Formation, Composition, and Term of Office of 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

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 14 /SEOJK.05/2019

REGARDING

THE FORMATION, COMPOSITION OF MEMBERSHIP, AND TERM OF OFFICE OF 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 53 of Financial Services Authority Regulation Number 73/POJK.05/2016 concerning Good Corporate Governance for Insurance Companies (State Gazette of the Republic of Indonesia Year 2016 Number 306, Supplement to the State Gazette of the Republic of Indonesia Number 5996), it is necessary to regulate the formation, composition of membership, 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

In this Financial Services Authority Circular, the following terms are meant:

1. Company means an insurance company, Sharia insurance company, reinsurance company, and Sharia reinsurance company.

2. Insurance Company means a general insurance company and a life insurance company as referred to in Law Number 40 of 2014 concerning Insurance.

3. Sharia Insurance Company means a Sharia general insurance company and a Sharia life insurance company as referred to in Law Number 40 of 2014 concerning Insurance.

4. Reinsurance Company means a company that conducts reinsurance business.

5. Sharia Reinsurance Company means a company that conducts Sharia reinsurance business.

6. Good Corporate Governance for Insurance Companies, hereinafter referred to as Good Corporate Governance, is the structure and process used and applied by the Company's organs 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.

7. General Meeting of Shareholders, hereinafter abbreviated as GMS, is the general meeting of shareholders as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Companies in the form of a limited liability company or equivalent to the GMS for Companies in the form of a cooperative legal entity.

8. Board of Directors means the Board of Directors as referred to in Law Number 40 of 2007 concerning Limited Liability Companies 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 legal entity.

9. Board of Commissioners means the Board of Commissioners as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Companies in the form of a limited liability company or equivalent to the Board of Commissioners for Companies in the form of a cooperative legal entity.

10. Independent Commissioner means a member of the Board of Commissioners who is not affiliated with shareholders or their equivalents, members of the Board of Directors, other members of the Board of Commissioners, and/or members of the Sharia Supervisory Board, i.e., does not have financial, managerial, shareholding, and/or family relationships with shareholders or their equivalents, 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 is a committee formed and responsible to the Board of Commissioners to assist in the implementation of the Board of Commissioners' duties, consisting of an audit committee, a risk monitoring committee, and other committees.

12. Audit Committee is 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 and external auditors by monitoring and evaluating the planning and execution of audits to assess the adequacy of internal controls, including the financial reporting process.

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

14. Other Committee is a Committee other than the Audit Committee and Risk Monitoring Committee formed and responsible to the Board of Commissioners to support the implementation of the Board of Commissioners' duties.

15. Remuneration and Nomination Committee is a Committee formed and responsible to the Board of Commissioners in assisting in the implementation of the Board of Commissioners' functions and duties related to remuneration and nomination of members of the Board of Directors and members of the Board of Commissioners.

16. Corporate Governance Policy Committee is 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.

17. Independent Party is a party outside the Company that does not have financial, managerial, shareholding, and/or family relationships with the Board of Commissioners, Board of Directors, and/or controlling shareholders, or other relationships that can influence their ability to act independently.

18. Executive Official is an official who is directly responsible to the Board of Directors or has significant influence over the Company's policies and/or operations, including division heads, office heads, heads of risk management units, heads of compliance units, heads of internal audit units, and/or equivalent officials.

II. FORMATION OF COMMITTEES

1. In order to support the effectiveness of the implementation of duties and responsibilities of the Board of Commissioners, the Board of Commissioners must form an Audit Committee and a Risk Monitoring Committee.

2. In addition to the Committees as referred to in item 1, the Company's Board of Commissioners may form Other Committees to support the implementation of the Board of Commissioners' duties, namely:
   a. Remuneration and Nomination Committee; b. Corporate Governance Policy Committee; and/or
   c. Other committees deemed necessary.

3. Committees formed by the Board of Commissioners must act independently, autonomously, and professionally, and be free from conflicts of interest and influence or pressure from any party in carrying out their duties and responsibilities.

4. The Board of Commissioners must ensure that the Committees formed as referred to in items 1 and 2 can carry out their duties effectively in supporting the implementation of the duties and responsibilities of the Board of Commissioners.

5. The Board of Commissioners appoints and dismisses Committee members based on the decision of the Board of Commissioners' meeting.

6. Directors cannot serve as members of the Committees.

7. The Board of Commissioners must compose the Committee membership for the next term at the latest 1 (one) month before the expiration of the Committee's term of office.

8. In the event that a Committee member resigns, the Committee member in question must be replaced within a maximum of 3 (three) months from the date of resignation.

9. In the event that a resigning Committee member as referred to in item 8 serves as the Chairman of the Audit Committee or the Chairman of the Risk Monitoring Committee, then:
   a. for Insurance Companies and Sharia Insurance Companies, replaced by another Independent Commissioner; or b. for Reinsurance Companies and Sharia Reinsurance Companies, replaced by another Independent Commissioner or an Independent Party.

10. Committees must have a Committee Charter or guidelines and code of conduct for each Committee that clearly establishes the role and responsibilities of the Committee along with the scope of work of the Committee, which at least consists of:
    a. Committee membership, including composition, membership requirements, expertise, and term of office of the Committee; b. disclosure of the Committee's independence;
    c. scope of Committee work, including work mechanisms, description of duties, responsibilities, and authority of the Committee;
    d. Committee code of conduct including regulations on ethics, working hours, and meeting arrangements including voting rights, meeting attendance policies, and preparation of meeting minutes; and e. Committee reporting.

11. The Committee Charter of each Committee as referred to in item 10 must be approved by the Board of Commissioners.

12. The Committee Charter of each Committee as referred to in item 10 must be known by and binding on every Committee member.

13. Committees may access records or information about employees, funds, assets, and other resources of the Company related to their authority and/or implementation of duties.

14. Committees must maintain the confidentiality of the Company's documents, data, and information, both from internal and external parties, and only use them for the purpose of implementing their duties.

III. COMPOSITION, MEMBERSHIP REQUIREMENTS, AND DUTIES OF COMMITTEES

A. Audit Committee

1. The Audit Committee in Insurance Companies and Sharia Insurance Companies consists of at least 3 (three) members comprising:
   a. 1 (one) Chairman who concurrently serves as a member who is an Independent Commissioner; b. 1 (one) member who has expertise in audit, finance, and/or accounting or Sharia accounting for Sharia Insurance Companies and Insurance Companies that have Sharia units; and
   c. 1 (one) member who has expertise in law and/or insurance.

2. The Audit Committee in Reinsurance Companies and Sharia Reinsurance Companies consists of at least 3 (three) members comprising:
   a. 1 (one) Chairman who concurrently serves as a member who is:

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

3. One of the members of the Audit Committee as referred to in items 1 and 2 is an Independent Party.

4. For Companies that have obtained business licenses before December 28, 2016, the requirement for Audit Committee members to come from an Independent Party as referred to in item 3 shall apply starting from December 28, 2019.

5. Audit Committee members with expertise as referred to in items 1 and 2 may come from the Company's Executive Officials.

6. An Audit Committee member is considered to have expertise in audit, finance, and/or accounting or Sharia accounting if they meet the criteria:
   a. have knowledge and/or education in audit, finance, and/or accounting or Sharia accounting; and b. have at least 3 (three) years of work experience in audit, finance, and/or accounting or Sharia accounting.

7. An Audit Committee member is considered to have expertise in law and/or insurance if they meet the criteria:
   a. have knowledge and/or education in law and/or insurance; and b. have at least 3 (three) years of work experience in law and/or insurance.

8. The Audit Committee is tasked with assisting the Board of Commissioners in monitoring and ensuring the effectiveness of the internal control system and the implementation of duties of internal and external auditors, including:
   a. assessing the implementation of activities and audit results conducted by internal and external auditors; b. providing recommendations regarding the improvement of the internal control system and its implementation;
   c. ensuring that the Board of Directors follows up on the findings of internal auditors, external auditors, and the results of supervision by the Financial Services Authority regarding the Company;
   d. reviewing the appointment of external auditors and providing recommendations to the Board of Commissioners regarding the appointment of candidate external auditors; e. ensuring that financial reports comply with applicable accounting standards in Indonesia and regulations in the field of insurance; f. evaluating the Audit Committee Charter periodically in accordance with developments in legislation; g. identifying other matters that the Audit Committee deems require the attention of the Board of Commissioners; and h. carrying out other assignments from the Board of Commissioners as long as such assignments have been established in the Audit Committee Charter.

B. Risk Monitoring Committee

1. The Risk Monitoring Committee in Insurance Companies and Sharia Insurance Companies consists of at least 3 (three) members comprising:
   a. 1 (one) Chairman who concurrently serves as a member who is an Independent Commissioner; b. 1 (one) member who has expertise in risk management and/or actuarial science; and
   c. 1 (one) member who has expertise in finance, economics, and/or insurance.

2. The Risk Monitoring Committee in Reinsurance Companies and Sharia Reinsurance Companies consists of at least 3 (three) members comprising:
   a. 1 (one) Chairman who concurrently serves as a member who is:

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

3. Risk Monitoring Committee members with expertise as referred to in items 1 and 2 may come from the Company's Executive Officials.

4. A Risk Monitoring Committee member is considered to have expertise in risk management and/or actuarial science if they meet the criteria:
   a. have knowledge and/or education in risk management and/or actuarial science; and b. have at least 3 (three) years of work experience in risk management and/or actuarial science.

5. A Risk Monitoring Committee member is 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 at least 3 (three) years of work experience in finance, economics, and/or insurance.

6. The Risk Monitoring Committee is tasked with assisting the Board of Commissioners in monitoring the implementation of risk management formulated by the Board of Directors and assessing the risk tolerance that can be taken by the Company, including:
   a. assessing the effectiveness of risk management, including assessing the risk tolerance that can be taken by the Company; b. conducting periodic evaluations on the implementation of risk management;
   c. evaluating the Risk Monitoring Committee Charter periodically in accordance with developments in legislation;
   d. identifying other matters that the Risk Monitoring Committee deems require the attention of the Board of Commissioners; and e. carrying out other assignments from the Board of Commissioners as long as such assignments have been established in the Risk Monitoring Committee Charter.

C. Remuneration and Nomination Committee

In the event that the Company forms a Remuneration and Nomination Committee, then:

1. The Remuneration and Nomination Committee consists of at least 3 (three) members comprising:
   a. 1 (one) Chairman who concurrently serves as a member who is a member of the Board of Commissioners; b. 1 (one) member from an Independent Commissioner or an Independent Party who has expertise in human resources; and
   c. 1 (one) member from a Company Executive Official who oversees the human resources field or 1 (one) employee representative.

2. The Board of Commissioners member as referred to in item 1 letter a is a Board of Commissioners member other than an Independent Commissioner.

3. The Company Executive Official who oversees the human resources field or the employee representative who becomes a member of the Committee must have knowledge regarding the Company's remuneration system, nomination system, and succession plan.

4. The Board of Commissioners may form a Remuneration Committee and a Nomination Committee separately.

5. In the event that the Company forms a Remuneration Committee and a Nomination Committee separately, the membership of each Committee is as referred to in item 1.

6. In the event that the Company forms a Remuneration Committee and a Nomination Committee separately, the Company Executive Official or employee representative who becomes:
   a. a member of the Remuneration Committee must have knowledge regarding the Company's remuneration system; and b. a member of the Nomination Committee must have knowledge regarding the Company's nomination system and succession plan.

7. The Remuneration and Nomination Committee is tasked with assisting the Board of Commissioners in:
   a. the remuneration field:

1. ensuring that the Company has a transparent remuneration system and applies the principle of prudence in providing remuneration, both fixed and variable;
2. evaluating remuneration policies based on performance, risk, fairness, objectives, and the Company's long-term strategy, fulfillment of reserves as regulated in legislation, and potential future income of the Company;
3. conducting periodic evaluations on the implementation of remuneration policies;
4. submitting evaluation results and recommendations to the Board of Commissioners regarding:
   a) remuneration structure and amount; b) remuneration policies for the Board of Directors and Board of Commissioners to be submitted to the GMS; and c) remuneration policies for employees as a whole to be submitted to the Board of Directors;
5. ensuring that remuneration policies comply with legislation; and
6. evaluating the Committee Charter periodically in accordance with developments in legislation.
   b. the nomination field:
7. formulating and providing recommendations regarding the system and procedures for assessment, selection, and/or replacement of members of the Board of Directors, members of the Board of Commissioners, and Company Executive Officials to the Board of Commissioners;
8. providing recommendations regarding candidates for members of the Board of Directors and/or candidates for members of the Board of Commissioners to the Board of Commissioners to be submitted to the GMS;
9. providing recommendations regarding Independent Parties who will become members of the Audit Committee and members of the Risk Monitoring Committee to the Board of Commissioners;
10. assisting the Board of Commissioners in assessing the performance of members of the Board of Directors and/or members of the Board of Commissioners; and
11. evaluating the Committee Charter periodically in accordance with developments in legislation.

8. In addition to the duties as referred to in item 7, the Board of Commissioners may provide other assignments to the Remuneration and Nomination Committee as long as such assignments have been established in the Remuneration and Nomination Committee Charter.

D. Corporate Governance Policy Committee

In the event that the Company forms a Corporate Governance Policy Committee, then:

1. The Corporate Governance Policy Committee consists of at least 3 (three) members comprising:
   a. 1 (one) Chairman who concurrently serves as a member who is a member of the Board of Commissioners; b. 1 (one) member from an Independent Commissioner or an Independent Party who has knowledge and/or experience in corporate governance and/or law; and
   c. 1 (one) Company Executive Official who oversees the compliance, corporate governance, and/or law field.

2. The Corporate Governance Policy Committee is tasked with assisting the Board of Commissioners to:
   a. review the Good Corporate Governance policies formulated by the Board of Directors; b. assess the consistency of the application of Good Corporate Governance, including those related to business ethics and the Company's corporate social responsibility; and
   c. evaluate the Corporate Governance Policy Committee Charter periodically in accordance with developments in legislation.

3. In addition to the duties as referred to in item 2, the Board of Commissioners may provide other assignments to the Corporate Governance Policy Committee as established in the Corporate Governance Policy Committee Charter.

IV. TERM OF OFFICE OF COMMITTEES

1. The term of office of Committee members who are not members of the Company's Board of Commissioners is the same as the term of office of Board of Commissioners members as established in the Company's Articles of Association, without prejudice to the right of the Board of Commissioners to dismiss them at any time.

2. Committee members who are members of the Board of Commissioners shall automatically cease to hold office upon the expiration of their term as members of the Board of Commissioners.

V. COMMITTEE REPORTS

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

2. Committee reports must be submitted to the Board of Commissioners at least every quarter.

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

4. Each Committee member is responsible for the substance contained in the Committee report.

5. Committee reports are part of the Board of Commissioners' duty implementation report and are submitted to the GMS, in the event that the agenda of discussion in the GMS is the implementation of the Board of Commissioners' duties.

6. The Board of Commissioners may evaluate the Committee's performance based on reports submitted by the Committee according to the time and methods established by the Board of Commissioners.

7. The completeness and execution of the Committee's duties shall be reported, at a minimum containing:
   a. the structure, membership, expertise, and independence of Committee members; b. the duties and responsibilities of the Committee;
   c. the frequency of Committee meetings; and
   d. the Committee's work program and the realization of the Committee's work program.

VI. INDEPENDENT PARTIES

1. Independent Parties may become members of the Committee in the Company if they meet the following requirements:
   a. they do not originate from officials, former officials, employees, or former employees of the Company or affiliated companies, before the individual has undergone a waiting period (cooling off) of at least 6 (six) months; b. they do not originate from officials, former officials, employees, or former employees of the Financial Services Authority (Otoritas Jasa Keuangan), before the individual has undergone a waiting period (cooling off) of at least 6 (six) months;
   c. they do not originate from parties having a relationship with the Company, such as parties originating from public accounting firms, actuarial consulting companies, legal consultants, or other parties currently providing services to the respective Company, before the individual has passed a waiting period (cooling off) of at least 6 (six) months from the last assignment with the respective Company;
   d. they have good integrity and sufficient knowledge and work experience in the fields of audit, finance, accounting, Sharia accounting, law, risk management, actuarial science, corporate governance, human resources, and/or insurance; e. they do not have personal interests/connections that can have a negative impact and conflict of interest with the Company; f. they are able to communicate effectively; g. they do not own shares in the Company; and h. other requirements established in the Committee charter, if necessary.

2. The waiting period (cooling off) as referred to in paragraph 1 letters a through c is the interval between the effective end of the individual's position, stated in writing as having resigned as an official, employee, or party having a relationship with the Company, and the effective appointment of the individual as an Independent Party.

3. The Company must verify the truthfulness of all supporting documents or data of the Independent Party who will become a Committee member to ensure compliance with the requirements in this Financial Services Authority Circular.

4. Independent Parties may hold concurrent positions in several Committees within the same Company as long as they meet the requirements in this Financial Services Authority Circular.

5. Independent Parties may only hold concurrent positions in 1 (one) Committee in another Company as long as they:
   a. meet all required competencies; b. meet independence criteria;
   c. are able to maintain Company confidentiality;
   d. observe applicable codes of ethics; and e. do not neglect the execution of duties and responsibilities as Committee members.

6. The Board of Commissioners proposes remuneration for Independent Parties in the Committee to the Board of Directors at a Board of Commissioners meeting that invites the Board of Directors.

VII. COMMITTEE MEETINGS

1. The Audit Committee and the Risk Monitoring Committee hold Committee meetings at least 1 (one) time every 3 (three) months.

2. Other Committees hold Committee meetings according to the Company's needs.

3. Meetings may be conducted directly and circularly.

4. Direct meetings may be conducted via teleconference technology, video conferencing, or other electronic media facilities.

5. Committee meetings may be held if attended by more than half of the number of members.

6. Each Committee meeting shall be recorded in meeting minutes signed by the meeting leader and all Committee members present.

7. Committee meeting decisions shall first be made based on deliberation for consensus. In the event that consensus is not reached, decisions shall be made based on the majority vote with the principle of 1 (one) person 1 (one) vote.

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

9. Committee members who are present or absent in the Committee meeting have the right to receive a copy of the Committee meeting minutes at the latest 3 (three) days after the meeting is held.

10. Committee meetings may be conducted through circular resolution (circulair resolution) decisions that are binding outside of Committee meetings, provided that all Committee members agree in writing.

11. Committee meeting minutes and circular resolution (circulair resolution) decisions shall be submitted in writing by the Committee to the Board of Commissioners and/or included as an attachment in the Committee's report to the Board of Commissioners.

12. The number of Committee meetings held, the attendance of each Committee member, and the circular resolution (circulair resolution) decisions established shall be included in the self-assessment report on the implementation of Good Corporate Governance.

13. Committee members' attendance in meetings and circular resolution (circulair resolution) decisions shall be reported in the Committee's quarterly report.

This copy is consistent with the original
Deputy Director of Legal Consultancy and
Banking Regulation Harmonization 1 as Acting Director of Law 1 Legal Department signed Wiwit Puspasari

VIII. CLOSING

The provisions in this Financial Services Authority Circular shall take effect from the date of establishment.

Established in Jakarta on July 22, 2019
EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTIONS REGULATOR FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, signed RISWINANDI