Amendment to OJK Regulation No. 72/POJK.05/2016 on Financial Health of Islamic Insurance and Reinsurance Companies

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
COPY
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 28 /POJK.05/2018
CONCERNING
AMENDMENT TO THE FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 72/POJK.05/2016 CONCERNING THE FINANCIAL HEALTH OF INSURANCE COMPANIES AND REINSURANCE COMPANIES WITH SHARIA PRINCIPLES BY THE GRACE OF THE MOST HIGH GOD, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that in providing alternative investment instrument choices to insurance companies and reinsurance companies with Sharia principles without ignoring the aspects of prudence, suitability with the characteristics of the liabilities of insurance companies and reinsurance companies with Sharia principles and the returns obtained, as well as increasing the role of domestic investors in supporting infrastructure development, it is necessary to improve the Financial Services Authority Regulation Number 72/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies with Sharia Principles; b. that based on the considerations as referred to in letter a, it is necessary to establish a Financial Services Authority Regulation concerning the Amendment to the Financial Services Authority Regulation Number 72/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies with Sharia Principles; 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 72/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies with Sharia Principles (State Gazette of the Republic of Indonesia Year 2016 Number 305, Supplement to the State Gazette of the Republic of Indonesia Number 5995);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING AMENDMENT TO THE FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 72/POJK.05/2016 CONCERNING THE FINANCIAL HEALTH OF INSURANCE COMPANIES AND REINSURANCE COMPANIES WITH SHARIA PRINCIPLES.

Article I
Several provisions in the Financial Services Authority Regulation Number 72/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies with Sharia Principles (State Gazette of the Republic of Indonesia Year 2016 Number 305, Supplement to the State Gazette of the Republic of Indonesia Number 5995) are amended as follows:

1. The provision of paragraph (2) of Article 13 is amended, so that Article 13
   reads as follows:
   Article 13
   (1) Companies must apply the principle of prudence in investment placement.
   (2) Permitted Assets from Tabarru’ Funds, Tanahud Funds, and Company Funds in the form of investment must be placed in the following types:
   a. time deposits at Sharia Commercial Banks, Sharia business units at commercial banks, or Sharia 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 Sharia Commercial Banks or Sharia business units at commercial banks;
   c. Sharia stocks listed on the stock exchange;
   d. sukuk or Sharia bonds listed on the stock exchange; e. Sharia MTN; f. Sharia securities issued by the Republic of Indonesia; g. Sharia securities issued by countries other than the Republic of Indonesia; h. Sharia securities issued by Bank Indonesia;
   i. Sharia securities issued by multinational institutions where the Republic of Indonesia is one of the members or shareholders;
   j. Sharia mutual funds; k. Sharia asset-backed securities;
   l. Sharia real estate investment funds in the form of collective investment contracts;
   m. Sharia securities transactions through repurchase agreement (REPO); n. Sharia financing through cooperation mechanisms with other parties in the form of Sharia financing provision cooperation (executing); o. pure gold; p. regional sukuk; and/or q. infrastructure investment funds in the form of collective investment contracts. (3) In addition to the types of investment as referred to in paragraph (2), Permitted Assets from Company Funds in the form of investment may also be placed in:
   a. direct participation in companies whose shares are not listed on the stock exchange; b. land, buildings with strata title, or land with buildings, for investment; and/or
   c. Sharia financing with mortgage rights.
   (4) Permitted Assets in the form of investment as referred to in paragraph (2) and paragraph (3) that can be placed abroad must be in the following types:
   a. Sharia stocks listed on the stock exchange; b. sukuk or Sharia bonds listed on the stock exchange;
   c. Sharia securities issued by countries other than the Republic of Indonesia;
   d. Sharia securities issued by multinational institutions where the Republic of Indonesia is one of the members or shareholders; e. Sharia mutual funds; and/or f. direct participation in companies whose shares are not listed on the stock exchange. (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 14 and Article 15, 2 (two) articles are inserted, namely Article 14A and Article 14B, so that they read as follows:
   Article 14A
   (1) Placement of Permitted Assets in the form of investment in regional sukuk as referred to in Article 13 paragraph (2) letter p must meet the following provisions:
   a. have received an effectiveness statement from OJK; and b. have an investment grade rating from a securities rating company recognized by OJK. (2) Placement of Permitted Assets in the form of investment in infrastructure investment funds in the form of collective investment contracts as referred to in Article 13 paragraph (2) letter q must meet the following provisions:
   a. their management does not contradict Sharia principles in the capital market; b. for infrastructure investment funds in the form of collective investment contracts issued through a public offering, have received an effectiveness statement from OJK;
   c. for infrastructure investment funds in the form of collective investment contracts issued not through a public offering, have been registered with OJK;
   d. have an investment grade rating from a securities rating company recognized by OJK; and e. one of the investment portfolios of the infrastructure investment fund in the form of collective investment contract in the form of infrastructure assets has generated income.

Article 14B
(1) Provisions regarding the calculation of the amount of DTMBR and MMBR for Companies that place Permitted Assets in the form of investment in:
a. regional sukuk as referred to in Article 13 paragraph (2) letter p follow the provisions for the calculation of the amount of DTMBR and MMBR for placement of Permitted Assets in the form of investment in sukuk or Sharia bonds listed on the stock exchange as referred to in Article 13 paragraph (2) letter d; and b. infrastructure investment funds in the form of collective investment contracts as referred to in Article 13 paragraph (2) letter q follow the provisions for the calculation of the amount of DTMBR and MMBR for placement of Permitted Assets in the form of investment in Sharia real estate investment funds in the form of collective investment contracts as referred to in Article 13 paragraph (2) letter l. (2) Provisions regarding the valuation basis for placement of Permitted Assets in the form of investment in:
a. regional sukuk as referred to in paragraph (2) letter p follow the provisions regarding the valuation basis for corporate bonds listed on the stock exchange as referred to in Article 13 paragraph (2) letter d; and b. infrastructure investment funds in the form of collective investment contracts as referred to in Article 13 paragraph (2) letter q follow the provisions regarding the valuation basis for Sharia real estate investment funds in the form of collective investment contracts as referred to in Article 13 paragraph (2) letter l that are not traded on the stock exchange.

3. The provisions of paragraph (1) and paragraph (4) of Article 19 are amended, so that Article 19 reads as follows:
   Article 19
   (1) Restrictions on Permitted Assets in the form of investment for each Tabarru’ Fund, Tanahud Fund, and Company Fund managed by the Company as referred to in Article 13 are as follows:
   a. investment in time deposits at Sharia Commercial Banks or Sharia business units at commercial banks, including deposit on call and time deposits with a term of less than or equal to 1 (one) month, for each Sharia Commercial Bank or Sharia business unit at commercial banks is at most 20% (twenty percent) of the total investment amount; b. investment in time deposits, for each BPRS is at most 1% (one percent) of the total investment amount and in total is at most 5% (five percent) of the total investment amount;
   c. investment in deposit certificates for each Sharia Commercial Bank or Sharia business unit at commercial banks is at most 50% (fifty percent) of the total investment amount in time deposits at Sharia Commercial Banks or Sharia business units at commercial banks as referred to in letter a;
   d. investment in Sharia stocks listed on the stock exchange, for each issuer is at most 10% (ten percent) of the total investment amount, and in total is at most 40% (forty percent) of the total investment amount; e. investment in sukuk or Sharia bonds listed on the stock exchange, for each issuer is at most 20% (twenty percent) of the total investment amount each, and in total is at most 50% (fifty percent) of the total investment amount; f. investment in Sharia MTN and Sharia securities issued by multinational institutions where the Republic of Indonesia is one of the members or shareholders, for each issuer is at most 20% (twenty percent) of the total investment amount and in total is at most 40% (forty percent) of the total investment amount; g. investment in Sharia securities issued by countries other than the Republic of Indonesia, for each issuer is at most 10% (ten percent) of the total investment amount; h. investment in Sharia mutual funds, for each Investment Manager is at most 20% (twenty percent) of the total investment amount, and in total is at most 50% (fifty percent) of the total investment amount;
   i. investment in Sharia asset-backed securities, for each Investment Manager is at most 10% (ten percent) of the total investment amount, and in total is at most 20% (twenty percent) of the total investment amount;
   j. investment in Sharia real estate investment funds in the form of collective investment contracts, for each Investment Manager is at most 10% (ten percent) of the total investment amount and in total is at most 20% (twenty percent) of the total investment amount; k. investment in REPO, for each counterparty is at most 2% (two percent) of the total investment amount and in total is at most 10% (ten percent) of the total investment amount;
   l. investment in Sharia financing through cooperation mechanisms with other parties in the form of Sharia financing provision cooperation (executing), for each party is at most 10% (ten percent) of the total investment amount, and in total is at most 20% (twenty percent) of the total investment amount;
   m. investment in pure gold, in total is at most 10% (ten percent) of the total investment amount; n. investment in direct participation (shares not listed on the stock exchange), in total is at most 10% (ten percent) of the total investment amount; o. investment in land, buildings with strata title, or land with buildings, for investment, in total is at most 20% (twenty percent) of the total investment amount; p. investment in land for investment, in total is at most 1/3 (one third) of the total investment amount as referred to in letter o; q. investment in Sharia financing with mortgage rights, in total is at most 10% (ten percent) of the total investment amount; r. investment in regional sukuk, for each issuer is at most 10% (ten percent) of the total investment amount, and in total is at most 20% (twenty percent) of the total investment amount; and/or s. investment in infrastructure investment funds in the form of collective investment contracts, for each Investment Manager is at most 10% (ten percent) of the total investment amount and in total is at most 20% (twenty percent) of the total investment amount. (2) Placement of Permitted Assets in the form of investment in Sharia mutual funds as referred to in Article 13 paragraph (2) letter j, whose underlying assets are entirely investments in securities issued by the Republic of Indonesia, is exempt from the provisions as referred to in paragraph (1) letter h. (3) Placement of Permitted Assets in the form of investment in Sharia mutual funds as referred to in Article 13 paragraph (2) letter j in the form of limited participation collective investment contracts, for each Investment Manager is at most 10% (ten percent) of the total investment amount and in total is at most 20% (twenty percent) of the total investment amount. (4) Placement of Permitted Assets in the form of investment as referred to in paragraph (1) letters d, e, f, g, h, i, j, k, r, and s, the total amount is at most 80% (eighty percent) of the total investment amount.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Yuliana

Article II
This OJK Regulation takes effect on the date of its promulgation.
To ensure that everyone knows it, it orders the promulgation of this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia. Established in Jakarta on December 10, 2018 CHAIRMAN OF THE COMMISSIONERS FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed WIMBOH SANTOSO Promulgated 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 244

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 28 /POJK.05/2018
CONCERNING
AMENDMENT TO THE FINANCIAL SERVICES AUTHORITY REGULATION NUMBER 72/POJK.05/2016 CONCERNING THE FINANCIAL HEALTH OF INSURANCE COMPANIES AND REINSURANCE COMPANIES WITH SHARIA PRINCIPLES

I. GENERAL
The Financial Services Authority Regulation Number 72/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies is the legal basis for OJK in assessing the financial health of insurance companies and reinsurance companies with Sharia Principles. In addition, the aforementioned Financial Services Authority Regulation also serves as a guideline for Companies in carrying out operational activities, particularly to maintain their financial health. One of the provisions regulated in the Financial Services Authority Regulation Number 72/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies with Sharia Principles is the choice of investment instruments that can serve as alternatives for Insurance Companies and Reinsurance Companies to invest. Every investment value carried out by Companies in the choice of investment instruments existing in the aforementioned Financial Services Authority Regulation can be included in permitted assets, which will 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 choice of permissible investment instruments for Companies, namely regional sukuk and infrastructure investment funds in the form of collective investment contracts. Both types of investment instruments mentioned can be used to provide alternative choices of investment instruments for Companies, while always prioritizing aspects of prudence, suitability with the characteristics of the liabilities of insurance companies and reinsurance companies and the returns obtained. In addition, both types of investment instruments mentioned can be used to increase the role of domestic investors, in this case Companies, in supporting infrastructure development. In relation to the above, it is necessary to improve the Financial Services Authority Regulation Number 72/POJK.05/2016 concerning the Financial Health of Insurance Companies and Reinsurance Companies with Sharia Principles.

II. ARTICLE BY ARTICLE
Article I
Number 1
Article 13
Paragraph (1)
What is meant by "principle of prudence" is investment placement that considers security, 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 based on Sharia Principles where the certificate of proof of deposit 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 What is meant by "regional sukuk" is a Sharia security in the form of a certificate or proof of ownership with equal value and representing an indivisible or undivided portion of the underlying assets that is issued by the regional government. Letter q What is meant by "infrastructure investment funds in the form of collective investment contracts" is a container in the form of a collective investment contract used to raise funds from investor public for the next most of which is invested in infrastructure assets by the Investment Manager. Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) Clear enough. Number 2
Article 14A
Paragraph (1)
Clear enough.
Paragraph (2)
Letter a
What is meant by "Sharia principles in the capital market" is Islamic legal principles in Sharia activities in the capital market based on fatwa of the National Sharia Council - Indonesian Ulema Council, as long as the aforementioned fatwa does not contradict Financial Services Authority Regulations concerning the Application of Sharia Principles in the Capital Market and/or Financial Services Authority Regulations otherwise based on fatwa of the National Sharia Council - Indonesian Ulema Council. Letter b Clear enough. Letter c Clear enough. Letter d Clear enough. Letter e Clear enough.
Article 14B
Clear enough.
Number 3
Article 19
Clear enough.
Article II
Clear enough.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6275