Annual Actuarial Report for Insurance, Reinsurance, Sharia Insurance, and Sharia Reinsurance Companies

To:

1. The Board of Directors of Insurance Companies;
2. The Board of Directors of Reinsurance Companies;
3. The Board of Directors of Sharia Insurance Companies; and
4. The Board of Directors of Sharia Reinsurance Companies,
   At their respective locations.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 29 /SEOJK.05/2017 CONCERNING ANNUAL ACTUARIAL REPORTS FOR INSURANCE COMPANIES, REINSURANCE COMPANIES, SHARIA INSURANCE COMPANIES, AND SHARIA REINSURANCE COMPANIES

In relation to the mandate of the following regulations:

1. Article 44 paragraph (8) of Financial Services Authority Regulation Number 71/POJK.05/2016 concerning the 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); and
2. Article 45 paragraph (8) of 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),
   it is necessary to regulate implementation provisions regarding the form and structure of annual actuarial reports for insurance companies, reinsurance companies, Sharia insurance companies, and Sharia reinsurance companies in this Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS
In this Financial Services Authority Circular, the following terms are defined as:

1. Company means an insurance company, reinsurance company, Sharia insurance company, Sharia reinsurance company, insurance company with a Sharia unit, or reinsurance company with a Sharia unit.
2. Liability means obligations as referred to in legislation in the field of insurance.

II. FORM AND STRUCTURE OF ANNUAL ACTUARIAL REPORTS

1. The annual actuarial report of the Company is prepared in accordance with the form and structure as set forth in the Appendix, which is an integral part of this Financial Services Authority Circular.
2. For insurance companies or reinsurance companies that have a Sharia unit, the statements, analyses, opinions, and recommendations contained in the actuarial report also apply to the Sharia unit.
3. The actuarial report as referred to in item 1 applies mutatis mutandis to general insurance companies or general Sharia insurance companies whose actuarial reports are still signed by Company employees who hold a certified non-life analyst certificate from the Indonesian Actuarial Association or registered actuarial consultants with the Financial Services Authority and are not affiliated with the Company, valid until December 31, 2017.

III. CLOSING PROVISIONS

1. This Financial Services Authority Circular takes effect on July 1, 2017.
2. Upon the effectiveness of this Financial Services Authority Circular, the Chairman of the Capital Market and Financial Institutions Supervisory Board Regulation Number PER-10/BL/2012 concerning Annual Actuarial Reports for Insurance Companies and Reinsurance Companies is repealed and declared invalid.

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

Issued in Jakarta on June 13, 2017
EXECUTIVE HEAD OF SUPERVISOR FOR
INSURANCE, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY, signed
FIRDAUS DJAELANI

APPENDIX
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 29 /SEOJK.05/2017 CONCERNING ANNUAL ACTUARIAL REPORTS FOR INSURANCE COMPANIES, REINSURANCE COMPANIES, SHARIA INSURANCE COMPANIES, AND SHARIA REINSURANCE COMPANIES

Annual Actuarial Report
[Company Name] [Reporting Period]

I. STATEMENT OF COMPANY ACTUARY AND BOARD OF DIRECTORS
I.1 Company Actuary Statement
This section must contain at least:
I.1.1 Company Actuarial Information including:

• Company Name;
• Company Actuary Name;
• Home Address and Telephone Number;
• Office Address and Telephone Number;
• Date of Appointment;
• Place and Date of Birth;
• Professional Qualification; and
• Work Experience (in accordance with the scope of duties).
  I.1.2 Description of procedures carried out and compliance with sound practice standards.
  I.1.3 Responsibility of the Company Actuary for the annual actuarial report.
  I, the undersigned, declare that:

1. All information provided has been made based on professional actuarial judgment and has applied adequate tests;
2. I am fully responsible for this annual actuarial report as a whole; and
3. This report is prepared in accordance with applicable legislation and general actuarial principles.
   Place, date of preparation
   Signed.
   Name
   Indonesian Actuarial Association (IAI) Registration Number Public Actuary License Number

I.2 Board of Directors Statement
We, the undersigned, declare that:

1. The liability determination procedure has been in accordance with applicable legislation;
2. The information provided to the Company Actuary in the annual actuarial report (Company Name) ... year ... is accurate and complete; and
3. We have understood the contents of this annual actuarial report and will implement the recommendations outlined in this actuarial report.
   Place, date of preparation
   Position *)
   Signed.
   Name
   *)Board of Directors authorized according to the Company's internal mechanisms

II. EXECUTIVE SUMMARY
This section contains the purpose of preparing the report, the scope of the report, a summary of changes since the last report, main conclusions (key findings) from the report including the Company's estimated ability to meet future obligations, and recommendations given by the Company Actuary to the Board of Directors.

III. INTRODUCTION
This section contains:

1. Background and purpose of the report;
2. Scope of the report;
3. Legal basis of the report; and
4. Materiality, reliance, and limitations in the preparation of the report.

IV. FOLLOW-UP ON RECOMMENDATIONS FROM PREVIOUS PERIODS
In this section, the Company Actuary must explain recommendations that have been implemented and those that have not, including any limitations encountered and target completion times.

V. DATA QUALITY
In this section, the Company Actuary must explain data completeness, data reliability, procedures carried out to ensure data completeness and reliability, including methods used and weaknesses in the data.

VI. COMPANY BUSINESS OVERVIEW
In this section, the Company Actuary must provide a description of general Company information consisting of the Company's structure and operations, including:

1. Business lines or products marketed
   The Company Actuary must describe the composition of products currently marketed and the composition of products planned for future marketing according to the Company's plans.
   Additionally, the Company Actuary must provide a description of the discontinuation of product marketing or plans to discontinue product marketing, accompanied by reasons for discontinuation and a description of portfolio management for products no longer marketed.
2. Target market
   The Company Actuary must describe the target market for each business line or product currently marketed and the Company's future plans.
3. Distribution channels used
   The Company Actuary must describe the distribution channels for each business line or product currently marketed and the Company's future plans.

VII. FINANCIAL HEALTH LEVEL AND CAPITAL ADEQUACY
This section must contain at least:

1. Analysis of financial health and capital adequacy
   The annual actuarial report must contain the Company's financial health level and own capital for at least the last 5 (five) years in the form of a table or graph.
   The Company Actuary must provide a description of events causing increases or decreases in the Company's financial health level and own capital, as well as the Company's policies regarding capital structure. Furthermore, the main drivers causing significant movements in the Company's financial health level and own capital must be described if there are significant movements.
2. Projection of financial health and capital adequacy
   The annual actuarial report must contain projections of the Company's financial health level and own capital for at least the next 5 (five) years in the form of a table or graph.
   This section must also contain an analysis of the deviation between last year's solvency projection and this year's realization to provide an indication of whether there is a large deviation or not, and simultaneously serve as a control for the Company Actuary in making projections so that the projections made are reliable. The Company Actuary must conduct stress tests to determine the impact of various events and scenarios on the Company's financial health level and own capital position to show events that may threaten the adequacy of the financial health level and the fulfillment of minimum capital.
3. Assumptions used
   The Company Actuary must provide an explanation of the assumptions used in the financial health and capital projections, and an explanation of the reasonableness of the assumptions used. If there are changes to the assumptions used, the Company Actuary must explain the reasons and impacts of such changes.
4. Analysis of the Company's access to capital needs
   The Company Actuary must provide an explanation regarding the Company's ability to obtain additional capital from shareholders or other sources.
5. Analysis of Company risks related to the formation of non-investment assets
   The Company Actuary must provide an explanation regarding the risks faced by the Company in forming non-investment assets, particularly if the Company forms deferred acquisition costs or implements capital-supporting reinsurance programs.

VIII. PREMIUM OR CONTRIBUTION PRICING AND PROFITABILITY
This section must contain at least:

1. Premium or contribution pricing policy
   The Company Actuary must provide an analysis of the premium or contribution pricing policy procedures for each business line or product marketed, including the assumptions used.
2. Review of pricing policy
   The Company Actuary must review the premium or contribution pricing policy if there are changes in pricing policies and procedures, or assumptions used in premium or contribution pricing.
3. Analysis of cost realization and profitability
   The Company Actuary must provide an analysis of cost realization and profitability for each business line or product marketed. Additionally, the Company Actuary must assess the profitability generated by a product and its impact on the Company's overall financial condition.
4. Profitability analysis for new and old coverage
   For life insurance companies, the Company Actuary must provide a profitability analysis for new and old coverage. The Company Actuary must show whether the new coverage produced in the current year generates profit or results in a loss.
5. Profit distribution
   The Company Actuary must provide an explanation regarding the amount of policyholder and shareholder profits for life insurance products containing a participation element. If the life insurance company does not have participation products, the entire discussion focuses on shareholder profits.
6. Underwriting Surplus Distribution
   The Company Actuary must provide an explanation regarding the calculation of underwriting surplus, the distribution of underwriting surplus for tabarru' funds, participants, and the Company, as well as the impact of underwriting surplus distribution on the financial health of tabarru' funds and tanahud funds.
7. Historical profitability analysis
   The Company Actuary must provide a historical profitability analysis for at least the last 5 (five) years and a projection for the next 5 (five) years. To support the depiction of the profitability analysis, the annual actuarial report must contain a table or graph of profitability trends for the last 5 (five) years. This section must also contain an analysis of the deviation between last year's profitability projection and this year's realization to provide an indication of whether there is a large deviation or not, and simultaneously serve as a control for the Company Actuary in making projections so that the projections made are reliable.

IX. LIABILITIES

1. Methods, assumptions, and calculation models used
   The Company Actuary must provide a description of the methods, assumptions, and calculation models used by the Company in forming Liabilities, particularly technical reserves for each business line and product. If there are changes in methods and assumptions for forming technical reserves or technical provisions, the appointed Company Actuary must explain the reasons and impacts of such changes on the amount of technical reserves or technical provisions reported and the Company's solvency level. The Company Actuary must provide an analysis of the sources of increases or decreases in technical reserves or technical provisions by comparing each assumption used with its realization.
2. Company Actuary's Opinion
   The Company Actuary must provide an opinion on the methods, assumptions, and calculation models used by the Company.

X. ASSET-LIABILITY MATCHING
The Company Actuary must provide a description regarding:

1. Analysis of the asset valuation methods conducted by the Company.
2. Analysis related to asset diversification including market risk, credit risk, liquidity risk, insurance risk, and operational risk.
3. Analysis of the asset profile in relation to the Company's liabilities, covering yield levels, duration, and liquidity.

XI. REINSURANCE
The Company Actuary must provide a description regarding:

1. Analysis of the reinsurance support held by the Company and its compatibility with the characteristics of business lines or products marketed.
2. Analysis of the self-retention established by the Company.
3. Quality of reinsurers supporting the Company's reinsurance program.

XII. RISK MANAGEMENT
The Company Actuary must provide a description regarding:

1. Description and opinion of the Company Actuary regarding the existing risk management framework in the Company.
2. Analysis of the effectiveness of the implementation of existing risk management in the Company.

XIII. FINANCIAL PROJECTIONS
Estimates of the Company's ability to meet future obligations in the form of a 5 (five) year projection of the Company's business, asset and liability growth, and financial health. In making projections, the Actuary must use optimistic, normal, and pessimistic scenarios. Assumptions in pessimistic assumptions must include at least:

1. occurrence of a financial crisis;
2. inflation higher than expected;
3. catastrophic losses;
4. decrease in investment yields;
5. decrease in the number of new coverages;
6. increase in policy lapse rates; and
7. increase in claim rates.
   The Company Actuary must conduct an analysis of the deviation between last year's profitability projection and this year's realization to provide an indication of whether there is a large deviation or not, and simultaneously serve as a control for the Company Actuary in making projections so that the projections made are reliable.

XIV. OTHER AREAS REQUIRING ATTENTION
The Company Actuary must provide a description of other matters that the Company Actuary deems important to disclose, especially those that have the potential to negatively affect the Company. The Company Actuary may provide a brief description if there is material information and/or facts that occurred and are deemed necessary to be communicated after the date of the Company Actuary's report.

Issued in Jakarta on June 13, 2017
EXECUTIVE HEAD OF SUPERVISOR FOR
INSURANCE, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY, signed
FIRDAUS DJAELANI