded on the stock exchange.

3. The provisions of paragraph (1) and paragraph (4) of Article 11 are amended, so that Article 11 reads as follows:
   Article 11
   (1) Restrictions on Permitted Assets in the form of investments as referred to in Article 5 paragraph (2) are as follows:
   a. investments in time deposits at Banks, including deposit on call and time deposits with a term of less than or equal to 1 (one) month, for each Bank are at most 20% (twenty percent) of the total investment amount; b. investments in time deposits, for each Rural Bank (BPR) and Islamic Rural Bank (BPRS) are at most 1% (one percent) of the total investment amount and in total are at most 5% (five percent) of the total investment amount;
   c. investments in deposit certificates for each Bank are at most 50% (fifty percent) of the total investment amount in time deposits at Banks as referred to in letter a;
   d. investments in stocks listed on the stock exchange, for each issuer are at most 10% (ten percent) of the total investment amount and in total are at most 40% (forty percent) of the total investment amount; e. investments in corporate bonds listed on the stock exchange, for each issuer are at most 20% (twenty percent) of the total investment amount and in total are at most 50% (fifty percent) of the total investment amount; f. investments in MTN and securities issued by multinational institutions of which the Republic of Indonesia is a member or shareholder, for each issuer are at most 20% (twenty percent) of the total investment amount and in total are at most 40% (forty percent) of the total investment amount; g. investments in securities issued by countries other than the Republic of Indonesia for each issuer are at most 10% (ten percent) of the total investment amount; h. investments in mutual funds, for each Investment Manager are at most 20% (twenty percent) of the total investment amount and in total are at most 50% (fifty percent) of the total investment amount;
   i. investments in asset-backed securities for each Investment Manager are at most 10% (ten percent) of the total investment amount and in total are at most 20% (twenty percent) of the total investment amount;
   j. investments in real estate investment funds in the form of collective investment contracts, for each Investment Manager are at most 10% (ten percent) of the total investment amount and in total are at most 20% (twenty percent) of the total investment amount; k. investments in REPO, for each counterparty are at most 2% (two percent) of the total investment amount and in total are at most 10% (ten percent) of the total investment amount;
   l. investments in direct participation (stocks not listed on the stock exchange), in total are at most 10% (ten percent) of the total investment amount;
   m. investments in land, buildings with strata title (strata title), or land with buildings, for investment, in total are at most 20% (twenty percent) of the total investment amount; n. investments in land for investment, in total are at most 1/3 (one third) of the total investment amount as referred to in letter m; o. investments in financing through cooperation mechanisms with other Parties in the form of credit provision cooperation (executing), for each Party are at most 10% (ten percent) of the total investment amount and in total are at most 20% (twenty percent) of the total investment amount; p. investments in pure gold, in total are at most 10% (ten percent) of the total investment amount; q. investments in loans secured by land title rights, in total are at most 10% (ten percent) of the total investment amount; r. investments in policy loans, with the amount of policy loans being at most 80% (eighty percent) of the cash value of the relevant policy. s. investments in regional bonds, for each issuer are at most 10% (ten percent) of the total investment amount and in total are at most 20% (twenty percent) of the total investment amount; and/or t. investments in infrastructure investment funds in the form of collective investment contracts, for each Investment Manager are at most 10% (ten percent) of the total investment amount and in total are at most 20% (twenty percent) of the total investment amount. (2) Placements of Permitted Assets in the form of investments in mutual funds as referred to in Article 5 paragraph (2) letter j, the underlying assets of which are entirely investments in securities issued by the Republic of Indonesia, are exempt from the provisions as referred to in paragraph (1) letter h. (3) Placements of Permitted Assets in the form of investments in mutual funds as referred to in Article 5 paragraph (2) letter j in the form of limited participation collective investment contracts for each Investment Manager are at most 10% (ten percent) of the total investment amount and in total are at most 20% (twenty percent) of the total investment amount. (4) Placements of Permitted Assets in the form of investments as referred to in paragraph (1) letter d, letter e, letter f, letter g, letter h, letter i, letter j, letter k, letter s, and letter t, in total, are at most 80% (eighty percent) of the total investment amount.

Article II
This Financial Services Authority Regulation takes effect on the date of enactment.

This copy is consistent with the original
Legal Director 1
Legal Department signed
Yuliana

In order that everyone may know it, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia. Established in Jakarta on December 10, 2018 CHAIRMAN OF THE COMMISSIONER COUNCIL FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed WIMBOH SANTOSO

Enacted in Jakarta on December 10, 2018

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2018 NUMBER 243

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 27/POJK.05/2018
CONCERNING
AMENDMENT TO FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 71/POJK.05/2016 CONCERNING FINANCIAL HEALTH OF INSURANCE COMPANIES AND REINSURANCE COMPANIES

I. GENERAL
Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance Companies and Reinsurance Companies is the legal basis for OJK in assessing the financial health of insurance and reinsurance companies. In addition, the aforementioned Financial Services Authority Regulation is also a guideline for Companies in carrying out operational activities, especially to maintain their financial health. One of the provisions regulated in Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance Companies and Reinsurance Companies is the choice of investment instruments that can serve as alternatives for Companies to invest. Every investment value made by Companies in the choice of investment instruments available in the aforementioned Financial Services Authority Regulation can be included in permitted assets, which can later be used for calculating the health level of the company. Currently, there are several investment products that exist and have not been included in the permitted choice of investment instruments for Companies, namely regional bonds and infrastructure investment funds in the form of collective investment contracts. Both types of investment instruments can be used to provide alternative investment instrument choices for Companies, but always prioritize the prudence aspect, suitability with the liability characteristics of insurance and reinsurance companies, and the returns obtained. In addition, both types of investment instruments can be used to increase the role of domestic investors, namely Companies, in supporting infrastructure development. In relation to the above, it is necessary to refine Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance Companies and Reinsurance Companies.

II. ARTICLE BY ARTICLE
Article I
Number 1
Article 5
Paragraph (1)
What is meant by "prudence principle" is investment placement that considers safety, optimal returns, liquidity needs, and the Company's Liability profile.
Paragraph (2)
Letter a
Clear enough.
Letter b
What is meant by "deposit certificate" is a deposit in the form of a deposit, including those based on Sharia principles, the certificate of deposit evidence of which can be transferred. Letter c Clear enough. Letter d Clear enough. Letter e Clear enough. Letter f Clear enough. Letter g Clear enough. Letter h Clear enough. Letter i Clear enough. Letter j Clear enough. Letter k Clear enough. Letter l Clear enough. Letter m Clear enough. Letter n Clear enough. Letter o Clear enough. Letter p Clear enough. Letter q Clear enough. Letter r Clear enough. Letter s Clear enough. Letter t What is meant by "regional bond" is a regional loan offered to the public through a public offering in the capital market. Letter u What is meant by "infrastructure investment fund in the form of collective investment contract" is a container in the form of a collective investment contract used to gather funds from public investors to subsequently invest most of them in infrastructure assets by the investment manager. Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) Clear enough. Number 2
Article 5A
Clear enough.
Article 5B
Clear enough.
Number 3
Article 11
Clear enough.
Article II
Clear enough.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6274