Amendment to POJK 17/POJK.05/2017 on Procedures for Administrative Sanctions in Insurance and Asset Freezing

Regulation of the Financial Services Authority Number 37 of 2024 concerning Amendment to POJK Number 17/POJK.05/2017 concerning Procedures and Methods for Imposing Administrative Sanctions in the Insurance Sector and Freezing Assets of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies

Abstract: In order to fulfill the mandate of Article 71 paragraph (4) of Law Number 40 of 2014 concerning Insurance as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector. This Financial Services Authority Regulation is established as an effort to:

1. strengthen law enforcement in the insurance industry;
2. increase the effectiveness of applying risk-based supervision mechanisms for insurance companies and reinsurance companies;
3. apply risk-based supervision methods in the procedure for imposing administrative sanctions on insurance and reinsurance companies, which were previously regulated progressively and based on compliance levels with statutory regulations (compliance-based).

The legal basis for this Financial Services Authority Regulation (POJK) is: Law No. 21 of 2011 as amended by Law No. 4 of 2023; Law No. 40 of 2014 as amended by Law No. 4 of 2023; and POJK No. 17/POJK.05/2017.

Refinements in this Financial Services Authority Regulation, particularly for insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies, include among others:

1. addition of the type of administrative sanction in the form of a reduction in health level;
2. change in the time limit for imposing administrative sanctions, which was originally limiting, to flexible based on the Financial Services Authority's considerations and assessments;
3. change in the procedure and method for imposing administrative sanctions, which was originally progressive, to non-progressive and based on violation categories.

The imposition of administrative sanctions for insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies is divided into 2 (two) categories of violations:

1. administrative violations, which are violations that do not have a significant and material impact on the financial health of insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies; and
2. substantive violations, which are violations that have a significant and material impact on the financial health of insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies.

In determining the category of violations, the Financial Services Authority uses general considerations and specific considerations to subsequently determine the type of administrative sanction to be imposed on insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies for each violation that occurs.

Provisions regarding the imposition of administrative sanctions for insurance brokerage companies, reinsurance brokerage companies, and insurance loss assessors remain regulated progressively, starting with administrative sanctions in the form of written warnings. Provisions regarding the imposition of administrative sanctions for actuarial consultants, public accountants, valuers, or other parties who are service provider professions for the insurance industry remain regulated progressively, starting with administrative sanctions in the form of written warnings.

Notes: This Financial Services Authority Regulation takes effect 3 (three) months from the date of promulgation. This Financial Services Authority Regulation was promulgated on December 23, 2024, and established on December 20, 2024. Administrative sanctions that have been imposed by the Financial Services Authority prior to the effectiveness of this Financial Services Authority Regulation are declared to remain valid. Administrative sanctions that have been imposed by the Financial Services Authority but are not yet completed at the time this Financial Services Authority Regulation takes effect, the procedure and method for imposing administrative sanctions must be adjusted to this Financial Services Authority Regulation.

At the time this Financial Services Authority Regulation takes effect, provisions regarding the progressive imposition of administrative sanctions as referred to in: a. Article 80 paragraph (2) of Financial Services Authority Regulation Number 73/POJK.05/2016 concerning Good Corporate Governance for Insurance Companies as amended by Financial Services Authority Regulation Number 43/POJK.05/2019 concerning Amendment to Financial Services Authority Regulation Number 73/POJK.05/2016 concerning Good Corporate Governance for Insurance Companies; and b. Article 52 paragraph (2) of Financial Services Authority Regulation Number 1/POJK.05/2018 concerning Financial Health for Insurance Companies in the Form of Joint Legal Entity Business Entities, are repealed and declared invalid.

At the time this Financial Services Authority Regulation takes effect, provisions regarding the progressive imposition of administrative sanctions as referred to in: a. Article 24 of Financial Services Authority Regulation Number 24/POJK.05/2019 concerning Business Plans of Non-Bank Financial Service Institutions; and b. Article 5 of Financial Services Authority Regulation Number 1/POJK.05/2016 concerning Investment in Government Securities for Non-Bank Financial Service Institutions as amended several times, lastly by Financial Services Authority Regulation Number 56/POJK.05/2017 concerning the Second Amendment to Financial Services Authority Regulation Number 1/POJK.05/2016 concerning Investment in Government Securities for Non-Bank Financial Service Institutions, are declared invalid for insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies.