OJK Circular No. 9/SEOJK.05/2024 on Quality Assessment of Subrogation Claims, Guarantee Activities, and Suretyship

To:

1. Board of Directors of General Insurance Companies;
2. Board of Directors of Sharia General Insurance Companies; and
3. Board of Directors of Guarantee Companies;
4. Board of Directors of Sharia Guarantee Companies,

at their respective addresses.

COPY

CIRCULAR OF THE FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA

NUMBER 9/SEOJK.05/2024

CONCERNING

QUALITY ASSESSMENT OF SUBROGATION CLAIMS, GUARANTEE ACTIVITIES, AND SURETYSHIP

In order to support a transparent, accountable, and responsible financial services sector, general insurance companies, Sharia general insurance companies, guarantee companies, and Sharia guarantee companies are designated as reporters in the Financial Information Services System based on Financial Services Authority Regulation Number 11 of 2024 concerning the Second Amendment to Financial Services Authority Regulation Number 18/POJK.03/2017 concerning Reporting and Request for Information on Debtors through the Financial Information Services System (State Gazette of the Republic of Indonesia Year 2024 Number 18/OJK, Additional State Gazette of the Republic of Indonesia Number 86/OJK). To implement reporting into the Financial Information Services System, it is necessary to formulate regulations regarding the basis for quality assessment of subrogation claims, guarantee activities, and suretyship for general insurance companies, Sharia general insurance companies, guarantee companies, and Sharia guarantee companies, in this Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

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

1. Company means a general insurance company, a Sharia general insurance company, a guarantee company, and a Sharia guarantee company.

2. Debtor means an individual, a company, or a party that receives facilities from the reporter in the form of fund provision, risk coverage/risk management, guarantee, and/or technology-based financing services.

3. Subrogation Claim means a claim owned by the Company to the Debtor after the Company has made a claim payment to the creditor.

II. SUBROGATION CLAIMS RELATED TO CREDIT INSURANCE, SHARIA FINANCING INSURANCE, CREDIT GUARANTEE, AND SHARIA FINANCING GUARANTEE

A. GENERAL

1. Claim submissions in credit insurance, Sharia financing insurance, credit guarantee, and Sharia financing guarantee can only be made when the credit, financing, or Sharia financing is declared in 'doubtful' collectibility in accordance with applicable legislation.

2. The Company records Subrogation Claims at the time the Company makes claim payments to the creditor in the same reporting period.

3. After the Company makes claim payments, the creditor performs write-offs on the credit, financing, or Sharia financing in accordance with applicable legislation.

4. In the event of payments for Subrogation Claims by the Debtor, the rights to loss recovery proceeds are shared between the Company and the creditor based on mutual agreement, considering the principles of proportionality and fairness.

5. In the event of payments for credit, financing, or Sharia financing after the Company has made claim payments as referred to in item 2, adjustments are made to:
   a. the quality of credit, financing, or Sharia financing by the creditor; and b. the quality of Subrogation Claims by the Company.

6. Payments for credit, financing, or Sharia financing as referred to in item 5 include payments originating from the settlement of collateral.

7. In the context of assessing the quality of Subrogation Claims, the Company performs data reconciliation related to Subrogation Claims with the creditor on a monthly basis, at the latest 5 (five) working days after the end of the current month.

8. Data reconciliation as referred to in item 7 is conducted for the purpose of:
   a. the validity of Subrogation Claim data; b. ensuring the quality of data to be reported; and
   c. avoiding the possibility of errors during data reporting.

B. QUALITY ASSESSMENT OF SUBROGATION CLAIMS

1. Subrogation Claims are recorded at the amount of risk covered or guaranteed by the Company over the credit balance, financing, or Sharia financing value.

2. The creditor adjusts the recording of the credit balance, financing, or Sharia financing value after deducting the claim value received by the creditor.

3. The quality assessment of Subrogation Claims for credit, financing, or Sharia financing is established based on the factor of the Debtor's ability to pay the Subrogation Claims.

4. Based on the assessment as referred to in item 1, the quality of the claim is established as:
   a. current; or b. doubtful.

5. The assessment of the Debtor's ability to pay Subrogation Claims is established as follows:
   a. current, if the Debtor makes payments for Subrogation Claims amounting to 100% (one hundred percent) of the total claim; or b. doubtful, if the Debtor does not make any payments at all or makes payments for Subrogation Claims but does not settle 100% (one hundred percent) of the total claim.

6. The Company administers each payment by the Debtor for Subrogation Claims and submits reporting through the Financial Information Services System.

III. GUARANTEE AND SURETYSHIP ACTIVITIES BY GENERAL INSURANCE COMPANIES, SHARIA GENERAL INSURANCE COMPANIES, GUARANTEE COMPANIES, AND SHARIA GUARANTEE COMPANIES

A. QUALITY ASSESSMENT OF GUARANTEE AND SURETYSHIP

1. The quality assessment of guarantee and suretyship towards the guaranteed party (principal) is established based on the performance assessment factor of the guaranteed party or principal.

2. The performance assessment of the guaranteed party or principal as referred to in item 1 includes assessment of the components of the guaranteed party's or principal's ability to fulfill their obligations.

3. The assessment of the component of the guaranteed party's or principal's ability to fulfill their obligations is established as follows:
   a. current, if the guaranteed party or principal fulfills their obligations in accordance with the agreed targets; b. doubtful, if the guaranteed party or principal fulfills their obligations but has not reached 100% (one hundred percent) of the agreed targets; or
   c. doubtful, if the guaranteed party or principal fulfills their obligations but has not reached 100% (one hundred percent) of the agreed targets and there is a statement of default from the beneficiary or obligee.

4. The assessment as referred to in item 3 is conducted based on the results of the evaluation by the beneficiary or obligee regarding the fulfillment of obligations by the guaranteed party or principal.

5. The Company obtains the results of the evaluation by the beneficiary or obligee periodically based on mutual agreement of the parties.

B. RECORDING METHODS FOR GUARANTEE AND SURETYSHIP

1. The Company records guarantee and suretyship for the duration of the guarantee and suretyship period.

2. The value of guarantee or suretyship is recorded at the amount of coverage or guarantee by the Company.

3. In the event that the guaranteed party or principal defaults and the beneficiary or obligee submits a claim, the Company transfers the reporting of guarantee or suretyship to Subrogation Claim reporting at the value of the claim paid by the Company.

IV. SUBROGATION CLAIMS RELATED TO GUARANTEE AND SURETYSHIP ACTIVITIES BY GENERAL INSURANCE COMPANIES, SHARIA GENERAL INSURANCE COMPANIES, GUARANTEE COMPANIES, AND SHARIA GUARANTEE COMPANIES

A. GENERAL

1. Claim submissions by the beneficiary or obligee in guarantee and suretyship activities can only be made when the guaranteed party or principal is declared in 'doubtful' collectibility in accordance with the provisions regulated in this Financial Services Authority Circular.

2. The Company records Subrogation Claims to the guaranteed party or principal at the time the Company makes claim payments to the beneficiary or obligee in the same reporting period.

3. In the event of Subrogation Claim payments after the Company has made claim payments as referred to in item 2, adjustments are made to the quality of Subrogation Claims by the Company.

4. Subrogation Claim payments as referred to in item 3 include payments originating from the settlement of collateral.

B. QUALITY ASSESSMENT OF SUBROGATION CLAIMS

1. Subrogation Claims are recorded at the value of the claim paid by the Company to the beneficiary or obligee.

2. The quality assessment of Subrogation Claims for guarantee and suretyship is established based on the factor of the guaranteed party's or principal's ability to pay Subrogation Claims.

3. Based on the assessment as referred to in item 2, the quality of the claim is established as:
   a. current; or b. doubtful.

4. The assessment of the guaranteed party's or principal's ability to pay Subrogation Claims is established as follows:
   a. current, if the Debtor makes payments for Subrogation Claims amounting to 100% (one hundred percent) of the total claim; or b. doubtful, if the Debtor cannot make any payments at all or makes payments for Subrogation Claims but cannot settle 100% (one hundred percent) of the total claim.

5. The Company administers each payment by the Debtor for Subrogation Claims and submits reporting through the Financial Information Services System.

V. ADMINISTRATIVE ACCOUNT TRANSACTIONS

1. All recordings regarding quality assessments of Subrogation Claims, guarantee activities, and suretyship at the Company are recorded in administrative accounts.

2. Assessments of administrative account transactions are conducted on all facilities provided.

VI. TRANSITIONAL PROVISIONS

For the initial reporting of Subrogation Claims in the Financial Information Services System, reporting is conducted for Subrogation Claims arising at least 5 (five) years prior to the establishment of this Financial Services Authority Circular.

This copy is consistent with the original

Director of Legal Development
Legal Department
Aat Windradi

VII. CLOSING PROVISIONS

This Financial Services Authority Circular takes effect on the date of establishment.

Established in Jakarta on 27 September 2024

HEAD OF EXECUTIVE SUPERVISOR
OF INSURANCE, GUARANTEE AND PENSION FUNDS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,

OGI PRASTOMIYONO

signed

signed

https://jdih.ojk.go.id/