Guidelines for the Calculation of Risk-Based Minimum Capital for Insurance and Reinsurance Companies

To:

1. The Board of Directors of Insurance Companies; and
2. The Board of Directors of Reinsurance Companies,
   At their places.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 24 /SEOJK.05/2017

REGARDING
GUIDELINES FOR THE CALCULATION OF RISK-BASED MINIMUM CAPITAL FOR INSURANCE AND REINSURANCE COMPANIES

In relation to the mandate of Article 4 paragraph (3) of Financial Services Authority Regulation Number 71/POJK.05/2016 concerning Financial Health of Insurance 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), it is necessary to regulate implementation provisions regarding guidelines for the calculation of risk-based minimum capital for insurance and reinsurance companies in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

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

1. Company means insurance companies and reinsurance companies.

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

3. Reinsurance Company means a company that conducts reinsurance business against risks faced by Insurance Companies, guarantee companies, or other reinsurance companies.

4. Party means an individual or business entity, whether in the form of a legal entity or not, as referred to in Law Number 40 of 2014 concerning Insurance.

5. Investment-Linked Insurance Products, hereinafter referred to as PAYDI, are insurance products that provide at least death risk protection and provide benefits that refer to the investment results of a fund pool specifically formed for the insurance product, whether stated in unit form or not.

6. Permitted Assets, hereinafter abbreviated as AYD, are assets calculated in the solvency ratio calculation.

7. Risk-Based Minimum Capital, hereinafter abbreviated as MMBR, is the amount of funds needed to anticipate potential losses arising from deviations in asset and liability management.

8. Solvency Ratio is the difference between the amount of permitted assets minus the amount of liabilities.

9. Liabilities are obligations as referred to in legislation in the insurance field.

II. CALCULATION OF RISK-BASED MINIMUM CAPITAL

1. MMBR for Companies is established based on the magnitude of potential losses arising from deviations in asset and liability management.
2. The calculation of funds as referred to in item 1 must be carried out based on the calculation guidelines for MMBR amounts as referred to in the Appendix, which is an inseparable part of this Financial Services Authority Circular Letter.

III. OTHER PROVISIONS

1. Each type of AYD in the form of investment calculated in this Financial Services Authority Circular Letter also includes investment types using Sharia principles.
2. This Financial Services Authority Circular Letter does not apply to Islamic Insurance Companies and Islamic Reinsurance Companies.

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

or the Sharia units of Insurance and Reinsurance Companies.

IV. CLOSING PROVISIONS

1. The provisions in this Financial Services Authority Circular Letter shall take effect on July 1, 2017.
2. Upon the taking effect of this Financial Services Authority Circular Letter, the Regulation of the Head of the Capital Market and Financial Institutions Supervisory Board Number PER-08/BL/2012 concerning Guidelines for the Calculation of Risk-Based Minimum Capital for Insurance and Reinsurance Companies is repealed and declared invalid.

Determined 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 24 /SEOJK.05/2017 REGARDING GUIDELINES FOR THE CALCULATION OF RISK-BASED MINIMUM CAPITAL FOR INSURANCE AND REINSURANCE COMPANIES

GUIDELINES FOR THE CALCULATION
OF RISK-BASED MINIMUM CAPITAL FOR INSURANCE
AND REINSURANCE COMPANIES

I. General Guidelines for MMBR Calculation

1. The calculation of Solvency Ratio and MMBR for Companies that have Sharia units is conducted separately between the parent company and its Sharia unit.
2. For the purpose of calculating the solvency ratio, the net capital balance of the Company placed in the Sharia unit is recorded as other assets.
3. The calculation of solvency ratio and MMBR for PAYDI is conducted with the following provisions:

a. For the portion of assets and liabilities sourced from the protection element of PAYDI and other promised benefits from that PAYDI 1, the recording of assets and liabilities is included in the financial position report as traditional insurance products.

b. For the portion of assets and liabilities sourced from the accumulation of funds for PAYDI that is guaranteed or has a guaranteed minimum return, the calculation of solvency ratio and MMBR is conducted as described in this Appendix.

c. For the portion of assets and liabilities sourced from the accumulation of funds for PAYDI that is not guaranteed, where the investment results fully refer to market performance or there is no guarantee on minimum investment returns, no calculation of solvency ratio and MMBR is conducted.

4. For Insurance Companies that sell PAYDI guaranteeing minimum investment returns, the total MMBR of such Insurance Company is the sum of the MMBR for traditional products (non-PAYDI) and the MMBR for guaranteed PAYDI. For example, for an Insurance Company selling PAYDI that provides a guarantee on minimum investment returns, the total MMBR of the Company is as follows:

(in millions of rupiah)

Risk Category	MMBR Traditional Products (Non PAYDI) (a)	MMBR Guaranteed PAYDI (b)	Total MMBR Company (a) + (b)
Credit Risk	250	25	275
Liquidity Risk	1,500	150	1,650
Market Risk	150	15	165
Insurance Risk	950	TB	TB
Operational Risk	250	TB	TB
Total	3,100	190	3,290

Note: TB = not applicable

5. MMBR is calculated by summing the funds required to anticipate risks that may arise from deviations in asset and Liability management. These risks consist of:

a. Credit Risk; b. Liquidity Risk;
c. Market Risk;
d. Insurance Risk; and e. Operational Risk.

6. The provisions for using ratings for investment and non-investment instruments in calculating the magnitude of risk as referred to in item 5 are as follows:

a. The ratings referred to in this regulation are ratings issued by securities rating agencies recognized by the Financial Services Authority or those that have obtained international recognition. b. For each investment instrument, the rating used is the rating of that instrument for each reporting period. If the instrument rating is not available, the latest rating for a similar instrument issued by the same issuer or one cluster below the rating of the relevant issuer may be used.
c. For investment instruments issued by Indonesian legal entities or special purpose vehicles established abroad by Indonesian legal entities, the investment instrument rating may be based on:

1. ratings issued by securities rating agencies recognized by the Financial Services Authority;
2. ratings issued by securities rating agencies affiliated with securities rating agencies recognized by the Financial Services Authority;
3. ratings of similar instruments issued by the relevant issuer that have been rated by securities rating agencies recognized by the Financial Services Authority; or
4. ratings issued by securities rating agencies recognized internationally.

d. For investment instruments issued by foreign legal entities, the rating used is the rating issued by securities rating agencies recognized internationally.

e. The grouping of ratings issued by securities rating agencies recognized by the Financial Services Authority and internationally is as follows:

Rating Cluster	Rating
1	AAA or equivalent
2	AA or equivalent
3	A or equivalent
4	BBB or equivalent
5	Below BBB or equivalent, or unrated

II. MMBR Calculation Guidelines for Companies

1. Credit Risk

a. Credit risk is the risk of possible loss or decrease in asset value caused by:

1. failure of the debtor and/or other parties to fulfill obligations to the Company; and
2. failure/inability of the reinsurer to fulfill its obligations to the Company.

b. The amount of funds needed to anticipate risk:

1. Failure of the debtor and/or other parties to fulfill obligations to the Company is determined by multiplying the risk factor (RF) for a specific type of asset by the AYD value.

a) The rating used refers to the provisions in Roman I item 6 letter e. b) The risk factor for each specific type of AYD for investment assets is as follows:

(1) Time deposits at banks, Rural Banks (BPR), and Sharia Rural Banks (BPRS), including on-call deposits and/or time deposits with a term of less than or equal to 1 (one) month, and certificates of deposit (negotiable certificate deposit) at banks;

(i) Risk Factor

Category	Risk Factor
i. Special Category	0.0%
ii. Other Categories, according to the rating of the Bank, BPR, and/or BPRS
• Rating Cluster 1	1.2%
• Rating Cluster 2	2.1%
• Rating Cluster 3	3.0%
• Rating Cluster 4	4.5%
• Rating Cluster 5	9.0%

Amount of Funds = ∑(AYDᵢ × RFᵢ)
AYDᵢ = AYD of asset type i
RFᵢ = risk factor of asset type i

(ii) Deposits/certificates of deposit included in the special category are deposits/certificates of deposit at 1 (one) Bank or deposits at 1 (one) BPR or BPRS that meet guarantee conditions (including interest rate limits) with an amount up to the maximum amount guaranteed by the Deposit Insurance Corporation.

(iii) Deposits/certificates of deposit included in other categories according to bank rating are deposits/certificates of deposit at one bank or deposits at one BPR or BPRS that do not meet guarantee conditions (including interest rate limits) or amounts exceeding the maximum amount guaranteed by the Deposit Insurance Corporation.

(2) Corporate bonds, Medium Term Notes (MTN), and securities issued by countries other than the Republic of Indonesia;

Category	Risk Factor
i. Rating Cluster 1	1.6%
ii. Rating Cluster 2	2.8%
iii. Rating Cluster 3	4.0%
iv. Rating Cluster 4	6.0%
v. Rating Cluster 5	12.0%

(3) Securities issued by:

(a) The Republic of Indonesia;
(b) Bank Indonesia; and
(c) Multinational institutions of which the Republic of Indonesia is a member or shareholder, including the World Bank, International Monetary Fund, International Development Bank, and Asian Development Bank, have a risk factor of 0% (zero percent);

(4) Securities transactions through repurchase agreement (REPO), risk factor 1% (one percent);

(5) Financing through cooperation mechanisms with other Parties in the form of credit provision cooperation (executing);

Financial Health Level of Financing Company*	Risk Factor
i. Very Healthy	1.6%
ii. Healthy	2.8%
iii. Less Healthy	4.0%
iv. Unhealthy	6.0%

• Obtained from the Financial Services Authority, through data requests from financing companies to the Financial Services Authority on the reporting date.

(6) Loans secured by land rights:

(a) The risk factor for loans secured by land rights is classified based on the loan to value (LTV) ratio and the type of property use; (b) LTV is calculated based on the loan balance and the market value of the property bound by land rights; and (c) The risk factor for each category is as follows:

Category	Risk Factor
i. Residential Property
• LTV < 65%	2.8%
• 65% < LTV < 75%	4.0%
ii. Other Commercial Property
• LTV < 65%	5.6%
• 65% < LTV < 75%	8.0%
iii. Unused Property	12.0%

(7) Policy loans with a risk factor of 0% (zero percent).

c) The risk factor for each type of AYD for non-investment assets is as follows:

Asset Type	Category	Risk Factor
Cash and Bank		0.0%
Premium Receivables (Direct Closing), including co-insurance receivables that are part of the Company		8.0%
Reinsurance Premium Receivables
Domestic Company	2.8%
Foreign Company
• Reinsurer Rating Cluster 1	2.8%
• Reinsurer Rating Cluster 2	4.0%
• Reinsurer Rating Cluster 3	6.0%
• Reinsurer Rating Cluster 4	12.0%
• Reinsurer Rating Cluster 5	15.0%
Reinsurance Assets
Assets sourced from estimated claim recovery value for the reinsurance portion	0.0%
Assets sourced from long-term contract agreements (capital oriented reinsurance)	30.0%
Co-insurance Claim Receivables
Domestic Co-insurer	2.8%
Foreign Co-insurer
• Reinsurer Rating Cluster 1	2.8%
• Reinsurer Rating Cluster 2	4.0%
• Reinsurer Rating Cluster 3	6.0%
• Reinsurer Rating Cluster 4	12.0%
• Reinsurer Rating Cluster 5	15.0%
Reinsurance Claim Receivables
Domestic Reinsurer	2.8%
Foreign Reinsurer
• Reinsurer Rating Cluster 1	2.8%
• Reinsurer Rating Cluster 2	4.0%
• Reinsurer Rating Cluster 3	6.0%
• Reinsurer Rating Cluster 4	12.0%
• Reinsurer Rating Cluster 5	15.0%
Investment Receivables
Investments not yet received payment on maturity date	2.0%
Investments defaulted on maturity date or upon cashing	25.0%
Investment Return Receivables	2.0%

2. Failure/inability of the reinsurer to fulfill its obligations to the Insurance Company or Reinsurance Company is determined by multiplying the reinsurance exposure (ER) by the risk factor (RF).

a) The amount of reinsurance exposure is calculated from the technical reserves less the reinsurer's assets (reinsurance assets), which is the portion of reinsurance assets sourced from the estimated claim recovery value for the reinsurance portion, minus reinsurance deposits consisting of all forms of deposits placed by the reinsurer with the insurer, including premiums retained by the insurer where the insurer has full authority to use such deposits.

Amount of Funds = ∑(ERᵢ × RFᵢ)
ERᵢ = reinsurance exposure for reinsurer i
RFᵢ = risk factor for reinsurer i

b) The risk factors used are as follows:

Category of Company/Reinsurer	Risk Factor
Domestic	2.8%
Foreign
• Reinsurer Rating Cluster 1	2.8%
• Reinsurer Rating Cluster 2	4.0%
• Reinsurer Rating Cluster 3	6.0%
• Reinsurer Rating Cluster 4	12.0%
• Reinsurer Rating Cluster 5	15.0%

3. Total credit risk is the sum of item 1) and item 2).

2. Liquidity Risk

a. Liquidity Risk (LR) is the risk of imbalance between projected asset cash flows and liability cash flows arising from a mismatch between the amount and maturity of assets with the amount and maturity of liabilities. b. To calculate Liquidity Risk, the AYD and Liability values are grouped by their maturity date, namely:

1. Maturity within less than 1 (one) year;
2. Maturity within more than 1 (one) year but less than 3 (three) years;
3. Maturity within more than 3 (three) years but less than 5 (five) years;
4. Maturity within more than 5 (five) years but less than 10 (ten) years; and
5. Maturity within 10 (ten) years or more.

c. AYD in the form of traded securities and valued based on market value (including shares) are classified as assets with a maturity of less than 1 (one) year.
d. AYD intended to be held until maturity are classified according to their remaining life.

e. The amount of funds needed to anticipate Liquidity Risk (LR) is calculated as follows:

LR = ∑ 4.0% × (Max (Lᵢ − AYDᵢ), 0)
AYDᵢ = book value of AYD maturing at period i
Lᵢ = book value of liabilities maturing at period i

3. Market Risk

a. Market Risk is the risk of possible losses due to changes in market prices of the Company's assets, changes in foreign exchange rates, and changes in interest rates as a result of market volatility and liquidity. b. The amount of funds needed to anticipate risk:

1. Changes in market prices of the Company's assets (PHP) are determined by multiplying the AYD value by the risk factor (RF) for a specific type of asset.

a) The rating used refers to the provisions in Roman I item 6 letter e. b) The risk factor for each type of asset and example calculation of capital burden for each type of investment asset is as follows:

(1) Shares listed on the stock exchange;

(i) Risk Factor

Description	Risk Factor
i. Shares included in IDX30 or JII	15.0%
ii. Shares listed on the Indonesian stock exchange, other than group i.	20.0%
iii. Shares listed on foreign stock exchanges:
• Shares constituting the main index of the primary stock exchange in Asia-Pacific and European countries members of the World Federation of Exchanges	20.0%
• Other shares	30.0%

(ii) The value of shares subject to the risk factor is the net value after considering the hedging component.

(2) Mutual Funds

Mutual Fund Securities Portfolio	Risk Factor
i. Fully consisting of government bonds	0.0%
ii. Fully consisting of private bonds and/or money market securities	6.0%
iii. Fully consisting of equity securities or indices	16.0%
iv. Mixed	Weighted Average based on the composition of the mutual fund securities portfolio

(3) Asset-Backed Securities

EBA Rating	Risk Factor
i. Rating Cluster 1	1.6%
ii. Rating Cluster 2	2.8%
iii. Rating Cluster 3	4.0%
iv. Rating Cluster 4	6.0%
v. Rating Cluster 5	12.0%

(4) Real estate investment funds in the form of collective investment contracts, risk factor 10.0% (ten point zero percent)

(5) Direct participation in Companies whose shares are not listed on the stock exchange

(i) The risk factor for direct participation is classified by category, as follows:

Category	Risk Factor
Under the supervision of the Financial Services Authority	10.0%
Not Under the supervision of the Financial Services Authority	20.0%

(ii) Direct participation in Companies with special purposes (special purpose vehicle), hereinafter referred to as SPV, or holding companies that do not conduct operations, has a risk factor adjusted according to the dominant business field of the subsidiary, weighted based on the Company's assets.

(6) Land, buildings with strata title (strata title), or land with buildings, for investment;

(i) The risk factor for land, buildings with strata title (strata title), or land with buildings, for investment is classified based on the investment return obtained, as follows:

Group	Risk Factor
Net investment return per year more than 4%	7.0%
Net investment return per year between 2% to 4%	15.0%
Net investment return per year less than 2%	40.0%

(ii) Net investment return per year does not consider profits from the sale or revaluation of buildings with strata title (strata title) or land with buildings.

(7) Pure gold, risk factor 3.0% (three point zero percent).

c) The risk factor for AYD types in the form of non-investment consisting of buildings with strata title or land with buildings, for own use, is 4.0% (four point zero percent).

2. Changes in foreign exchange rates

a) Changes in foreign exchange rates (CFER) arise from differences in the value of assets and liabilities in foreign currency, as well as fluctuations in foreign exchange rates against the rupiah. Changes in foreign exchange rates are calculated as follows:

AYDᵢ – Lᵢ	Risk Factor	CFER
Less than or equal to zero	30%	30% × ∑ (Lᵢ – AYDᵢ)
More than zero but not exceeding 20% of Total Liabilities	0%	Zero
Exceeding 20% of Total Liabilities	10%	10% × ∑ (AYDᵢ – (120% × Lᵢ))

AYDᵢ = book value of currency i AYD
Lᵢ = book value of currency i Liabilities

b) The calculation results of the amount of funds in letter a) are converted into rupiah according to the Bank Indonesia middle exchange rate on the reporting date. c) Insurance contracts containing provisions for converting foreign currency to rupiah using a specific exchange rate established in the contract must be treated as insurance contracts in rupiah.

d) In the event of a hedging contract, the value of assets and liabilities is the net value of assets and liabilities that has considered hedging.

3. Changes in interest rates

a) Changes in interest rates (CIR) arise from differences between the investment returns assumed in premium setting and the investment returns obtained, resulting in insufficient premiums to pay insurance benefits. Changes in interest rates are calculated by:

CIR = fCIR Max((CPrf – CP0), 0) fCIR = CIR factor CPrf = premium reserves calculated with risk-free interest CP0 = premium reserves calculated by the company actuary (premium reserves presented in the financial position report/balance sheet)

b) The risk-free interest rate refers to the average yield of the last 3 (three) years of benchmark SUN series with a term appropriate to the average policy term at the company level. c) The CIR factor (fCIR), is 15% (fifteen percent).

4. Total Market Risk is the sum of letter b items 1) through 3).

4. Insurance Risk

a. Insurance risk (IR) is the risk of possible failure of the Company to fulfill obligations to policyholders or insureds as a result of inadequate risk selection (underwriting), premium setting (pricing), and/or claim handling. b. The amount of funds needed to anticipate risk:

1. Calculation of Insurance Risk (IR) for premium reserves for insurance products with a term of more than 1 (one) year whose policy terms and conditions cannot be renewed (non-renewable) on each policy anniversary, as well as for products with a term of more than 1 (one) year whose policy terms and conditions are

1 As per regulations, PAYDI always contains a protection element.

can be renewed and provides other benefits after a certain period determined using the following formula:

Stress testing to achieve a 95% (ninety-five percent) confidence level is conducted on all variables forming the calculation of premium reserves, except for the interest rate variable (interest rate variable stress testing is calculated in market risk).

2. Calculation of Insurance Risk (RA) for reserves on unearned premiums for insurance products with a term of up to 1 (one) year or a term longer than 1 (one) year whose policy terms and conditions are renewable (renewable) on each policy anniversary, is determined using the following formula:

3. Calculation of RA for claim provisions is determined by the following formula:

4. Calculation of Insurance Risk (RA) for catastrophe risk reserves is determined using the following formula:

RA = max ((CP* - CP), 0)
CP* = premium reserves calculated with the best estimate plus margin for adverse deviation with a 95% premium reserve sufficiency confidence level (company level). CP = premium reserves according to the financial position report (balance sheet) and according to the company's actuarial calculations.

RA = ∑ ((CAPYBMPi – ARi)fcpi)
CAPYBMPi = reserves on unearned premiums for business line i ARi = reinsurance assets for CAPYBMP for business line i fcpi = risk factor for reserves on unearned premiums for business line i

RA = ∑ ((CKi– ARi)fcki)
CKi = claim reserves for business line i
ARi = reinsurance assets for claim reserves for business line i fcki = risk factor for claim reserves for business line i

5. The magnitude of fcp, fck, and fcb for each insurance business line is as follows:

Insurance Line	Risk Factor fcp	Risk Factor fck	Risk Factor fcb
Property	25%	20%	25%
Motor Vehicle (own damage, third party liability, and personal accident)	25%	20%	25%
Marine Cargo	30%	25%	30%
Marine Hull	30%	25%	30%
Aviation Hull	30%	25%	30%
Satellite	25%	20%	25%
Onshore Energy (oil and gas)	35%	30%	35%
Offshore Energy (oil and gas)	35%	30%	35%
Engineering	25%	20%	25%
Liability	35%	30%	35%
Personal Accident	25%	20%	25%
Health	25%	20%	25%
Credit	30%	25%	30%
Suretyship	25%	20%	25%
Miscellaneous	25%	20%	25%
Life	10%	10%	10%

c. Total Insurance Risk is the sum of letter b items 1) through 4).

5. Operational Risk
   a. Operational risk (RO) is the risk of possibility caused by insufficient and/or non-functioning internal processes, human resource errors, system failures, and/or external problems affecting the Company's operations, plus a certain percentage of investment funds, which are managed funds, originating from PAYDI. The more complex the Company's structure, the higher the operational risk. b. Operational risk (RO) consists of:

1. the Company's operational risk; and
2. PAYDI's operational risk (if having PAYDI),
   c. The amount of funds needed to anticipate risk:
3. The Company's Operational Risk (RO) is determined by calculating the proxy for operational complexity multiplied by the Company's Operational Risk (RO) factor. The proxy for operational complexity is calculated from:
   a) general and administrative expenses (BUA) after deducting education and training expenses (BPL). The calculation of the aforementioned expenses uses information from the last 4 (four) quarterly report periods. b) Deferred Acquisition Cost (DAC).
4. PAYDI Operational Risk (ROPAYDI) is determined by multiplying the amount of the Company's PAYDI investment funds by the ROPAYDI factor.
   d. Total Operational Risk is the sum of letter c item 1) letter a) items 1) and 2), and item 2).

III. Guidelines for Calculating MMBR for Insurance Companies Selling PAYDI with Components of Investment Guaranteed with Minimum Returns

1. Insurance Companies selling PAYDI with investment components guaranteed with minimum returns must be able to determine the amount of its Minimum Liability to policyholders for the investment component based on the guarantee provided in the policy. If the Company does not specifically determine the Minimum Liability amount to policyholders for the investment component based on the guarantee provided in the policy, then the Minimum Liability is calculated by accumulating the premium portion for the investment component using a minimum interest rate equivalent to the guarantee in the policy.

2. The amount of AYD used in the PAYDI solvency calculation is the accumulated amount of AYD.

3. The amount of Liability used in the PAYDI solvency calculation is:
   a. the accumulated amount of AYD, if the Company's Minimum Liability to policyholders is smaller than the accumulated amount of AYD, or b. the Company's Minimum Liability to policyholders, if the Company's Minimum Liability to policyholders is larger than the accumulated amount of AYD.

4. The MMBR components consist of:
   a. Credit risk; b. Market risk; and
   c. Liquidity risk.

5. The calculation method for each of the above components is as follows.
   a. Credit Risk

1. The credit risk factor calculated is only for loss or decline in value of assets caused by the failure of the debtor and/or other parties to fulfill obligations to the Company.
2. The provisions and procedures for calculating the amount of funds considered in MMBR for this component are the same as those described in Roman II item 1 letter b item 1).
3. The amount of AYD used for the MMBR calculation is the accumulated amount of AYD.
   b. Market Risk
4. The market risk factor calculated is only for losses resulting from changes in market prices of the Company's assets and changes in foreign exchange rates.
5. The provisions and procedures for calculating the amount of funds considered in MMBR for this component are the same as those described in Roman II item 3 letter b item 1) and item 2).
6. The amount of AYD used for the MMBR calculation is the accumulated amount of AYD.
   c. Liquidity Risk
7. Liquidity Risk is the risk of imbalance between asset cash flow projections and liability cash flows arising from discrepancies between the amount and maturity of liabilities and the amount and maturity of assets as found in Roman II item 2 letter a.
8. The amount of funds considered in MMBR to cover this imbalance risk is determined to be 1% (one percent) of the amount of Liability used in the PAYDI solvency calculation.

Determined in Jakarta on June 13, 2017
EXECUTIVE HEAD OF SUPERVISOR
OF INSURANCE, PENSION FUNDS,
LENDING INSTITUTIONS, AND
OTHER FINANCIAL SERVICES INSTITUTIONS
FINANCIAL SERVICES AUTHORITY, sd
Yuliana
Legal Director
Legal Department

This copy is consistent with the original

sd
FIRDAUS DJAELANI