OJK Circular No. 5/SEOJK.05/2015 on Risk Level Assessment of Non-Bank Islamic Financial Institutions — OJK — ID

To the Board of Directors or equivalent at:

Islamic Insurance Companies and Islamic Reinsurance Companies
Islamic Financing Companies
Islamic Pension Funds
Sharia Business Units of Insurance Companies, Reinsurance Companies, Financing Companies, and Pension Funds
at your location.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 5/SEOJK.05/2015 CONCERNING RISK LEVEL ASSESSMENT OF NON-BANK ISLAMIC FINANCIAL INSTITUTIONS

In relation to the mandate stipulated in Article 5 paragraph (4), Article 7 paragraph (3), and Article 8 paragraph (6) of Financial Services Authority Regulation Number 10/POJK.05/2014 concerning Risk Level Assessment of Non-Bank Financial Institutions (State Gazette of the Republic of Indonesia Year 2014 Number 197, Supplement to the State Gazette of the Republic of Indonesia Number 5575), it is necessary to regulate implementation provisions regarding risk level assessment, format and procedures for submitting risk assessment result reports, as well as format and procedures for submitting follow-up action plans for risk assessments for insurance/reinsurance companies, financing companies, and pension funds that conduct part or all of their business activities based on Sharia principles in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

Non-Bank Islamic Financial Institutions, hereinafter abbreviated as Islamic NBFI, are:
a. insurance and reinsurance companies that conduct all or part of their business using Sharia principles ... as referred to in legislation in the field of insurance; b. financing companies that conduct all or part of their business using Sharia principles, as referred to in legislation in the field of financing institutions; and
c. pension funds that conduct all or part of their business using Sharia principles, as referred to in legislation in the field of pension funds.
Financial Services Authority, hereinafter abbreviated as OJK, is an independent institution free from the interference of other parties, which has the function, duties, and authority for regulation, supervision, examination, and investigation as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

II. GUIDELINES FOR RISK LEVEL ASSESSMENT AND PREPARATION OF RISK ASSESSMENT RESULT REPORTS

Risk level assessment of Islamic NBFIs is conducted by considering the materiality and significance of a type of risk against the total risk of the Islamic NBFI.
Risk level assessment of Islamic NBFIs is conducted by taking into account the history of risks that have occurred and the probability of a risk occurring in the future.
Risk level assessment for each type of Islamic NBFI is prepared according to the guidelines as referred to in Appendix I which is an integral part of this OJK Circular Letter.
The Risk Assessment Result Report must be prepared and signed by the director or equivalent who oversees the risk management function and acknowledged by the President Director or equivalent.
The Risk Assessment Result Report for Islamic NBFIs must be prepared according to the format as referred to in Appendix II which is an integral part of this OJK Circular Letter.

III. GUIDELINES FOR PREPARATION OF FOLLOW-UP ACTION PLANS FOR RISK ASSESSMENT

The follow-up action plan for risk assessment is signed by the Board of Directors or equivalent.
The follow-up action plan for risk assessment of Islamic NBFIs is prepared according to the format as referred to in Appendix III which is an integral part of this OJK Circular Letter.

IV. PROCEDURES FOR SUBMISSION OF RISK ASSESSMENT RESULT REPORTS AND FOLLOW-UP ACTION PLANS FOR RISK ASSESSMENT

Risk assessment result reports and follow-up action plans for risk assessment are submitted to OJK online through the OJK data communication network system.
In the event that the OJK data communication network system is not yet available, risk assessment result reports and follow-up action plans for risk assessment are submitted online via the official email of the Islamic NBFI by attaching softcopy risk assessment result reports and follow-up action plans for risk assessment in spreadsheet format to rbs.iknb.syariah@ojk.go.id.
In the event that OJK experiences technical difficulties during the deadline for submission of risk assessment result reports or follow-up action plans for risk assessment so that:
a. Islamic NBFIs cannot submit risk assessment result reports or follow-up action plans for risk assessment online as referred to in item 1 or item 2; and/or b. OJK cannot receive risk assessment result reports or follow-up action plans for risk assessment online as referred to in item 1 or item 2, OJK announces in writing to Islamic NBFIs on the same day after the technical difficulty occurs and Islamic NBFIs are required to submit softcopy risk assessment result reports or follow-up action plans for risk assessment in spreadsheet format offline no later than the next working day.
In the event of technical difficulties as referred to in item 3, Islamic NBFIs submit softcopy risk assessment result reports and follow-up action plans for risk assessment in spreadsheet format offline as referred to in item 3 via a letter signed by the Board of Directors or equivalent and addressed to:
Financial Services Authority u.p. Director of Non-Bank Islamic Financial Institutions Sumitro Djojohadikusumo Building Jl. Lapangan Banteng Timur No. 2—4 Jakarta 10710
Submission of softcopy risk assessment result reports and follow-up action plans for risk assessment in spreadsheet format offline as referred to in item 3 can be done in one of the following ways:
a. handed over directly to the OJK office as referred to in item 4; b. sent via registered post office; or
c. sent via courier/courier service company.
Islamic NBFIs are deemed to have submitted risk assessment result reports and follow-up action plans for risk assessment with the following provisions:
a. for submission online through the OJK data communication network system, evidenced by a receipt from OJK; b. for submission online via email, evidenced by an email receipt from OJK; or
c. for offline submission, evidenced by:
1) a receipt letter from OJK, if the report is handed over directly to the OJK office as referred to in item 4; or
2) a shipping receipt from the post office or courier/courier service company, if the report is sent via post office or courier/courier service company.

V. CLOSING
The provisions in this Financial Services Authority Circular Letter shall take effect on the date of determination. To ensure everyone knows, order the publication of this Financial Services Authority Circular Letter by placing it in the State Gazette of the Republic of Indonesia. Determined in Jakarta on January 29, 2015 EXECUTIVE HEAD OF SUPERVISOR FOR INSURANCE, PENSION FUNDS, FINANCING INSTITUTIONS, AND OTHER FINANCIAL SERVICE INSTITUTIONS FINANCIAL SERVICES AUTHORITY, Signed. FIRDAUS DJAELANI STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 12 DATE 10 FEBRUARY 2015 Copy consistent with the original Director of Legal Affairs Legal Department, Signed. Sudarmaji

APPENDIX I
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 5/SEOJK.05/2015 CONCERNING RISK LEVEL ASSESSMENT OF NON-BANK ISLAMIC FINANCIAL INSTITUTIONS

GUIDELINES FOR RISK LEVEL ASSESSMENT
OF NON-BANK ISLAMIC FINANCIAL INSTITUTIONS
TABLE OF CONTENTS
CHAPTER I: INTRODUCTION..............................................................................2
A. Definition and Scale of Risk Level Assessment.................................2
B. Purpose of Risk Assessment Guidelines .......................................3
C. General Principles of Risk Level Assessment ...........................................3
CHAPTER II: RISK LEVEL CALCULATION PROCESS ....................................5
A. Overview of Risk Level Calculation.................................5
B. Inherent Risk Assessment..................................................................5
C. Management and Control Assessment ..........................................6
D. Determination of Net Risk Value..........................................................7
E. Determination of Capital Support (Equity) Risk Value.....................8
F. Determination of Overall Risk Value................................................9

CHAPTER III : RISK LEVEL ASSESSMENT PER RISK TYPE...................... 11
A. Governance Risk......................................................................11
B. Corporate Governance Risk...........................................................................13
C. Strategic Risk ................................................................................16
D. Operational Risk..........................................................................19
E. Asset and Liability Risk................................................................23
F. Islamic Insurance Risk .................................................................27
G. Islamic Financing Risk.............................................................38
H. Capital Support (Equity) Risk for Islamic Insurance..................42
I. Capital Support (Equity) Risk for Islamic Financing.............43
J. Capital Support Risk for Islamic Pension Funds ...............................44
Example of Risk Level Calculation for Islamic Insurance and
Reinsurance Companies ................................................................................ 46
Example of Risk Level Calculation for Islamic Financing Companies..... 47
Example of Risk Level Calculation for Islamic Pension Funds..................... 48

CHAPTER I
INTRODUCTION
A. DEFINITION AND SCALE OF RISK LEVEL ASSESSMENT In the course of business operations, Islamic NBFIs face various risks that may prevent the achievement of company objectives. Islamic NBFIs need to apply risk management to minimize the risks faced. One part of risk management is conducting risk measurement and assessment. The purpose of risk assessment is to determine the probability of failure of the Islamic NBFI. Risk assessment activities are conducted continuously and always updated periodically or based on current conditions experienced by the Islamic NBFI. According to regulations, Islamic NBFIs are required to submit risk assessment results to OJK at least once a year. The probability of failure of the Islamic NBFI is reflected in the risk value and risk level. Risk levels are grouped into five levels namely: low, medium-low, medium-high, high, and very high. Meanwhile, risk values have a range of 0 to 4. The higher the risk value, the greater the likelihood of the Islamic NBFI experiencing failure. Conversely, the lower the risk value, the smaller the likelihood of the Islamic NBFI experiencing failure. Risk values and risk levels can be seen in Table 1.
Table 1
Risk Values and Risk Levels of Islamic NBFIs
Risk Value
(RV)
Risk Level Explanation
0 < RV ≤ 1 Low The probability of the Islamic NBFI failing to meet its obligations is relatively low. The Islamic NBFI is indicated to be very healthy and has the ability to meet its obligations. 1 < RV ≤ 1.5 Medium-Low The probability of the Islamic NBFI failing to meet its obligations is at a medium to low level. Generally, the Islamic NBFI is healthy but there is potential failure to meet its obligations.
1.5 < RV ≤ 2 Medium-High The probability of the Islamic NBFI failing to meet its obligations is at a medium to high level. Generally, the Islamic NBFI is less healthy and there is quite small potential failure to meet its obligations.
2 < RV ≤ 3 High The probability of the Islamic NBFI failing to meet its obligations is at a high level. Generally, the Islamic NBFI is unhealthy and has quite large potential failure in meeting its obligations. 3 < RV ≤ 4 Very High The probability of the Islamic NBFI failing to meet its obligations is at a very high level. Generally, the Islamic NBFI is unhealthy and has very large potential failure in meeting its obligations.

B. PURPOSE OF RISK ASSESSMENT GUIDELINES
This guideline aims to provide guidance for the management of Islamic NBFIs in conducting risk level assessments of Islamic NBFIs.
C. GENERAL PRINCIPLES OF RISK LEVEL ASSESSMENT
Management of Islamic NBFIs needs to pay attention to general principles as follows:

Risk-Based
Risk level assessment is conducted by identifying various factors that can affect the probability of failure of the Islamic NBFI to achieve its goals.
Materiality
Islamic NBFIs need to consider the materiality and significance of inherent risk and management control from each type of risk. The determination of materiality and significance is based on adequate data and information regarding factors affecting the risk level of the Islamic NBFI.
Comprehensive
The risk level assessment process is conducted across all risk areas of the Islamic NBFI through structured and integrated analysis.

CHAPTER II
RISK LEVEL CALCULATION PROCESS
A. OVERVIEW OF RISK LEVEL CALCULATION
Risk level calculation is based on the following factors:

Inherent risk, which is all risks inherent in each type of activity of the Islamic NBFI;
Management and control, which are things that can be done by the Board of Directors and Board of Commissioners or equivalent and Sharia Supervisory Board to minimize inherent risk levels; and
Capital support (equity), which is the funding/equity available that describes the ability of the Islamic NBFI to meet its obligations and sustain its business.
The framework of the risk assessment system can be described as follows:
[Diagram Description: Inherent Risk (Governance, Corporate Governance, Strategy, Operational, Asset and Liability, Insurance, Financing) minus Management & Control equals Net Risk. Net Risk plus Capital Support (Equity) equals Overall Risk Value]

B. INHERENT RISK ASSESSMENT
Inherent risk is the risk inherent in the activities of the Islamic NBFI without considering the management and control aspects carried out by that Islamic NBFI. Inherent risks that have an impact on the ability of the Islamic NBFI to meet its obligations are included in the inherent risk assessment. The inherent risk of Islamic NBFIs is greatly influenced by the characteristics and complexity of the Islamic NBFI, the business lines of the Islamic NBFI, the type of product/type of program of the Islamic NBFI. The more diverse and higher the volume of operational activities, the higher the inherent risk of the company. Meanwhile, the company's risk profile determines how much level of inherent risk is willing to be accepted with consideration of the capital support needed. In certain risk areas, Islamic NBFIs that operate based on Sharia principles have the same risk characteristics, but in some other risk areas there are specializations according to the type of Islamic NBFI and financial services provided. The inherent risk assessment of Islamic NBFIs is conducted separately from the management and control carried out to reduce that risk. In other words, in this inherent risk assessment, the Islamic NBFI only assesses risks that may arise in the implementation of an Islamic NBFI without paying attention to whether the risk has been minimized due to strong management and control.
C. MANAGEMENT AND CONTROL ASSESSMENT
The management and control aspect refers to how the Islamic NBFI identifies, measures, monitors, and controls its inherent risks. In practice, this is done through a series of policies and procedures, applied systems, administrative practices, and supervision practices implemented. The assessment of the strength of management and control is intended to assess the mechanisms or management and control systems for each inherent risk exposed to the Islamic NBFI. Aspects considered in this assessment include management's concern for risk as well as the control systems it possesses, including the risk management framework owned and applied by the Islamic NBFI. The results of the management and control assessment will become a risk reduction factor for inherent risk to become net risk.

D. DETERMINATION OF NET RISK VALUE
The determination of net risk value is done in two stages, namely measuring the net risk value for each type of risk and measuring the total net risk value.
1. Net risk value is basically the inherent risk value after considering the management and control value. This risk value is the average of the inherent risk value and the management control value.
Net Risk = (Inherent Risk + Management and Control) The calculation of net risk value above is performed for operational risk, asset and liability risk, insurance risk, financing risk, and strategic risk. Corporate governance and governance risks are net risk values and there is no reduction from management and control.
2. Measurement of total net risk value
After the net risk value is obtained for all types of risk, then the calculation of total net risk value is done by weighting each type of risk. Weights for each type of risk are presented in the following table:
Table 2
Weights of Risks Other Than Capital Risk
NON-CAPITAL RISKS
No. Type of Risk Weight (%) Asya 1 Weight (%) Psya 2 Weight (%) Dapensya 3 1 Governance 10 10 15 2 Corporate Governance 15 15 20 3 Strategy 15 15 10 4 Operational 20 20 25 5 Assets and Liabilities 20 10 30 6 A Insurance 20 NA NA 6 B Financing NA 30 NA TOTAL 100 Note:
1. Asya: Islamic Insurance
2. Psya: Islamic Financing
3. Dapensya: Islamic Pension Fund
Total net risk value is calculated with the following formula.
Total Net Risk Value = √(Σ(from i=1 to 6) (NR_i^4 x Weight_i)) i is the type of risk as listed in Table 2.

E. DETERMINATION OF CAPITAL SUPPORT (EQUITY) RISK VALUE Capital support value reflects the ability of the Islamic NBFI to meet its obligations. In determining capital support, Islamic NBFIs consider aspects of capital capability and additional capital. Capital support risk value is calculated by weighting capital capability and additional capital.
Table 3
Weights of Capital Support (Equity) Risk Value CAPITAL SUPPORT RISK No. Type of Risk Weight (%) Asya 1 Weight (%) Psya 2 Weight (%) Dapensya 3 1 Funding Capability (Equity) 2 Additional Funding (Equity) TOTAL 100 Note:

Asya: Islamic Insurance
Psya: Islamic Financing
Dapensya: Islamic Pension Fund

F. DETERMINATION OF OVERALL RISK VALUE
The overall risk value of the Islamic NBFI reflecting the probability of failure of the Islamic NBFI is calculated based on the net risk value by considering the capital support or equity of the Islamic NBFI.
Table 4
Weights of Total Net Risk Value and Capital Support (Equity) Risk Value OVERALL RISK No. Type of Risk Weight (%) Asya 1 Weight (%) Psya 2 Weight (%) Dapensya 3 1 Total Net Risk Value 60 50 50 2 Total Capital Support 40 50 50 TOTAL 100 Note:

Asya: Islamic Insurance
Psya: Islamic Financing
Dapensya: Islamic Pension Fund
Next, the overall risk value is calculated by summing and weighting the total net risk value with the capital support risk value using the following formula. NRK = √((TNRB^4 x Weight TNRB) + (NRDD^4 x Weight NRDD)) NRK = Overall Risk Value TNRB = Total Net Risk Value NRDD = Capital Support Risk Value

In full, the formula for calculating Overall Risk Value is presented in the following table:
Table 5
Risk Assessment
Type of Risk
Inherent Risk
(IR)
Management &
Control
(MC)
Risk
Value
Risk Weight (%) Asya *) Psya *) Dapensya *)
1. Governance (0-4) 10 10 15
2. Corporate Governance (0-4) 15 15 20
3. Strategy (0-4) (0-4) (0-4) 15 15 10
4. Operational (0-4) (0-4) (0-4) 20 20 25
5. Assets and Liabilities (0-4) (0-4) (0-4) 20 10 30
6.A. Insurance (0-4) (0-4) (0-4) 20 NA NA
6.B. Financing (0-4) (0-4) (0-4) NA 30 NA
Total Net Risk Value 100
Capital Support (Equity)
1.Funding Capability
(Equity)
(0-4) 50
2.Additional Funding
(Equity)
(0-4) 50
Total Capital Support (Equity) Value 100
1. Total Net Risk Value (0-4) 60 50 50
2. Total Capital
Support
(0-4) 40 50 50
Overall Risk Value (0-4) 100
*) Asya: Islamic Insurance
*) Psya: Islamic Financing
*) Dapensya: Islamic Pension Fund
) for Sharia DPLK, assessment is only up to total net risk assessment.

CHAPTER III
RISK LEVEL ASSESSMENT PER RISK TYPE
This chapter provides guidelines for Islamic NBFIs in conducting risk level assessment per type of risk. In risk assessment, general indications of inherent risk for each industry follow the nature of the business of that type of industry. The types of risks used to conduct risk assessment are 7 (seven) types each for Islamic insurance and Islamic financing, and 6 (six) types of risk for Islamic pension funds.
Table 6
Type of Risk
No. Islamic Insurance Islamic Financing Islamic Pension Fund 1 Governance 2 Corporate Governance Corporate Governance Corporate Governance 3 Strategy 4 Operational 5 Assets and Liabilities Assets and Liabilities Assets and Liabilities 6 Insurance Financing - Capital Support (Equity) Capital Support (Equity) Capital Support

A. GOVERNANCE RISK
Governance risk is the risk of failure of the Islamic NBFI to achieve its objectives due to the failure of the Islamic NBFI to maintain the best composition of managers who have high competence and integrity. Managers referred to in this guideline include directors/managers, board of commissioners, supervisory board, or equivalents. Risks arising from governance will affect the ability of the Islamic NBFI to meet its obligations to stakeholders. The topics assessed in this risk are as follows:
1) Appointment and dismissal
In this topic, the areas assessed include procedures and legality of documents related to such appointment and dismissal.

2) Composition and Proportion
Aspects to be assessed include the adequacy of the number and composition of managers and the clarity of their structure and job descriptions.

3) Competence and Integrity
In this topic, the areas assessed include the results of competency and propriety tests, work experience, education and training, and the behavior of managers.

4) Leadership
In leadership, the areas assessed include the vision and mission as well as the characteristics of the managers.

The following are general indications of management risk for each risk value range:

Indication of LJKNB Syariah with Low Management Risk (0 < NR ≤ 1)
a. Appointment and/or dismissal of managers is very adequate. b. The composition and proportion of managers are sufficient and appropriate for the needs of the LJKNB Syariah.
c. The competence and integrity of managers are very adequate and support the duties and authority of managers.
d. The leadership of managers is very good.
Indication of LJKNB Syariah with Low-Medium Management Risk (1 < NR ≤ 1.5)
a. Appointment and/or dismissal of managers is adequate. b. The composition and proportion of managers are sufficient, but there are indications of being less appropriate for the needs of the LJKNB Syariah.
c. The competence and integrity of managers are adequate and support the duties and authority of managers.
d. The leadership of managers is good.
Indication of LJKNB Syariah with Medium-High Management Risk (1.5 < NR ≤ 2)
a. Appointment and/or dismissal of managers is less adequate. b. The composition and proportion of managers are less sufficient.
c. The competence and integrity of managers are less adequate and less supportive of the duties and authority of managers.
d. The leadership of managers is fair.
Indication of LJKNB Syariah with High Management Risk (2 < NR ≤ 3)
a. Appointment and/or dismissal of managers is conducted with inadequate processes and documentation. b. The composition and proportion of managers are insufficient.
c. The competence and integrity of managers are inadequate and do not support the duties and authority of managers.
d. The leadership of managers is not good.
Indication of LJKNB Syariah with Very High Management Risk (3 < NR ≤ 4)
a. Appointment and/or dismissal of managers is conducted with very inadequate processes and documentation. b. The composition and proportion of managers are very insufficient for needs.
c. The competence and integrity of managers are inadequate and hinder the implementation of the duties and authority of managers.
d. The leadership of managers is very poor.

B. GOVERNANCE RISK
Governance risk is the potential for failure in the implementation of good governance of LJKNB Syariah, inappropriate management style, control environment, and behavior of every party involved directly or indirectly with LJKNB Syariah that can affect the fulfillment of LJKNB Syariah's obligations. The topics assessed in this risk are as follows:

1) Governance Guidelines
Areas to be assessed include the availability and completeness of governance guidelines, the governance formulation process, the application of governance guidelines, and the evaluation of the application of governance guidelines.

2) Transparency
In this topic, the aspects assessed include transparency in the decision-making process, and transparency in the disclosure and provision of relevant information regarding LJKNB Syariah.

3) Accountability
Aspects to be assessed include the determination of functions, activities, and tasks, code of conduct, early detection systems, rewards and punishments, and internal control structure.

4) Responsiveness
In this topic, aspects to be assessed include responsibility to consumers, responsibility to shareholders/providers of capital, and social responsibility.

5) Independence
Areas to be assessed include the presence or absence of conflicts of interest and intervention by shareholders or equivalents, commissioners or equivalents, and/or other parties.

6) Fairness and Equity
In this topic, aspects to be assessed include cooperation with business partners, treatment of consumers, and treatment of employees.

7) Risk Management
Aspects to be evaluated include the availability of risk management guidelines, risk management control units, and the implementation of risk management.

The following are general indications of governance risk for each risk value range:

Indication of LJKNB Syariah with Low Governance Risk (0 < NR ≤ 1)
a. Governance guidelines owned by LJKNB Syariah are very adequate. b. LJKNB Syariah implements the principle of transparency very well.
c. LJKNB Syariah implements the principle of accountability very well.
d. LJKNB Syariah implements the principle of responsibility very well. e. LJKNB Syariah implements the principle of independence very well. f. LJKNB Syariah implements the principle of fairness and equity very well. g. LJKNB Syariah implements the principle of risk management very well.
Indication of LJKNB Syariah with Low-Medium Governance Risk (1 < NR ≤ 1.5)
a. Governance guidelines owned by LJKNB Syariah are adequate. b. LJKNB Syariah implements the principle of transparency well.
c. LJKNB Syariah implements the principle of accountability well.
d. LJKNB Syariah implements the principle of responsibility well. e. LJKNB Syariah implements the principle of independence well. f. LJKNB Syariah implements the principle of fairness and equity well. g. LJKNB Syariah implements the principle of risk management well.
Indication of LJKNB Syariah with Medium-High Governance Risk (1.5 < NR ≤ 2)
a. Governance guidelines owned by LJKNB Syariah are fairly adequate. b. LJKNB Syariah implements the principle of transparency fairly well.
c. LJKNB Syariah implements the principle of accountability fairly well.
d. LJKNB Syariah implements the principle of responsibility fairly well. e. LJKNB Syariah implements the principle of independence fairly well. f. LJKNB Syariah implements the principle of fairness and equity fairly well. g. LJKNB Syariah implements the principle of risk management fairly well.
Indication of LJKNB Syariah with High Governance Risk (2 < NR ≤ 3)
a. Governance guidelines owned by LJKNB Syariah are less adequate. b. LJKNB Syariah implements the principle of transparency less well.
c. LJKNB Syariah implements the principle of accountability less well.
d. LJKNB Syariah implements the principle of responsibility less well. e. LJKNB Syariah implements the principle of independence less well. f. LJKNB Syariah implements the principle of fairness and equity less well. g. LJKNB Syariah implements the principle of risk management less well.
Indication of LJKNB Syariah with Very High Governance Risk (3 < NR ≤ 4)
a. Governance guidelines of LJKNB Syariah are not available or tend to be inadequate. b. LJKNB Syariah does not implement the principle of transparency to LJKNB Syariah stakeholders.
c. LJKNB Syariah does not implement the principle of accountability in the operation of LJKNB Syariah.
d. LJKNB Syariah does not implement the principle of responsiveness in the operation of LJKNB Syariah. e. LJKNB Syariah does not implement the principle of independence in the operation of LJKNB Syariah. f. LJKNB Syariah does not implement the principle of fairness and equity in the operation of LJKNB Syariah. g. LJKNB Syariah does not implement the principle of risk management in the operation of LJKNB Syariah.

C. STRATEGY RISK
Strategy risk is the potential failure of LJKNB Syariah in realizing obligations to consumers due to the unfeasibility or failure in planning, setting, and implementing strategy, making appropriate business decisions, and/or LJKNB Syariah's lack of responsiveness to external changes. Strategy risk assessment consists of inherent risk assessment and management control assessment. The topics assessed in the inherent risk of strategy risk are as follows:

1) Alignment of strategy with business environment conditions
In this topic, aspects to be assessed include the alignment of the vision, mission, and business direction of LJKNB Syariah, LJKNB Syariah's internal readiness in developing programs/business, and consideration of external factors in the development of LJKNB Syariah programs/business.

2) Strategic position of LJKNB Syariah
Aspects to be assessed include the adequacy of competitor analysis, LJKNB Syariah's readiness to face macroeconomic changes, reputation risk, and diversification plans to be carried out by LJKNB Syariah. The topics assessed in management and control are as follows:

1) Strategy formulation and setting process
In this topic, aspects to be assessed include evaluation of the formulation of risk levels to be taken and acceptable risk tolerance, and active supervision by the board of commissioners, board of supervisors/sharia supervisory board, and/or board of directors/managers.

2) Implementation of strategy plans
This can be assessed from the understanding of the board of directors/managers and officials one level below them as well as from key performance indicators.

The following are general indications of strategy risk for each risk value range in both inherent risk and management and control:

Indication of LJKNB Syariah Strategy Risk with Low Inherent Risk (0 < NR ≤ 1)
a. The strategy owned and implemented by LJKNB Syariah is very aligned with its environmental conditions. b. The policies implemented by LJKNB Syariah are very aligned with the strategic position of LJKNB Syariah.
Indication of LJKNB Syariah Strategy Risk with Low-Medium Inherent Risk (1 < NR ≤ 1.5)
a. The strategy owned and implemented by LJKNB Syariah is aligned with its environmental conditions. b. The policies implemented by LJKNB Syariah are aligned with the strategic position of LJKNB Syariah.
Indication of LJKNB Syariah Strategy Risk with Medium-High Inherent Risk (1.5 < NR ≤ 2)
a. The strategy owned and implemented by LJKNB Syariah is fairly aligned with its environmental conditions. b. The policies implemented by LJKNB Syariah are fairly aligned with the strategic position of LJKNB Syariah.
Indication of LJKNB Syariah Strategy Risk with High Inherent Risk (2 < NR ≤ 3)
a. The strategy owned and implemented by LJKNB Syariah is less aligned with its environmental conditions. b. The policies implemented by LJKNB Syariah are less aligned with the strategic position of LJKNB Syariah.
Indication of LJKNB Syariah Strategy Risk with High Inherent Risk (3 < NR ≤ 4)
a. The strategy owned and implemented by LJKNB Syariah is not aligned with its environmental conditions. b. The policies implemented by LJKNB Syariah are not aligned with the strategic position of LJKNB Syariah.

MANAGEMENT AND CONTROL

Indication of LJKNB Syariah with Very Strong Management and Control over Strategy Risk (0 < MP ≤ 1)
a. The process of formulating and setting LJKNB Syariah's strategy plans is conducted very well. b. The implementation of LJKNB Syariah's strategy plans is conducted very well.
Indication of LJKNB Syariah with Strong Management and Control over Strategy Risk (1 < MP ≤ 1.5)
a. The process of formulating and setting LJKNB Syariah's strategy plans is conducted well. b. The implementation of LJKNB Syariah's strategy plans is conducted well.
Indication of LJKNB Syariah with Fairly Strong Management and Control over Strategy Risk (1.5 < MP ≤ 2)
a. The process of formulating and setting LJKNB Syariah's strategy plans is conducted fairly well. b. The implementation of LJKNB Syariah's strategy plans is conducted fairly well.
Indication of LJKNB Syariah with Weak Management and Control over Strategy Risk (2 < MP ≤ 3)
a. The process of formulating and setting LJKNB Syariah's strategy plans is conducted less well. b. The implementation of LJKNB Syariah's strategy plans is conducted less well.
Indication of LJKNB Syariah with Very Weak Management and Control over Strategy Risk (3 < MP ≤ 4)
a. LJKNB Syariah does not have a strategy in conducting its business. b. No strategy plan is made by LJKNB Syariah.

D. OPERATIONAL RISK
Operational risk is the potential failure of LJKNB Syariah in realizing obligations to consumers as a result of the unfeasibility or failure of internal processes, human resources, information technology systems, and/or events originating from outside the LJKNB Syariah environment. Operational risk assessment consists of inherent risk assessment and management control assessment. The topics assessed in the inherent risk of operational risk are as follows:

1) Complexity of LJKNB Syariah
Aspects to be assessed in this topic include size and organizational structure, human resources, volume and workload, corporate actions and new business development, and sources and lines of business or products marketed (sharia insurance and reinsurance companies).

2) Information technology systems
Aspects to be assessed include the reliability of information technology systems, changes in information technology systems, and infrastructure.

3) Fraud and legal issues
In this topic, areas to be assessed include the history of internal fraud at LJKNB Syariah and legal issues with consumers.

4) Disruptions to LJKNB Syariah business
Aspects to be assessed include the frequency and materiality of external events, the location and geographical conditions of LJKNB Syariah, and the use of third-party services.

The topics assessed in management and control are as follows:

1) Policies and procedures
Aspects to be noted include the formulation of policies and decision-making processes, standard operating procedures (SOPs), policy communication and documentation, and risk management.

2) Administrative activities
In this topic, aspects to be noted include the budgeting cycle and activity plans, consumer administration, recording, bookkeeping, and transaction reporting, as well as archives and documentation.

3) Management of information technology systems
In this topic, areas to be assessed include the management of information technology systems and infrastructure, blueprints and application change management, data security management, database management, and information management, and backup procedures and disaster recovery plans.

4) Prevention of fraud and legal issues
Areas to be assessed include the internal control structure and supervision by the audit committee/board of commissioners/board of supervisors/sharia supervisory board.

5) Human resource management
Areas to be assessed include human resource planning and strategy, recruitment processes, career development, payroll, and work benefits, and employee rejuvenation and replacement.

6) Third-party service usage management
In this topic, areas assessed include third-party service usage policies, appointment of service providers, reporting and accountability, and control over the costs of third-party service usage.

The following are general indications of operational risk for each risk value range in both inherent risk and management and control:

INHERENT RISK

Indication of LJKNB Syariah Operational Risk with Low Inherent Risk (0 < NR ≤ 1)
a. LJKNB Syariah has an organizational structure, human resources, volume, and workload with very low complexity levels. b. LJKNB Syariah has very adequate information technology systems capable of supporting the operation of LJKNB Syariah.
c. LJKNB Syariah has never had a history of internal fraud or experienced legal issues with consumers.
d. LJKNB Syariah has no disruptions in the operation of LJKNB Syariah.
Indication of LJKNB Syariah Operational Risk with Low-Medium Inherent Risk (1 < NR ≤ 1.5)
a. LJKNB Syariah has an organizational structure, human resources, volume, and workload with low complexity levels. b. LJKNB Syariah has adequate information technology systems capable of supporting the operation of LJKNB Syariah.
c. LJKNB Syariah almost never has a history of internal fraud or experiences legal issues with consumers.
d. There are few disruptions occurring at LJKNB Syariah.
Indication of LJKNB Syariah Operational Risk with Medium-High Inherent Risk (1.5 < NR ≤ 2)
a. LJKNB Syariah has an organizational structure, human resources, volume, and workload with fair complexity levels. b. LJKNB Syariah has less adequate information technology systems capable of supporting the operation of LJKNB Syariah.
c. LJKNB Syariah rarely has a history of internal fraud or experiences legal issues with consumers.
d. Disruptions occurring at LJKNB Syariah are fairly significant.
Indication of LJKNB Syariah Operational Risk with High Inherent Risk (2 < NR ≤ 3)
a. LJKNB Syariah has an organizational structure, human resources, volume, and workload with high complexity levels. b. LJKNB Syariah has inadequate information technology systems.
c. LJKNB Syariah often has a history of internal fraud or experiences legal issues with consumers.
d. Disruptions occurring at LJKNB Syariah are significant.
Indication of LJKNB Syariah Operational Risk with Very High Inherent Risk (3 < NR ≤ 4)
a. LJKNB Syariah has an organizational structure, human resources, volume, and workload with very high complexity levels. b. LJKNB Syariah has very inadequate information technology systems.
c. LJKNB Syariah frequently has a history of internal fraud or experiences legal issues with consumers.
d. Disruptions occurring at LJKNB Syariah are very significant.

MANAGEMENT AND CONTROL

Indication of LJKNB Syariah with Very Strong Management and Control over Operational Risk (0 < MP ≤ 1)
a. LJKNB Syariah's policies and procedures are very adequate. b. LJKNB Syariah's administrative activities are very good.
c. The management of information technology systems at LJKNB Syariah is very good.
d. LJKNB Syariah's mechanisms and policies to prevent internal fraud and legal issues with consumers are very good. e. LJKNB Syariah's human resource management is very good. f. The management of third-party services at LJKNB Syariah is very good.
Indication of LJKNB Syariah with Strong Management and Control over Operational Risk (1 < MP ≤ 1.5)
a. LJKNB Syariah's policies and procedures are adequate. b. LJKNB Syariah's administrative activities are good.
c. The management of information technology systems at LJKNB Syariah is good.
d. LJKNB Syariah's mechanisms and policies to prevent internal fraud and legal issues with consumers are good. e. LJKNB Syariah's human resource management is good. f. The management of third-party services at LJKNB Syariah is good.
Indication of LJKNB Syariah with Fair Management and Control over Operational Risk (1.5 < MP ≤ 2)
a. LJKNB Syariah's policies and procedures are adequate but there are some things that need to be improved. b. LJKNB Syariah's administrative activities are fairly good but there are some things that need to be improved.
c. The management of Information Technology Systems at LJKNB Syariah is fairly good but there are some things that need to be improved.
d. LJKNB Syariah's mechanisms and policies to prevent internal fraud and legal issues with consumers are fairly good but there are some things that need to be improved. e. LJKNB Syariah's human resource management is fairly good but there are some things that need to be improved. f. The management of third-party services is fairly good but there are some things that need to be improved.
Indication of LJKNB Syariah with Weak Management and Control over Operational Risk (2 < MP ≤ 3)
a. LJKNB Syariah's policies and procedures are inadequate. b. LJKNB Syariah's administrative activities are poor.
c. The management of information technology systems at LJKNB Syariah is not good.
d. LJKNB Syariah's mechanisms and policies to prevent internal fraud and legal issues with consumers are not good. e. LJKNB Syariah's human resource management is not good. f. The management of third-party services at LJKNB Syariah is poor.
Indication of LJKNB Syariah with Very Weak Management and Control over Operational Risk (3 < MP ≤ 4)
a. LJKNB Syariah's policies and procedures are very inadequate. b. LJKNB Syariah's administrative activities are very poor.
c. There is no management of information technology systems at LJKNB Syariah.
d. There are no mechanisms or policies to prevent internal fraud and legal issues with consumers. e. There is no human resource management at LJKNB Syariah. f. The management of third-party services at LJKNB Syariah is very poor.

E. ASSET AND LIABILITY RISK
Asset and liability risk is the risk that occurs due to the potential failure in the management of LJKNB Syariah's assets and liabilities, which causes a shortage of funds in fulfilling obligations to consumers. Asset and liability risk assessment consists of inherent risk assessment and management control assessment.

The topics assessed in the inherent risk of asset and liability risk are as follows:

1) Asset Management
Areas to be assessed include the level of reliability and difficulty of asset valuation, complexity of investment structure, investment objectives-investment style, investment strategy-asset allocation, default risk, investment in affiliated parties, and legal asset risk.

2) Liability Management
For sharia insurance and reinsurance companies, areas to be assessed include the fairness of the use of methods and assumptions for technical reserve formation, the fairness of assumptions used by actuaries, and other obligations. For sharia financing companies, areas to be assessed include the assessment of liability exposures with return rate risk, the assessment of liability exposures with exchange rate risk, and the assessment of potential losses due to return rate and exchange rate risks. For sharia pension funds, areas to be assessed include the fairness of assumptions used by actuaries (PPMP), the alignment of actuarial calculation bases with pension fund regulations (Specifically for DPPK Syariah PPMP), and the alignment of pension benefit obligation calculations with regulations (PPIP).

3) Mismatch between assets and liabilities
Aspects assessed in this topic include the mismatch of asset and liability maturity/duration, the mismatch between assets and liabilities in foreign currency (currency gap), and the level of liquidity.

The topics assessed in management and control are as follows:

1) Board of Directors/Managers' Concern
Aspects assessed in this topic include concern for asset management objectives, concern for asset risk issues, and the reporting process.

2) Asset and Liability Risk Management
Aspects assessed in this topic include asset and liability management risk management, liquidity risk management, and

monitoring from the actuarial side (specifically for Islamic insurance/reinsurance companies and PPMP DPPKS).
3) Investment risk management
Matters assessed in this topic include the determination of investment objectives, determination and review of investment strategies, monitoring of asset allocation, limits, and rebalancing, expertise, selection and monitoring of investment managers, due diligence processes for investments not listed on the exchange, investment selection processes—selection of securities, benchmarking and performance measurement processes, risk analysis, objectivity of investment decision-making, investment strategies—expected investment returns and desired risk levels (risk appetite), and diversification.
4) Controls in conducting asset valuation
Matters assessed in this topic include valuation policies, independent valuation, human resource expertise, reconciliation, frequency, and automation. Below are the general indications of asset and liability risk for each risk value range in both inherent risk and management and control:

INHERENT RISK

Indication of Asset and Liability Risk of Non-Bank Islamic Financial Service Institutions with Low Inherent Risk (0 < NR ≤ 1)
a. Asset management of Non-Bank Islamic Financial Service Institutions is very good b. Liability management of Non-Bank Islamic Financial Service Institutions is very good
c. Asset and liability matching is very adequate
Indication of Asset and Liability Risk of Non-Bank Islamic Financial Service Institutions with Low-Medium Inherent Risk (1 < NR ≤ 1.5)
a. Asset management of Non-Bank Islamic Financial Service Institutions is good b. Liability management of Non-Bank Islamic Financial Service Institutions is good
c. Asset and liability matching is adequate
Indication of Asset and Liability Risk of Non-Bank Islamic Financial Service Institutions with Medium-High Inherent Risk (1.5 < NR ≤ 2)
a. Asset management of Non-Bank Islamic Financial Service Institutions is less good b. Liability management of Non-Bank Islamic Financial Service Institutions is less good
c. Asset and liability matching is less adequate
Indication of Asset and Liability Risk of Non-Bank Islamic Financial Service Institutions with High Inherent Risk (2 < NR ≤ 3)
a. Asset management of Non-Bank Islamic Financial Service Institutions is poor b. Liability management of Non-Bank Islamic Financial Service Institutions is poor
c. Asset and liability matching is inadequate
Indication of Asset and Liability Risk of Non-Bank Islamic Financial Service Institutions with Very High Inherent Risk (3 < NR ≤ 4)
a. Asset management of Non-Bank Islamic Financial Service Institutions is very poor b. Liability management of Non-Bank Islamic Financial Service Institutions is very poor
c. Asset and liability matching is very inadequate

MANAGEMENT AND CONTROL

Indication of Non-Bank Islamic Financial Service Institutions with Very Strong Management and Control over Asset and Liability Risk (0 < MP ≤ 1)
a. The Board of Directors/managers of Non-Bank Islamic Financial Service Institutions have very high concern for the objectives of asset and liability management. b. Non-Bank Islamic Financial Service Institutions have very adequate asset and liability risk management.
c. Non-Bank Islamic Financial Service Institutions conduct investment risk management very well.
d. Non-Bank Islamic Financial Service Institutions have very strong controls in conducting asset valuation.
Indication of Non-Bank Islamic Financial Service Institutions with Strong Management and Control over Asset and Liability Risk (1 < MP ≤ 1.5)
a. The Board of Directors/managers of Non-Bank Islamic Financial Service Institutions have high concern for the objectives of asset and liability management. b. Non-Bank Islamic Financial Service Institutions have adequate asset and liability risk management.
c. Non-Bank Islamic Financial Service Institutions conduct investment risk management well.
d. Non-Bank Islamic Financial Service Institutions have strong controls in conducting asset valuation.
Indication of Non-Bank Islamic Financial Service Institutions with Fairly Strong Management and Control over Asset and Liability Risk (1.5 < MP ≤ 2)
a. The Board of Directors/managers of Non-Bank Islamic Financial Service Institutions have fair concern for the objectives of asset and liability management. b. Non-Bank Islamic Financial Service Institutions have fair asset and liability risk management but there are several matters that need improvement.
c. Non-Bank Islamic Financial Service Institutions conduct investment risk management fairly but there are several matters that need improvement.
d. Non-Bank Islamic Financial Service Institutions have fairly strong controls in conducting asset valuation.
Indication of Non-Bank Islamic Financial Service Institutions with Fairly Weak Management and Control over Asset and Liability Risk (2 < MP ≤ 3)
a. The Board of Directors/managers of Non-Bank Islamic Financial Service Institutions have less concern for the objectives of asset and liability management. b. Non-Bank Islamic Financial Service Institutions have less adequate asset and liability risk management.
c. Non-Bank Islamic Financial Service Institutions conduct investment risk management poorly.
d. Non-Bank Islamic Financial Service Institutions have weak controls in conducting asset valuation.
Indication of Non-Bank Islamic Financial Service Institutions with Weak Management and Control over Asset and Liability Risk (3 < MP ≤ 4)
a. The Board of Directors/managers of Non-Bank Islamic Financial Service Institutions have no concern for the objectives of asset and liability management. b. Non-Bank Islamic Financial Service Institutions have inadequate asset and liability risk management.
c. Non-Bank Islamic Financial Service Institutions conduct investment risk management very poorly.
d. Non-Bank Islamic Financial Service Institutions have very weak controls in conducting asset valuation.

F. ISLAMIC INSURANCE RISK
Islamic insurance risk is the potential failure of Islamic insurance and reinsurance companies (hereinafter referred to as Companies) to meet obligations to policyholders as a result of insufficient risk selection processes (underwriting), contribution determination (pricing), use of reinsurance and/or claim handling. Islamic insurance risk assessment consists of inherent risk assessment and management and control assessment. Islamic insurance risk assessment is distinguished for Islamic life insurance companies, Islamic general insurance companies, and Islamic reinsurance companies.

Islamic Life Insurance
Topics assessed in the inherent risk of Islamic insurance risk are as follows:
1) Level of significance of Islamic insurance risk to total business
Assessment of this topic includes the proportion of Islamic insurance protection risk and the proportion of investment.
2) Product risk mix and type of benefits
Assessment of this topic includes the types of risks covered, benefit payment methods, types of coverage sources, and product types.
3) Islamic reinsurance structure
Assessment of the reinsurance structure includes the proportion of risk covering aspects such as: reinsured risk, types and programs of Islamic reinsurance, reinsurer companies, and concentration of Islamic reinsurance.

Topics assessed in management and control are as follows:
1) Understanding by the Board of Directors or equivalent
Matters assessed in this topic include understanding of insurance risk and monitoring of insurance risk.
2) Product design
Matters assessed in this topic include policies and procedures for product development, business lines/product types, product approval processes, product risk assessment, product modification, policy wording, and reinsurance requirements.
3) Contribution determination
Matters assessed in this topic include policies and procedures for contribution determination, actuarial assumptions, claim estimates (claim costs), profit/loss rates, investment objectives and returns, reinsurance, and contribution tariff review.
4) Underwriting
Matters assessed in this topic include underwriting function structure, underwriting infrastructure, underwriting procedures and processes, group insurance products, delegation of authority, compliance with policies and procedures, monitoring of coverage portfolio development, data quality, and reinsurance considerations in the underwriting process.
5) Liability valuation
Matters assessed in this topic include liability valuation reports and financial condition reports.
6) Reinsurance
Matters assessed in this topic include reinsurance program structure, reinsurance function structure, reinsurance management, reinsurance documentation, and financial reinsurance.
7) Claims
Matters assessed in this topic include claim handling function structure, claims policies and procedures, claim handling processes, human resources, systems and data quality, portfolio monitoring, role and cooperation with reinsurance companies.
8) Distribution
Matters assessed in this topic include selection of distribution channel types, marketing and e-business systems, cooperation agreements, distribution channel controls, and commission structures.
9) Review by independent parties
Matters assessed in this topic include opinions of internal and/or external auditors and supervision of the risk management function.

Below are the general indications of Islamic life insurance risk in each risk value range for both inherent risk and management and control:

INHERENT RISK

Indication of Islamic Life Insurance Risk with Low Inherent Risk (0 < NR ≤ 1)
a. Non-Bank Islamic Financial Service Institutions have a very low level of significance of Islamic life insurance risk compared to total business. b. Non-Bank Islamic Financial Service Institutions have a very good product risk mix and type of benefits.
c. Non-Bank Islamic Financial Service Institutions have a very adequate reinsurance structure.
Indication of Islamic Life Insurance Risk with Low-Medium Inherent Risk (1 < NR ≤ 1.5)
a. Non-Bank Islamic Financial Service Institutions have a low level of significance of Islamic life insurance risk compared to total business. b. Non-Bank Islamic Financial Service Institutions have a good product risk mix and type of benefits.
c. Non-Bank Islamic Financial Service Institutions have an adequate reinsurance structure.
Indication of Islamic Life Insurance Risk with Medium-High Inherent Risk (1.5 < NR ≤ 2)
a. Non-Bank Islamic Financial Service Institutions have a fairly low level of significance of Islamic life insurance risk compared to total business. b. Non-Bank Islamic Financial Service Institutions have a fairly good product risk mix and type of benefits.
c. Non-Bank Islamic Financial Service Institutions have a less adequate reinsurance structure.
Indication of Islamic Life Insurance Risk with High Inherent Risk (2 < NR ≤ 3)
a. Non-Bank Islamic Financial Service Institutions have a high level of significance of Islamic life insurance risk compared to total business. b. Non-Bank Islamic Financial Service Institutions have a less good product risk mix and type of benefits.
c. Non-Bank Islamic Financial Service Institutions have an inadequate reinsurance structure.
Indication of Islamic Life Insurance Risk with Very High Inherent Risk (3 < NR ≤ 4)
a. Non-Bank Islamic Financial Service Institutions have a very high level of significance of Islamic life insurance risk compared to total business. b. Non-Bank Islamic Financial Service Institutions have a poor product risk mix and type of benefits.
c. Non-Bank Islamic Financial Service Institutions have a very inadequate reinsurance structure.

MANAGEMENT AND CONTROL
1. Indication of Islamic Life Insurance with Very Strong Management and Control over Insurance Risk (0 < MP ≤ 1)
a. Understanding by the Board of Directors or equivalent regarding Islamic life insurance risk is very good. b. The product design process owned by the company is conducted very well.
c. Contribution determination is conducted very well.
d. The underwriting process is conducted very well. e. Liability valuation is conducted very well. f. Reinsurance structure and process are conducted very well. g. The claims process owned by the company is conducted very well. h. The distribution process of Islamic insurance products is conducted very well.
i. Review by independent parties is conducted very well.

2. Indication of Islamic Life Insurance with Strong Management and Control over Insurance Risk (1 < MP ≤ 1.5)
a. Understanding by the Board of Directors or equivalent regarding Islamic life insurance risk is good. b. The product design process owned by the company is conducted well.
c. Contribution determination is conducted well.
d. The underwriting process is conducted well. e. Liability valuation is conducted well. f. Reinsurance structure and process are conducted well. g. The claims process owned by the company is conducted well. h. The distribution process of insurance products is conducted well.
i. Review by independent parties is conducted well.

3. Indication of Islamic Life Insurance with Fairly Strong Management and Control over Insurance Risk (1.5 < MP ≤ 2)
a. Understanding by the Board of Directors or equivalent regarding insurance risk is fairly good. b. The product design process owned by the company is conducted fairly well.
c. Contribution determination is conducted fairly well.
d. The underwriting process is conducted fairly well. e. Liability valuation is conducted fairly well. f. Reinsurance structure and process are conducted fairly well. g. The claims process owned by the company is conducted fairly well. h. The distribution process of insurance products is conducted fairly well.
i. Review by independent parties is conducted fairly well.

4. Indication of Islamic Life Insurance with Fairly Weak Management and Control over Insurance Risk (2 < MP ≤ 3)
a. Understanding by the Board of Directors or equivalent regarding insurance risk is not good. b. The product design process owned by the company is conducted not well.
c. Contribution determination is conducted not well.
d. The underwriting process is conducted not well. e. Liability valuation is conducted not well. f. Reinsurance structure and process are conducted not well. g. The claims process owned by the company is conducted not well. h. The distribution process of insurance products is conducted not well.
i. Review by independent parties is conducted not well.

5. Indication of Islamic Life Insurance with Weak Management and Control over Insurance Risk (3 < MP ≤ 4)
a. Understanding by the Board of Directors or equivalent regarding insurance risk is very not good. b. The product design process owned by the company is conducted very not well.
c. Contribution determination is conducted very not well.
d. The underwriting process is conducted very not well. e. Liability valuation is conducted very not well. f. Reinsurance structure and process are conducted very not well. g. The claims process owned by the company is conducted very not well. h. The distribution process of insurance products is conducted very not well.
i. Review by independent parties is conducted very not well.

2. General Insurance and Islamic Reinsurance
Topics assessed in the inherent risk of general insurance and Islamic reinsurance risk are as follows:
1) Nature of insurance business
Matters assessed from this topic include short-tail versus long-tail products, short-term coverage versus long-term coverage, and the hazard level of the business covered.
2) Composition and diversification of business portfolio
Matters assessed from this topic include business diversification and market segmentation.
3) Reinsurance structure
Matters assessed from this topic include the proportion of risk reinsured, types and programs of reinsurance by the reinsurer company, and reinsurance concentration.

Topics assessed in management and control are as follows:
1) Understanding by the Board of Directors or equivalent
Matters assessed in this topic include understanding of insurance risk issues and monitoring of insurance risk.
2) Product design
Matters in this topic include policies and procedures in product development, business lines/product types, product approval processes, assessment of product risk, product modification, policy terms, and reinsurance requirements.
3) Contribution determination
Matters assessed in this topic include policies and procedures for contribution determination, claim estimates (claim costs), investment returns, cost and commission assumptions, risk profile data quality, profit rates, market and competitor condition analysis, reinsurance, contribution tariff review, and contribution tariff changes.
4) Underwriting
Matters assessed in this topic include underwriting policies and procedures, underwriting function structure, underwriting infrastructure, delegation of authority, underwriting manual, compliance with policies and procedures, monitoring of coverage portfolio development, data quality, and reinsurance considerations in underwriting.
5) Liability valuation
Matters assessed in this topic include financial condition reports, liability valuation reports, and data integrity.
6) Reinsurance
Matters assessed in this topic include reinsurance program structure, reinsurance function structure, reinsurance management, reinsurance documentation, financial reinsurance, and reinsurance partner companies.
7) Claims
Matters assessed in this topic include claim handling function structure, claims policies and procedures, claim handling processes, systems and data quality, portfolio monitoring, and role and cooperation with Islamic reinsurance companies.
8) Distribution
Matters assessed in this topic include selection of distribution channel types, marketing and e-business systems, cooperation agreements, distribution channel controls, and commission structures and mis-selling.
9) Review by independent parties
Matters assessed in this topic include opinions of internal and/or external auditors and supervision of the risk management function.

Below are the general indications of general insurance and Islamic reinsurance risk for each risk value range in both inherent risk and management and control:

INHERENT RISK

Indication of General Insurance and Islamic Reinsurance Risk with Low Inherent Risk (0 < NR ≤ 1)
a. The Company has Islamic insurance products and business that are very low risk. b. The Company has a very adequate composition and diversification of business portfolio.
c. The Company has a very good Islamic reinsurance structure.
Indication of General Insurance and Islamic Reinsurance Risk with Low-Medium Inherent Risk (1 < NR ≤ 1.5)
a. The Company has Islamic insurance products and business that are low risk. b. The Company has an adequate composition and diversification of business portfolio.
c. The Company has a good Islamic reinsurance structure.
Indication of General Insurance and Islamic Reinsurance Risk with Medium-High Inherent Risk (1.5 < NR ≤ 2)
a. The Company has Islamic insurance products and business that are fairly low risk. b. The Company has a less good composition and diversification of business portfolio.
c. The Company has a less good Islamic reinsurance structure.
Indication of General Insurance and Islamic Reinsurance Risk with High Inherent Risk (2 < NR ≤ 3)
a. The Company has Islamic insurance products and business that are high risk. b. The Company has a not good composition and diversification of business portfolio.
c. The Company has a not good Islamic reinsurance structure.
Indication of General Insurance and Islamic Reinsurance Risk with Very High Inherent Risk (3 < NR ≤ 4)
a. The Company has Islamic insurance products and business that are very high risk. b. The Company has a very not good composition and diversification of business portfolio.
c. The Company has a very not good Islamic reinsurance structure.

MANAGEMENT AND CONTROL

Indication of General Insurance and Islamic Reinsurance with Very Strong Management and Control over Islamic Insurance Risk (0 < MP ≤ 1)
a. Understanding by the Board of Directors or equivalent regarding Islamic insurance risk is very good. b. The product design process owned by the company is conducted very well.
c. Contribution determination is conducted very well.
d. The underwriting process is conducted very well. e. Liability valuation is conducted very well. f. Islamic reinsurance structure and process are conducted very well. g. The claims process owned by the company is conducted very well. h. The distribution process of Islamic insurance products is conducted very well.
i. Review by independent parties is conducted very well.
Indication of General Insurance and Islamic Reinsurance with Strong Management and Control over Islamic Insurance Risk (1 < MP ≤ 1.5)
a. Understanding by the Board of Directors or equivalent regarding Islamic insurance risk is good. b. The product design process owned by the company is conducted well.
c. Contribution determination is conducted well.
d. The underwriting process is conducted well. e. Liability valuation is conducted well. f. Islamic reinsurance structure and process are conducted well. g. The claims process owned by the company is conducted well. h. The distribution process of Islamic insurance products is conducted well.
i. Review by independent parties is conducted well.
Indication of General Insurance and Islamic Reinsurance with Fairly Strong Management and Control over Islamic Insurance Risk (1.5 < MP ≤ 2)
a. Understanding by the Board of Directors or equivalent regarding Islamic insurance risk is fairly good. b. The product design process owned by the company is conducted fairly well.
c. Contribution determination is conducted fairly well.
d. The underwriting process is conducted fairly well. e. Liability valuation is conducted fairly well. f. Islamic reinsurance structure and process are conducted fairly well. g. The claims process owned by the company is conducted fairly well. h. The distribution process of Islamic insurance products is conducted fairly well.
i. Review by independent parties is conducted fairly well.
Indication of General Insurance and Islamic Reinsurance with Fairly Weak Management and Control over Islamic Insurance Risk (2 < MP ≤ 3)
a. Understanding by the Board of Directors or equivalent regarding Islamic insurance risk is not good. b. The product design process owned by the company is conducted not well.
c. Contribution determination is conducted not well.
d. The underwriting process is conducted not well. e. Liability valuation is conducted not well. f. Islamic reinsurance structure and process are conducted not well. g. The claims process owned by the company is conducted not well. h. The distribution process of Islamic insurance products is conducted not well.
i. Review by independent parties is conducted not well.
Indication of General Insurance and Islamic Reinsurance with Weak Management and Control over Islamic Insurance Risk (3 < MP ≤ 4)
a. Understanding by the Board of Directors or equivalent regarding Islamic insurance risk is very not good. b. The product design process owned by the company is conducted very not well.
c. Contribution determination is conducted very not well.
d. The underwriting process is conducted very not well. e. Liability valuation is conducted very not well.

f. The structure and process of Sharia reinsurance are conducted very poorly. g. The claims process owned by the company is conducted very poorly. h. The distribution process of Sharia insurance products is conducted very poorly.
i. The implementation of review by independent parties is conducted very poorly.

G. SHARIA FINANCING RISK
Sharia financing risk is the risk that occurs due to the failure of consumers and/or other parties to fulfill obligations to the Sharia financing company. Sharia financing risk can also be caused by the concentration of financing distribution on consumers, geographical areas, types of financing, or specific business fields. In the Sharia financing company industry, Sharia financing risk is one of the largest risks that can be the main cause of the failure of Sharia financing companies. In most Sharia financing companies, the provision of Sharia financing is the largest source of Sharia financing risk compared to other Sharia financing receivable portfolios. The value of receivables originating from the distribution of Sharia financing can reach more than 90% (ninety percent) of the total Sharia financing receivables.

The assessment of Sharia financing risk consists of inherent risk assessment and management and control assessment. The topics assessed in the inherent risk of Sharia financing risk are as follows:
1) Composition of Sharia financing receivable portfolios and concentration levels
Matters assessed on this topic include the type and features of Sharia financing receivable exposure and the level of concentration of Sharia financing distribution.
2) Sharia financing distribution strategy
Matters assessed on this topic include the Sharia financing distribution process, the growth rate of Sharia financing receivables, and Sharia financing strategies and products.
3) Quality of Sharia financing receivables and adequacy of provisioning
Matters assessed on this topic include the rate of problematic Sharia financing receivables, the rate of low-quality Sharia financing receivables, the size of collateral taken over, and the adequacy of provisioning.
4) External factors
Matters assessed on this topic include the level of competition and other external factors required.

The topics assessed in the management and control of Sharia financing risk are as follows:
1) Management of Sharia financing risk
Matters assessed on this topic include the level of risk to be taken (risk appetite) and risk tolerance, as well as the adequacy of active supervision by the Board of Commissioners and Board of Directors or equivalent.
2) Sharia financing risk management framework
Matters assessed on this topic include the Sharia financing risk management strategy, the Sharia financing risk management organization, policies and procedures, and the determination of Sharia financing limits.
3) Risk management process and risk management information system
Matters assessed on this topic include the risk management process and the risk management information system.
4) Sharia financing risk control system
Matters assessed on this topic relate to the Sharia financing risk control system.

The following are general indications of Sharia financing risk for each risk value range in inherent risk as well as management and control:

INHERENT RISK

Indication of Sharia Financing with Low Inherent Risk (0 < NR ≤ 1)
a. The composition of Sharia financing receivable portfolios has very small nominal exposure and a very low level of portfolio concentration in one sector/area. b. The Sharia financing distribution strategy is very adequate.
c. The quality of Sharia financing receivables is very good and the adequacy of provisioning done by the company is very adequate.
d. External factors that can impact debtor ability are very small.
Indication of Sharia Financing with Low-Medium Inherent Risk (1 < NR ≤ 1.5)
a. The composition of Sharia financing receivable portfolios has small nominal exposure and a low level of portfolio concentration in one sector/area. b. The Sharia financing distribution strategy is adequate.
c. The quality of Sharia financing receivables is good and the adequacy of provisioning done by the company is adequate.
d. External factors that can impact debtor ability are small.
Indication of Sharia Financing with Medium-High Inherent Risk (1.5 < NR ≤ 2)
a. The composition of Sharia financing receivable portfolios has medium nominal exposure and a medium level of portfolio concentration in one sector/area. b. The Sharia financing distribution strategy is less adequate.
c. The quality of Sharia financing receivables is medium and the adequacy of provisioning done by the company is less adequate.
d. External factors that can impact debtor ability are less adequate.
Indication of Sharia Financing with High Inherent Risk (2 < NR ≤ 3)
a. The composition of Sharia financing receivable portfolios has large nominal exposure and a high level of portfolio concentration in one sector/area. b. The Sharia financing distribution strategy is not adequate.
c. The quality of Sharia financing is low and the adequacy of provisioning done by the company is not adequate.
d. External factors that can impact debtor ability are large.
Indication of Sharia Financing with Very High Inherent Risk (3 < NR ≤ 4)
a. The composition of Sharia financing receivable portfolios has very large nominal exposure and a very high level of portfolio concentration in one sector/area. b. The Sharia financing distribution strategy is very not adequate.
c. The quality of Sharia financing is very low and the adequacy of provisioning done by the company is very not adequate.
d. External factors that can impact debtor ability are very large.

MANAGEMENT AND CONTROL

Indication of Sharia Financing with Very Strong Management and Control over Financing Risk (0 < MP ≤ 1)
a. The management of Sharia financing risk is very adequate. b. The Sharia financing risk management framework is very adequate.
c. The risk management process, management information system, and human resources are very adequate.
d. The Sharia financing risk control system is very adequate.
Indication of Sharia Financing with Strong Management and Control over Financing Risk (1 < MP ≤ 1.5)
a. The management of Sharia financing risk is adequate. b. The Sharia financing risk management framework is adequate.
c. The risk management process, management information system, and human resources are adequate.
d. The Sharia financing risk control system is adequate.
Indication of Sharia Financing with Fairly Strong Management and Control over Financing Risk (1.5 < MP ≤ 2)
a. The management of Sharia financing risk is less adequate. b. The Sharia financing risk management framework is less adequate.
c. The risk management process, management information system, and human resources are less adequate.
d. The Sharia financing risk control system is less adequate.
Indication of Sharia Financing with Weak Management and Control over Financing Risk (2 < MP ≤ 3)
a. The management of Sharia financing risk is not adequate. b. The Sharia financing risk management framework is not adequate.
c. The risk management process, management information system, and human resources are not adequate.
d. The Sharia financing risk control system is not adequate.
Indication of Sharia Financing with Very Weak Management and Control over Financing Risk (3 < MP ≤ 4)
a. The management of Sharia financing risk is very not adequate. b. The Sharia financing risk management framework is very not adequate.
c. The risk management process, management information system, and human resources are very not adequate.
d. The Sharia financing risk control system is very not adequate.

H. SHARIA INSURANCE FUNDING SUPPORT (CAPITALIZATION) RISK Company capitalization represents the company's ability to absorb unexpected losses caused by, among others, an increase in claim ratios beyond expectations, poor investment results, or other unexpected events. The assessment of Sharia insurance funding support (capitalization) risk covers the following topics:
1) Funding Capability (Capitalization)
Matters assessed on this topic include the level of Tabarru' fund solvency, wealth available for qard, and capitalization management and changes in capitalization.
2) Additional Funding (Capitalization)
Matters assessed on this topic include (i) profitability which includes company funds, Tabarru' fund underwriting surplus, and (ii) additional capital sources which include funding support from the corporate group and access to the capital market.

The following are general indications of funding support (capitalization) risk for each risk value range:

Indication of Companies with Very Strong Capital Strength (0 < NR ≤ 1)
a. The company's capitalization capability is very strong. b. The company's capital addition sources are very high.
Indication of Companies with Strong Capital Strength (1 < NR ≤ 1.5)
a. The company's capitalization capability is strong. b. The company's capital addition sources are high.
Indication of Companies with Fair Capital Strength (1.5 < NR ≤ 2)
a. The company's capitalization capability is fair. b. The company's capital addition sources are fair.
Indication of Companies with Weak Capital Strength (2 < NR ≤ 3)
a. The company's capitalization capability is weak. b. The company's capital addition sources are low.
Indication of Companies with Very Weak Capital Strength Risk (3 < NR ≤ 4)
a. The company's capitalization capability is very weak. b. The company's capital addition sources are very low.

I. SHARIA FINANCING COMPANY FUNDING SUPPORT (CAPITALIZATION) RISK
Company capitalization represents the ability of Sharia financing companies to absorb unexpected losses resulting from the management of company assets and liabilities. The topics discussed in the funding support (capitalization) risk for Sharia financing companies are as follows:
1) Funding Capability (Capitalization)
Matters assessed on this topic include the nominal value of equity and the size of the funding (capitalization) adequacy ratio owned by the Sharia financing company.
2) Additional Funding (Capitalization)
Matters assessed on this topic include (i) the level of profitability which includes profit trends and current year profit, future profits, profit distribution/allocation (profitability), and (ii) additional capital sources which include the financial conditions of the main controlling entity, corporate group, and other shareholders as well as general provisions from net profit.

The following are general indications of funding support (capitalization) risk for each risk value range:

Indication of Companies with Very Strong Capital Strength (0 < NR ≤ 1)
a. The company's funding (capitalization) capability is very strong. b. The company's additional funding (capitalization) is very high.
Indication of Companies with Strong Capital Strength (1 < NR ≤ 1.5)
a. The company's funding (capitalization) capability is strong. b. The company's additional funding (capitalization) is high.
Indication of Companies with Fair Capital Strength (1.5 < NR ≤ 2)
a. The company's funding (capitalization) capability is fair. b. The company's additional funding (capitalization) is fair.
Indication of Companies with Weak Capital Strength (2 < NR ≤ 3)
a. The company's funding (capitalization) capability is weak. b. The company's additional funding (capitalization) is low.
Indication of Companies with Very Weak Capital Strength Risk (3 < NR ≤ 4)
a. The company's funding (capitalization) capability is very weak. b. The company's additional funding (capitalization) is very low.

J. SHARIA PENSION FUND FUNDING SUPPORT RISK
Funding support describes the ability of Sharia pension funds to face unexpected losses resulting from the management of assets and liabilities of the Sharia pension fund. Funding support can be obtained from surpluses experienced by the Sharia pension fund (specifically for defined benefit pension programs) and the financial conditions or financial projections or funding sources that can be obtained from the employer. In this case, the assessment of funding is conducted to assess the level of adequacy of available funding sources for the Sharia pension fund to reduce the risk of unfulfilled promises to participants, as a result of remaining inherent risks that cannot be mitigated with the management and control applied. The assessment of Sharia pension fund funding support risk covers the following topics:
1) Funding capability
Matters assessed from this topic include the funding condition of the Sharia pension fund.
2) Additional funding
Matters assessed from this topic include the employer's ability to fund the Sharia pension fund (DPPK), the mechanism for withdrawing contributions from the employer to the Sharia pension fund, contribution collection methods, determination of due contributions, contribution receipts, contribution receivables, calculation of penalties for late contributions, and funding conditions.

The following are general indications of funding support risk for each risk value range:

Indication of Sharia Pension Funds with Very Strong Funding Support (0 < NR ≤ 1)
a. The pension fund has very adequate funding capability. b. The pension fund's additional funding is very adequate.
Indication of Sharia Pension Funds with Strong Funding Support (1 < NR ≤ 1.5)
a. The pension fund has adequate funding capability. b. The pension fund's additional funding is adequate.
Indication of Sharia Pension Funds with Fair Funding Support (1.5 < NR ≤ 2)
a. The pension fund has less adequate funding capability. b. The pension fund's additional funding is less adequate.
Indication of Sharia Pension Funds with Weak Funding Support (2 < NR ≤ 3)
a. The pension fund has inadequate funding capability. b. The pension fund's additional funding is inadequate.
Indication of Sharia Pension Funds with Very Weak Funding Support (3 < NR ≤ 4)
a. The pension fund has very inadequate funding capability. b. The pension fund's additional funding is very inadequate.

Example Calculation of Risk Level for Sharia Insurance and Reinsurance Companies Risk Type | Risk Value (C) | Weight (D) | Net Risk Value (E) --- | --- | --- | ---

Governance | 1.4 | 10% | 0.38
Management | 1.4 | 15% | 0.58
Strategy | 2.5 | 15% | 5.86
3.1 Inherent Risk (A) | 4.0 | |
3.2 Management and Control (B) | 1.0 | |
Operational | 2.5 | 20% | 7.81
4.1 Inherent Risk | 4.0 | |
4.2 Management and Control | 1.0 | |
Assets and Liabilities | 3.0 | 20% | 16.20
5.1 Inherent Risk | 4.0 | |
5.2 Management and Control | 2.0 | |
Insurance | 3.5 | 20% | 30.01
6.1 Inherent Risk | 4.0 | |
6.2 Management and Control | 3.0 | |
(F) | 100% | 60.80

Total Net Risk Value (G) | 2.79

Funding Support (Capitalization) a. Funding Capability (Capitalization) | 3.0 | 50% | 40.50 b. Additional Funding (Capitalization) | 3.0 | 50% | 40.50 (H) | 100% | 81.00

Total Funding Support (Capitalization) Risk Value (I) | 3.00

Weight of Net Risk Value and Funding Support Value = 60% : 40% Total Overall Risk Value (J) | 2.88

Notes:
A: inherent risk value
B: management and control value
C: risk value = (A+B)/2
D: risk weight
E: total risk per module = C^4 x D
F: sum of combined values = ∑ E
G: total net risk value = √F
H: sum of funding support values
I: total funding support risk value = √H
J: total overall risk value = √((G^4 x 60%) + (I^4 x 40%))

Example Calculation of Risk Level for Sharia Financing Companies Risk Type | Risk Value (C) | Weight (D) | Net Risk Value (E) --- | --- | --- | ---

Governance | 1.4 | 10% | 0.38
Management | 1.4 | 15% | 0.58
Strategy | 2.5 | 15% | 5.86
3.1 Inherent Risk (A) | 4.0 | |
3.2 Management & Control (B) | 1.0 | |
Operational | 1.5 | 20% | 1.01
4.1 Inherent Risk | 2.0 | |
4.2 Management & Control | 1.0 | |
Assets and Liabilities | 2.0 | 10% | 1.60
5.1 Inherent Risk | 2.0 | |
5.2 Management & Control | 2.0 | |
Financing | 2.0 | 30% | 4.80
6.1 Inherent Risk | 2.0 | |
6.2 Management and Control | 2.0 | |
(F) | 100% | 14.20

Total Net Risk Value (G) | 1.94

Funding Support (Capitalization) a. Funding Capability (Capitalization) | 0.9 | 50% | 0.33 b. Additional Funding (Capitalization) | 1.3 | 50% | 1.43 (H) | 100% | 1.76

Total Funding Support (Capitalization) Risk Value (I) | 1.15

Weight of Net Risk Value and Funding Support Value = 50% : 50% Total Overall Risk Value (J) | 1.68

Example Assessment of Sharia Pension Fund Risk Risk Type | Risk Value (C) | Weight (D) | Net Risk Value (E) --- | --- | --- | ---

Governance | 0.5 | 15% | 0.01
Management | 0.6 | 15% | 0.02
Strategy | 2.7 | 15% | 7.97
3.1 Inherent Risk (A) | 2.9 | |
3.2 Management & Control (B) | 2.5 | |
Operational | 1.4 | 25% | 0.83
4.1 Inherent Risk | 1.1 | |
4.2 Management & Control | 1.6 | |
Assets and Liabilities | 1.7 | 30% | 2.51
5.1 Inherent Risk | 2.9 | |
5.2 Management & Control | 0.5 | |
(F) | 100% | 11.3

Total Net Risk Value (G) | 1.83

Funding Support a. Funding Capability | 0.9 | 50% | 0.33 b. Additional Funding | 1.3 | 50% | 1.43 (H) | 100% | 1.76

Total Funding Support Risk Value (I) | 1.20

Weight of Net Risk Value and Funding Support = 50% : 50% Total Overall Risk Value (J) | 1.60

Pension Fund Risk Category
Medium High

Notes:
A: inherent risk value
B: management & control value
C: risk value = (A+B)/2
D: risk weight
E = net risk value = C^4 x D
F: sum of combined values = ∑ E
G: total net risk value = √F
H: sum of combined funding values
I: total funding support risk value = √H
J: overall risk value = √((G^4 x 50%) + (I^4 x 50%))

Determined in Jakarta on January 29, 2015
EXECUTIVE HEAD OF SUPERVISOR
OF INSURANCE, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY,
Signed.
Copy matches the original FIRDAUS DJAELANI
Director of Legal Affairs I
Legal Department,
Signed.
Signed.
Sudarmaji

APPENDIX II
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 5 /SEOJK.05/2015 ABOUT RISK LEVEL ASSESSMENT OF NON-BANK SHARIA FINANCIAL SERVICE INSTITUTIONS

Appendix II.1
Risk Level Assessment Result Report for Sharia Insurance/Reinsurance Companies Company Name :
Business Type : (1) Life (2) General (3) Reinsurance Sharia Business : (1) Full fledge (2) Sharia Business Unit (UUS) Assessment Date :
Report Date :
A. General Information
Shareholders:
Name Value Ownership Percentage Ownership
Directors or equivalent:
Name Position Term of Office
Board of Commissioners or equivalent:
Name Position Term of Office
Sharia Supervisory Board:
Name Position Date of Appointment

Financial Information as of Assessment Date
Description Value (Rupiah)*
Tabarru' Fund Wealth
Tabarru' Fund Liabilities
Tabarru' Fund Technical Provisions
Company Fund Wealth
Company Fund Liabilities
Gross Contributions
Gross Claims
Total Sum Insured
Achievement Ratio of Tabarru' Fund Solvency Level Surplus (Deficit) of Company Wealth For Qardh Total Policyholders *Except for achievement ratio of solvency level and number of policyholders For the last one-year period since the assessment date B. Risk Level Assessment Summary Risk Type | Risk Value | Risk Weight | Net Risk --- | --- | --- | ---
1. Governance | | |
2. Management | | |
3. Strategy | | |
3.1 Inherent Risk | | |
3.2 Management and Control | | |
4. Operational | | |
4.1 Inherent Risk | | |
4.2 Management and Control | | |
5. Assets and Liabilities | | |
5.1 Inherent Risk | | |
5.2 Management and Control | | |
6. Insurance | | |
6.1 Inherent Risk | | |
6.2 Management and Control | | |
Total Net Risk Value | | |
1. Funding Capability (Capitalization) | | |
2. Additional Funding (Capitalization) | | |
Total Funding Support (Capitalization) Risk Value | | |
1. Total Net Risk Value | | |
2. Total Funding Support (Capitalization) Risk Value | | |
Total Overall Risk Value | | |
Risk Level | | |
C. Risk Description
General Description
Description per Risk Type
Governance Risk Risk Value:… Risk Level:…
Notes:
Management Risk Risk Value:… Risk Level:…
Notes:
Strategy Risk Risk Value:… Risk Level:…
Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Operational Risk Risk Value:… Risk Level:…
Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Assets and Liabilities Risk Risk Value:… Risk Level:… Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Insurance Risk Risk Value:… Risk Level:…
Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Funding Support (Capitalization) Risk Risk Value:… Risk Level:… Funding Capability (Capitalization) Value:
Notes:
Additional Funding (Capitalization) Value:
Notes:
Acknowledged,
Name:
Position:
Prepared by:
Name:
Position:

Appendix II.2
Risk Level Assessment Result Report for Sharia Financing Companies Company Name :
Main Business Activity :
Sharia Business : (1) Full fledge (2) Sharia Business Unit (UUS) Assessment Date :
Report Date :
A. General Information
Shareholders:
Name Value Ownership Percentage Ownership
Directors or equivalent:
Name Position Term of Office
Board of Commissioners or equivalent:
Name Position Term of Office
Sharia Supervisory Board:
Name Position Date of Appointment

Financial Information as of Assessment Date
Description Value (Rupiah)* Ratio per Net Assets Assets Receivables Ijarah Assets Other Assets Liabilities Capital Business Results Age Classification Receivables Financing to Asset Ratio Gearing Ratio Total Customers *Except for financial ratios and number of customers For the last one-year period since the assessment date B. Risk Level Assessment Summary Risk Type | Risk Value | Risk Weight | Net Risk --- | --- | --- | ---
1. Governance | | |
2. Management | | |
3. Strategy | | |
3.1 Inherent Risk | | |
3.2 Management and Control | | |
4. Operational | | |
4.1 Inherent Risk | | |
4.2 Management and Control | | |
5. Assets and Liabilities | | |
5.1 Inherent Risk | | |
5.2 Management and Control | | |
6. Financing | | |
6.1 Inherent Risk | | |
6.2 Management and Control | | |
Total Net Risk Value | | |
1. Funding Capability (Capitalization) | | |
2. Additional Funding (Capitalization) | | |
Total Funding Support (Capitalization) Risk Value | | |
1. Total Net Risk Value | | |
2. Total Funding Support (Capitalization) Risk Value | | |
Total Overall Risk Value | | |
Risk Level | | |
C. Risk Description
General Description
Description per Risk Type
Governance Risk Risk Value:… Risk Level:…
Notes:
Management Risk Risk Value:… Risk Level:…
Notes:
Strategy Risk Risk Value:… Risk Level:…
Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Operational Risk Risk Value:… Risk Level:…
Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Assets and Liabilities Risk Risk Value:… Risk Level:… Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Financing Risk Risk Value:… Risk Level:…
Inherent Risk Value:
Notes:
Management and Control Value:
Notes:
Funding Support (Capitalization) Risk Risk Value:… Risk Level:… Funding Capability (Capitalization) Value:
Notes:
Additional Funding (Capitalization) Value:
Notes:
Acknowledged,
Name:
Position:
Prepared by:
Name:
Position:

Appendix II.3
Risk Level Assessment Result Report for Sharia Pension Funds Pension Fund Name:
Type : (1) DPPK PPMP (2) DPPK PPIP (3) DPLK
Sharia Business : (1) Full fledge (2) Sharia Business Unit (UUS) Assessment Date :
Report Date :
A. General Information
Founders and Co-Founders:
Name Description Number of Participants
Managers:
Name Position Term of Office
Supervisory Board:
Name Position/Representation Term of Office
Sharia Supervisory Board:
Name Position Date of Appointment

Financial Information as of the Assessment Date Description of Value (Rupiah)* Ratio per Net Assets Net Assets Investments Normal Contribution Receivables Additional Contribution Receivables Other Receivables Other Assets Business Results Financing Ratio (PPMP) Solvency Ratio (PPMP) Return on Investment (ROI) Number of Participants

Except for financial ratios and number of participants
For the one-year period leading up to the assessment date

B. Risk Level Assessment Overview
Risk Type
Risk Value
Risk Weight
Net Risk Value

Governance
Management
Strategy
3.1 Inherent Risk
3.2 Management and Control
Operational
4.1 Inherent Risk
4.2 Management and Control
Assets and Liabilities
5.1 Inherent Risk
5.2 Management and Control

Risk Type
Risk Value
Risk Weight
Net Risk Value
Total Net Risk Value
1. Financing Capability
2. Additional Financing
Total Support Fund Risk Value
1. Total Net Risk Value
2. Total Support Fund Risk Value
Overall Risk Value
Risk Level

C. Risk Description
General Description

Description per Risk Type
Governance Risk Risk Value:… Risk Level:…
Description:
Management Risk Risk Value: … Risk Level:…
Description:
Strategy Risk Risk Value: … Risk Level:…
Inherent Risk Value:
Description:
Management and Control Value:
Description:
Operational Risk Risk Value: … Risk Level:…
Inherent Risk Value:
Description:
Management and Control Value:
Description:
Assets and Liabilities Risk Risk Value: … Risk Level:… Inherent Risk Value:
Description:
Management and Control Value:
Description:
Support Fund Risk Value: … Risk Level:…
Financing Capability Value:

Description:
Additional Financing Value:
Description:
Acknowledged,
Name:
Position:
Prepared by:
Name:
Position:
Established in Jakarta on 29 January 2015
EXECUTIVE HEAD OF SUPERVISOR
OF INSURANCE, PENSION FUNDS,
LENDING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY,
Signed,
Copy matches the original
FIRDAUS DJAELANI
Director of Legal Affairs I
Legal Department,
Signed,
Signed,
Sudarmaji

APPENDIX III
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 5/SEOJK.05/2015 REGARDING RISK LEVEL ASSESSMENT OF NON-BANK ISLAMIC FINANCIAL SERVICE INSTITUTIONS

FOLLOW-UP PLAN FOR RISK LEVEL ASSESSMENT
OF NON-BANK ISLAMIC FINANCIAL SERVICE INSTITUTIONS
1. Name :
2. Institution Type : (1) Insurance/Reinsurance
(2) Financing
(3) Pension Fund
3. Sharia Business Model : (1) Full-fledged
(2) Sharia Business Unit (SBU)
4. Risk Level Assessment Date
:
5. Report Date :
6. Risk Level: 7. Risk Value :
8. Risk Type 9. Risk Cause
10. Follow-up Plan
11. Target Time
12. PIC
Prepared by
13. Name : 14. Signature
15. Position :
Acknowledged
16. Name : 17. Signature
18. Position :
Filling Guidelines:
1. Fill in the name of the Non-Bank Islamic Financial Service Institution.
2. Fill in the type of Non-Bank Islamic Financial Service Institution by selecting one from the list provided.
3. Fill in the model of Sharia business activity implementation.
4. Fill in the risk level assessment date that serves as the basis for the follow-up plan.
5. Fill in the date the risk level assessment report is signed.
6. Fill in the risk level of the Non-Bank Islamic Financial Service Institution according to the results of the risk level assessment as referred to in item 3.

7. Fill in the risk value of the Non-Bank Islamic Financial Service Institution according to the results of the risk level assessment as referred to in item 3.
8. Fill in the risk type as referred to in POJK Number 10/POJK.05/2014 regarding Risk Level Assessment of Non-Bank Islamic Financial Service Institutions.
9. Fill in the cause of the risk.
10. Fill in the plan for various follow-up steps to be taken to reduce the risk level for each area of risk.
11. Fill in the target time for implementation of follow-up to be taken for each follow-up step, which can be the completion date of the follow-up or the start and end dates of the follow-up if the target time for starting the follow-up is not immediately after the follow-up plan is drawn up.
12. Fill in the unit responsible for implementing the follow-up.
13. Fill in the name of the official who prepared the follow-up plan for the risk level assessment of the Non-Bank Islamic Financial Service Institution.
14. Fill in the signature of the official who prepared the follow-up plan.
15. Fill in the job title of the official who prepared the follow-up plan for the risk level assessment of the Non-Bank Islamic Financial Service Institution.
16. Fill in the name of the board of directors or equivalent at the Non-Bank Islamic Financial Service Institution who handles the risk management of the Non-Bank Islamic Financial Service Institution.
17. Fill in the signature of the board of directors or equivalent at the Non-Bank Islamic Financial Service Institution who handles risk management.
18. Fill in the job title of the board of directors or equivalent at the Non-Bank Islamic Financial Service Institution who handles the risk management of the Non-Bank Islamic Financial Service Institution.
Established in Jakarta on 29 January 2015
EXECUTIVE HEAD OF SUPERVISOR
OF INSURANCE, PENSION FUNDS,
LENDING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY,
Signed,
FIRDAUS DJAELANI
Copy matches the original
Director of Legal Affairs I
Legal Department,
Signed,
Signed,
Sudarmaji