Financial Services Authority Circular No. 16/SEOJK.05/2014 Regarding Committees on the Board of Commissioners of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies

To:

1. Insurance Companies;
2. Sharia Insurance Companies;
3. Reinsurance Companies; and
4. Sharia Reinsurance Companies
   at their respective locations.

COPY

FINANCIAL SERVICES AUTHORITY CIRCULAR
NUMBER 16/SEOJK.05/2014

REGARDING

COMMITTEES ON THE BOARD OF COMMISSIONERS
OF INSURANCE COMPANIES, SHARIA INSURANCE COMPANIES, REINSURANCE COMPANIES, AND SHARIA REINSURANCE COMPANIES

In relation to the mandate of Article 27 paragraph (6) of Financial Services Authority Regulation Number 2/POJK.05/2014 concerning Good Corporate Governance for Insurance Companies (State Gazette of the Republic of Indonesia Year 2014 Number 71, Supplement to the State Gazette of the Republic of Indonesia Number 5526), it is necessary to regulate the formation, membership composition, and term of office of committees on the board of commissioners of insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies in this Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

1. Company means insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies.

2. Insurance Company means general insurance companies and life insurance companies.

3. Sharia Insurance Company means Sharia general insurance companies and Sharia life insurance companies.

4. Reinsurance Company means a company conducting reinsurance business as referred to in the insurance law.

5. Sharia Reinsurance Company means a company conducting Sharia reinsurance business as referred to in the insurance law.

6. Company Organ means the General Meeting of Shareholders, the Board of Directors, and the Board of Commissioners for Companies in the form of a limited liability company or equivalent to the General Meeting of Shareholders, Board of Directors, and Board of Commissioners for Companies in the form of a cooperative or joint business legal entity.

7. General Meeting of Shareholders, hereinafter abbreviated as GMS, means the General Meeting of Shareholders as referred to in the limited liability company law for Companies in the form of a limited liability company or equivalent to the GMS for Companies in the form of a cooperative or joint business legal entity.

8. Board of Directors means the Company Organ that performs management functions as referred to in the limited liability company law for Companies in the form of a limited liability company or equivalent to the Board of Directors for Companies in the form of a cooperative or joint business legal entity.

9. Board of Commissioners means the Company Organ that performs supervision and advisory functions as referred to in the limited liability company law or equivalent to the Board of Commissioners for Companies in the form of a cooperative or joint business legal entity.

10. Independent Commissioner means a member of the Board of Commissioners who is not affiliated with shareholders, members of the Board of Directors, other members of the Board of Commissioners and/or members of the Sharia Supervisory Board, namely having no financial, management, share ownership and/or family relationships with shareholders, members of the Board of Directors, other members of the Board of Commissioners and/or members of the Sharia Supervisory Board or other relationships that can influence their ability to act independently.

11. Committee means a committee formed and responsible to the Board of Commissioners to assist in the implementation of the Board of Commissioners' duties, consisting of audit committees, risk monitoring committees, remuneration and nomination committees, corporate governance policy committees, and other committees.

12. Audit Committee means a committee formed and responsible to the Board of Commissioners to assist the Board of Commissioners in monitoring and ensuring the effectiveness of the internal control system and the implementation of duties of internal auditors and independent/external auditors.

13. Risk Monitoring Committee means a committee formed and responsible to the Board of Commissioners to assist the Board of Commissioners in monitoring the implementation of risk management and assessing the risk tolerance that can be taken by the Company.

14. Remuneration and Nomination Committee means a committee formed and responsible to the Board of Commissioners to assist the Board of Commissioners in reviewing and monitoring the Company's remuneration and nomination procedures.

15. Corporate Governance Policy Committee means a committee formed and responsible to the Board of Commissioners to assist the Board of Commissioners in reviewing and monitoring the comprehensive application of good corporate governance and assessing the consistency of its application.

16. Independent Party means an individual outside the Company who is independent and has adequate expertise, experience, and knowledge in the fields of audit, finance, accounting, Sharia accounting, law, risk management, corporate governance, human resources, and/or insurance.

17. Good Corporate Governance for Companies, hereinafter abbreviated as Good Corporate Governance, is the structure and process used and applied by the Company Organ to improve the achievement of business results objectives and optimize the Company's value for all stakeholders, particularly policyholders, insured parties, participants, and/or parties entitled to benefits, in an accountable manner and based on legislation and ethical values.

18. Financial Services Authority is an independent institution free from the interference of other parties, which has the function, task, and authority for regulation, supervision, examination, and investigation as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

II. COMMITTEES

1. Companies are required to have an Audit Committee and a Risk Monitoring Committee.

2. Committees as referred to in item 1 must be formed separately.

3. In addition to the Committees as referred to in item 1, Companies may form Remuneration and Nomination Committees, Corporate Governance Policy Committees, and other committees.

4. Committees must act independently in carrying out their duties and responsibilities.

5. Companies are required to have a committee charter or working guidelines for each Committee, which clearly establishes the role and responsibilities of the Committee and its scope of work.

6. The committee charter or working guidelines as referred to in item 5 must consist of at least:
   a. composition, membership requirements, and expertise of the Committee; b. disclosure of the Committee's independence;
   c. duties, responsibilities (including maintaining the confidentiality of data and information), and authority of the Committee;
   d. scope of work; e. Committee meetings; f. reporting; and g. term of office of the Committee.

7. The committee charter or working guidelines as referred to in item 5 must be approved by the Board of Commissioners.

8. Committee membership must consist of at least 3 (three) persons.

9. Committee members are appointed and dismissed by the Board of Commissioners.

10. In the event that the chairman and/or members of the Committee resign, the chairman and/or members of the Committee must be replaced within a maximum of 1 (one) month from the resignation of the chairman and/or members of the Committee, unless the person who resigned is:
    a. the chairman of the Audit Committee or the chairman of the Risk Monitoring Committee in an Insurance Company, who must be replaced by another Independent Commissioner until a new Independent Commissioner is appointed; or b. the chairman of the Audit Committee or the chairman of the Risk Monitoring Committee in a Reinsurance Company, who must be replaced by another Independent Commissioner or Independent Party until a new Independent Commissioner or Independent Party is appointed.

III. AUDIT COMMITTEE

1. The membership of the Audit Committee of Insurance Companies and Sharia Insurance Companies must consist of at least:
   a. 1 (one) Independent Commissioner serving as chairman; b. 1 (one) member with expertise in audit, finance, accounting, or Sharia accounting for Sharia Insurance Companies and Insurance Companies with Sharia units; and
   c. 1 (one) member with expertise in law or insurance.

2. The membership of the Audit Committee of Reinsurance Companies and Sharia Reinsurance Companies must consist of at least:
   a. 1 (one) chairman who is:

1. an Independent Commissioner in the event that Reinsurance Companies and Sharia Reinsurance Companies have Independent Commissioners; or
2. an Independent Party with expertise in audit, finance, law, insurance, accounting, or Sharia accounting for Sharia Reinsurance Companies and Reinsurance Companies with Sharia units, in the event that Reinsurance Companies and Sharia Reinsurance Companies do not have Independent Commissioners;
   b. 1 (one) member with expertise in law or insurance; and
   c. 1 (one) member with expertise in audit, finance, accounting, or Sharia accounting for Sharia Reinsurance Companies and Reinsurance Companies with Sharia units.

3. The chairman or members of the Audit Committee are considered to have expertise in audit, finance, accounting, or Sharia accounting if they meet the criteria:
   a. have knowledge and/or education in audit, finance, and/or accounting, including Sharia accounting; and b. have work experience in audit, finance, and/or accounting for at least 3 (three) years or Sharia accounting for at least 1 (one) year.

4. The chairman or members of the Audit Committee are considered to have expertise in law or insurance if they meet the criteria:
   a. have knowledge and/or education in law and/or insurance; and b. have work experience in law and/or insurance for at least 5 (five) years.

5. The Audit Committee is tasked with assisting the Board of Commissioners in:
   a. ensuring that internal controls are implemented properly; b. ensuring that internal audits and independent audits are implemented in accordance with applicable auditing standards;
   c. ensuring that the Board of Directors implements follow-up actions on the findings of internal audit units, independent/external auditors, and the results of Financial Services Authority supervision;
   d. recommending the appointment of candidate independent/external auditors; and e. ensuring the conformity of financial reports with applicable accounting standards.

6. The term of office of Audit Committee members is determined to be the same as the term of office of the Board of Commissioners as stipulated in the Company's Articles of Association and can be re-elected only for 1 (one) subsequent term.

IV. RISK MONITORING COMMITTEE

1. The membership of the Risk Monitoring Committee of Insurance Companies and Sharia Insurance Companies must consist of at least:
   a. 1 (one) Independent Commissioner serving as chairman; b. 1 (one) member with expertise in risk management or actuarial science; and
   c. 1 (one) member with expertise in finance, economics, and/or insurance.

2. The membership of the Risk Monitoring Committee of Reinsurance Companies and Sharia Reinsurance Companies must consist of at least:
   a. 1 (one) chairman who is:

1. an Independent Commissioner in the event that Reinsurance Companies and Sharia Reinsurance Companies have Independent Commissioners; or
2. an Independent Party with expertise in risk management, actuarial science, or finance in the event that Reinsurance Companies and Sharia Reinsurance Companies do not have Independent Commissioners;
   b. 1 (one) member with expertise in risk management or actuarial science; and
   c. 1 (one) member with expertise in finance, economics, and/or insurance.

3. The chairman or members of the Risk Monitoring Committee are considered to have expertise in risk management or actuarial science if they meet the criteria:
   a. have knowledge and/or education in risk management or actuarial science; and/or b. have work experience for at least 2 (two) years in risk management or actuarial science.

4. The chairman or members of the Risk Monitoring Committee are considered to have expertise in finance, economics, and/or insurance if they meet the criteria:
   a. have knowledge and/or education in finance, economics, and/or insurance; and b. have work experience in finance, economics, and/or insurance for at least 5 (five) years.

5. The Risk Monitoring Committee is tasked with assisting the Board of Commissioners in:
   a. conducting supervision and monitoring of the implementation of risk management application; and b. assessing the effectiveness of risk management, including assessing the risk tolerance that can be taken by the Company.

6. The term of office of Risk Monitoring Committee members is determined to be the same as the term of office of the Board of Commissioners as stipulated in the Company's Articles of Association and can be re-elected only for 1 (one) subsequent term.

V. OTHER COMMITTEES

1. To assist in the implementation of the Board of Commissioners' duties, Companies may form Remuneration and Nomination Committees and Corporate Governance Policy Committees.

2. Remuneration and Nomination Committee
   a. The membership of the Remuneration and Nomination Committee must consist of at least:

1. 1 (one) member of the Board of Commissioners serving as chairman;
2. 1 (one) Independent Party with expertise, knowledge, and experience in human resources; and
3. 1 (one) executive officer of the Company in charge of the human resources field or 1 (one) employee representative.
   b. Executive officers of the Company in charge of the human resources field or employee representatives who are members of the Committee must have knowledge regarding the Company's remuneration, nomination, and succession plan systems.
   c. Companies may form remuneration committees and nomination committees separately.
   d. In the event that Companies form Remuneration and Nomination Committees separately, the membership of each committee is as referred to in letter a, with the provision that executive officers of the Company or employee representatives as referred to in letter a, item 3) must have knowledge regarding:
4. the Company's remuneration system, for remuneration committees; or
5. the Company's nomination and succession plan systems, for nomination committees.
   e. The Remuneration and Nomination Committee performs duties as follows:
6. In the Remuneration Field
   a) studying legislation and regulations applicable in remuneration policies; b) ensuring that the Company has a transparent remuneration system consisting of salaries or honoraria, allowances, and facilities that are fixed and variable incentives; c) assisting the Board of Commissioners in formulating and determining remuneration policies consisting of salaries or honoraria, allowances, and facilities that are fixed and variable incentives for the Board of Commissioners and Board of Directors, if necessary to be proposed to the GMS; and d) evaluating the employee compensation system, provision of allowances, and other facilities.
7. In the Nomination Field
   a) formulating selection criteria and nomination procedures for members of the Board of Directors, members of the Board of Commissioners, and other executive officers within the Company; b) creating evaluation systems and providing recommendations regarding the required number of members of the Board of Directors and members of the Board of Commissioners of the Company; c) seeking candidates for members of the Board of Directors and members of the Board of Commissioners to obtain GMS decisions in accordance with the Company's Articles of Association; and d) providing recommendations regarding Independent Parties who will become members of the Committee. f. The term of office of Remuneration and Nomination Committee members is determined to be the same as the term of office of the Board of Commissioners as stipulated in the Company's Articles of Association and can be re-elected only for 1 (one) subsequent term, except that the committee chairman can be re-elected for more than 1 (one) subsequent term.

3. Corporate Governance Policy Committee
   a. The membership of the Corporate Governance Policy Committee must consist of at least:

1. 1 (one) member of the Board of Commissioners serving as chairman;
2. 1 (one) Independent Party with knowledge and/or experience in corporate governance or law; and
3. 1 (one) executive officer of the Company in charge of compliance, corporate governance, or law.
   b. The Corporate Governance Policy Committee is tasked with assisting the Board of Commissioners in:
4. reviewing Good Corporate Governance policies formulated by the Board of Directors;
5. assessing the consistency of the application of Good Corporate Governance, including those related to business ethics and the Company's corporate social responsibility.
   c. The term of office of Corporate Governance Policy Committee members is determined to be the same as the term of office of the Board of Commissioners as stipulated in the Company's Articles of Association and can be re-elected only for 1 (one) subsequent term, except that the committee chairman can be re-elected for more than 1 (one) subsequent term.

VI. COMMITTEE FORMATION PROCEDURES

1. At the latest 3 (three) months before the expiration of the Committee's term of office, the Board of Commissioners is required to formulate the Committee's membership for the next term.

2. The Board of Commissioners proposes the honorarium of Independent Parties in the Committee to the Board of Directors at a Board of Commissioners meeting inviting the Board of Directors.

VII. COMMITTEE REPORTING PROCEDURES TO THE BOARD OF COMMISSIONERS

1. Committees submit reports to the Board of Commissioners regarding the implementation of each task, accompanied by recommendations if necessary.

2. Committees make quarterly reports and annual reports on the implementation of the Committee's tasks to the Board of Commissioners.

3. Committee reports must be signed by at least the chairman of the Committee and one member of the Committee.

VIII. INDEPENDENT PARTIES

1. Independent Parties must meet the following requirements:
   a. not originating from officials or employees of the Company or companies affiliated with the Company, except for former officials or employees who have undergone a waiting period (cooling off) of 6 (six) months; b. not originating from public accounting firms, actuarial consulting firms, or legal consultants currently providing services to the relevant Company, except after having passed a waiting period of at least 6 (six) months from the last assignment at the relevant Company;
   c. not originating from the Financial Services Authority's insurance business regulation and supervision units, except those who have undergone a waiting period of at least 6 (six) months;
   d. having good integrity and sufficient knowledge and experience in the fields of audit, finance, accounting, Sharia accounting, law, risk management, actuarial science, corporate governance, human resources, and/or insurance; and e. able to communicate effectively.

2. Independent Parties can only serve concurrently as members in 1 (one) other committee in another Company with a different business field or another Company as long as the individual:
   a. meets all required competencies; b. meets independence criteria;
   c. is able to maintain Company confidentiality;
   d. observes applicable codes of ethics; and e. does not neglect the implementation of duties and responsibilities as a Committee member.

IX. MEETING RESULTS AND MINUTES

1. Audit Committees and Risk Monitoring Committees are required to hold committee meetings at least 1 (one) time in 1 (one) month.

2. Other Committees hold committee meetings at least 4 (four) times in 1 (one) year.

3. Committee meeting results must be recorded in committee minutes and documented properly.

4. Meeting minutes are made by the staff of the Company's work unit present, but must be initialed by all Committee members present and signed by the meeting leader.

5. Differences of opinion (dissenting opinions) occurring in Committee meeting decisions must be clearly stated in the Committee meeting minutes, accompanied by the reasons for the differences of opinion.

6. Meetings held via teleconference, video conference, or other electronic media facilities must have recordings of the meeting implementation, and meeting minutes must be made and signed by the meeting leader.

7. Committee members present or absent in Committee meetings are entitled to receive copies of the committee meeting minutes.

8. The number of Committee meetings held and the attendance of each Committee member are included in the self-assessment report on the application of Good Corporate Governance.

X. OTHER PROVISIONS

1. Committees have the authority to access records and information about the Company related to the implementation of their duties.

2. Each Independent Commissioner can only serve as chairman in:
   a. Audit Committees or Risk Monitoring Committees; and b. Remuneration and Nomination Committees, Corporate Governance Policy Committees, or other committees.

3. Until the implementation of regulations requiring Insurance Companies to have Independent Commissioners comprising at least half of the Board of Commissioners as regulated in Article 22 paragraph (2) of Financial Services Authority Regulation Number 2/POJK.05/2014 concerning Good Corporate Governance for Insurance Companies, Independent Commissioners can hold concurrent positions as chairmen of Audit Committees and Risk Monitoring Committees.

4. Companies are required to adjust the composition and membership criteria of Audit Committees and Risk Monitoring Committees in accordance with the provisions of this Financial Services Authority Circular, at the latest 3 (three) months since this Financial Services Authority Circular takes effect.

5. In the event that the results of Financial Services Authority supervision conclude that Committees do not meet the provisions as referred to in Roman numeral II item 4, the Financial Services Authority can require Companies to replace the chairman and/or members of the Committee so that all or at least half of the Committee's membership originates from Independent Commissioners and/or Independent Parties.

XI. CLOSING

Provisions in this Financial Services Authority Circular take effect on the date of establishment.

To ensure that everyone knows, it is ordered that the announcement of this Financial Services Authority Circular be published in the State Gazette of the Republic of Indonesia.

Established in Jakarta on December 9, 2014

EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY,
Signed,
FIRDAUS DJAELANI

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 2 DATE 6 JANUARY 2015

Copy in accordance with the original
Legal Director 1
Legal Department,
Signed, Signed,
Sudarmaji