POJK on Own Retention and Domestic Reinsurance Support

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA
EXCERPT
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 14/POJK.05/2015
ON
OWN RETENTION AND DOMESTIC REINSURANCE SUPPORT BY THE GRACE OF THE ALMIGHTY GOD, THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that the financial health of insurance companies, sharia insurance companies, reinsurance companies, and sharia reinsurance companies is influenced by own retention and reinsurance support; b. that in order to encourage the growth of the national insurance industry and optimize the capacity of domestic insurance, sharia insurance, reinsurance, and sharia reinsurance, it is necessary to adjust regulations regarding own retention and reinsurance support;
c. that based on the considerations referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation on Own Retention and Domestic Reinsurance Support;
Recalling:

1. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);
2. Law Number 40 of 2014 concerning Insurance (State Gazette of the Republic of Indonesia Year 2014 Number 337, Supplement to the State Gazette of the Republic of Indonesia Number 5618);
   DECIDING:
   Establishing: FINANCIAL SERVICES AUTHORITY REGULATION ON OWN RETENTION AND DOMESTIC REINSURANCE SUPPORT.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Company means insurance company, sharia insurance company, reinsurance company, and sharia reinsurance company.
2. Insurance Company means general insurance company and life insurance company as referred to in Law Number 40 of 2014 concerning Insurance.
3. Sharia Insurance Company means sharia general insurance company and sharia life insurance company as referred to in Law Number 40 of 2014 concerning Insurance.
4. General Insurance Company means a company that conducts general insurance business, and/or reinsurance business for risks of other General Insurance Companies as referred to in Law Number 40 of 2014 concerning Insurance.
5. Life Insurance Company means a company that conducts life insurance business as referred to in Law Number 40 of 2014 concerning Insurance.
6. Sharia General Insurance Company means a company that conducts sharia general insurance business and/or sharia reinsurance business for risks of other Sharia General Insurance Companies as referred to in Law Number 40 of 2014 concerning Insurance and/or General Insurance Companies that conduct part of their business using sharia principles.
7. Sharia Life Insurance Company means a company that conducts sharia life insurance business as referred to in Law Number 40 of 2014 concerning Insurance and/or Life Insurance Companies that conduct part of their business using sharia principles.
8. Reinsurance Company means a company that conducts reinsurance business as referred to in Law Number 40 of 2014 concerning Insurance.
9. Sharia Reinsurance Company means a company that conducts sharia reinsurance business as referred to in Law Number 40 of 2014 concerning Insurance and/or Reinsurance Companies that conduct part of their business using sharia principles.
10. Financial Services Authority, hereinafter abbreviated as OJK, is the Financial Services Authority as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

CHAPTER II
OWN RETENTION
Article 2
(1) Companies are required to have and apply own retention for each risk managed in accordance with the own retention limit.
(2) The application of the own retention limit as referred to in paragraph (1) must be based on a risk and loss profile that is created systematically, regularly, relevantly, and accurately.
Article 3
Further regulations regarding the own retention limit as referred to in Article 2 paragraph (1) are regulated in a Financial Services Authority Circular.

CHAPTER III
REINSURANCE SUPPORT
First Section
Reinsurance Support Strategy
Article 4
(1) Insurance Companies and Sharia Insurance Companies are required to develop and implement reinsurance support strategies for the conduct of business of Insurance Companies or Sharia Insurance Companies so that they have sufficient capacity to meet liabilities. (2) Insurance Companies and Sharia Insurance Companies are required to review the implementation of reinsurance support strategies at least once a year. (3) For the first time, the reinsurance support strategy as referred to in paragraph (1) must be submitted to the OJK no later than January 15, 2016. (4) In the event that Insurance Companies and Sharia Insurance Companies change the reinsurance support strategy, Insurance Companies and Sharia Insurance Companies are required to submit such changes to the OJK along with the reasons within a maximum of 10 (ten) working days since the change of the reinsurance support strategy.
Article 5
The reinsurance support strategy as referred to in Article 4 paragraph (1) must at least contain:
a. comprehensive reinsurance policies considering the benefits of diversification and the feasibility of the counterparty; b. a healthy system for selecting and monitoring reinsurance programs;
c. a summary of the own retention formation process and own retention monitoring; and
d. the person responsible for implementing and controlling the reinsurance program.
Article 6
In developing reinsurance support strategies, Insurance Companies and Sharia Insurance Companies must consider the following factors:
a. the risk profile of the risks underwritten; b. capital adequacy and access to additional capital;
c. volatility of past claims and/or estimated claims;
d. the profitability level of each business line; e. retention size appropriate to the Insurance Company and Sharia Insurance Company; f. the use of proportional and non-proportional reinsurance programs; g. environmental conditions, particularly for disaster-prone areas; h. automatic reinsurance capacity;
i. optimization of reinsurance quality, usage, and costs;
j. the impact if domestic domestic reinsurers with automatic reinsurance portions go bankrupt; k. the rating of domestic domestic reinsurers; and
l. reinsurance market conditions.

Second Section
Reinsurance Support for Simple Risks
Article 7
Insurance Companies and Sharia Insurance Companies are required to obtain 100% (one hundred percent) reinsurance support from domestic reinsurers for coverages with simple risks.
Article 8
(1) The obligation to obtain 100% (one hundred percent) reinsurance support from domestic reinsurers as referred to in Article 7 is exempted for General Insurance Companies and Sharia General Insurance Companies for:
a. insurance products that are global (worldwide); and/or b. insurance products specifically designed for multinational companies.
(2) The obligation to obtain 100% (one hundred percent) reinsurance support from domestic reinsurers as referred to in Article 7 is exempted for Life Insurance Companies and Sharia Life Insurance Companies for:
a. insurance products that are global (worldwide); b. insurance products specifically designed for multinational companies; and/or
c. new insurance products whose development (product development) is supported by foreign reinsurers.
(3) New insurance products whose development (product development) is supported by foreign reinsurers as referred to in paragraph (2) letter c may obtain reinsurance support from foreign reinsurers for a maximum period of 4 (four) years since such insurance product was reported to the OJK.
Article 9
In the event that Insurance Companies and Sharia Insurance Companies meet the provisions as referred to in Article 8 paragraph (1) or paragraph (2), Insurance Companies and Sharia Insurance Companies may obtain reinsurance support from foreign reinsurers within limits approved by the OJK.

Third Section
Automatic Reinsurance
Article 10
(1) Insurance Companies and Sharia Insurance Companies are required to have automatic reinsurance support.
(2) Automatic reinsurance support as referred to in paragraph (1) must be conducted by prioritizing placement to domestic reinsurers.
(3) The placement of automatic reinsurance support prioritized to domestic reinsurers as referred to in paragraph (2), for coverages other than coverages with simple risks as referred to in Article 7, must follow the minimum size of placement of automatic reinsurance support prioritized to domestic reinsurers. (4) Further regulations regarding the minimum size of placement of automatic reinsurance support prioritized to domestic reinsurers as referred to in paragraph (3) are regulated in a Financial Services Authority Circular.
Article 11
(1) Automatic reinsurance support as referred to in Article 10 paragraph (1) must be obtained for every insurance product marketed, including automatic reinsurance support for catastrophic risks. (2) In the event that General Insurance Companies and Sharia General Insurance Companies have formed reserves for catastrophic risks, General Insurance Companies and Sharia General Insurance Companies are exempted from the obligation to obtain automatic reinsurance support for catastrophic risks as referred to in paragraph (1). (3) In the event that General Insurance Companies and Sharia General Insurance Companies have automatic reinsurance support for catastrophic risks, the minimum own retention is determined with the assumption of catastrophic risk events occurring once every 250 (two hundred fifty) years. (4) Automatic reinsurance support for catastrophic risks as referred to in paragraph (1) must be placed prioritized to domestic reinsurers in accordance with the minimum size of placement of automatic reinsurance support for catastrophic risks. (5) Further regulations regarding the minimum size of placement of automatic reinsurance support for catastrophic risks as referred to in paragraph (4) are regulated in a Financial Services Authority Circular.
Article 12
(1) In obtaining automatic reinsurance support as referred to in Article 10, General Insurance Companies must follow the priority order as follows:
a. automatic reinsurance support is obtained from at least 2 (two) domestic Reinsurance Companies; b. in the event that automatic reinsurance support as referred to in letter a is not obtained, automatic reinsurance support is obtained from at least 1 (one) domestic Reinsurance Company and 1 (one) domestic General Insurance Company; and
c. in the event that automatic reinsurance support from domestic reinsurers as referred to in letters a and b is not obtained, automatic reinsurance support may be obtained from foreign reinsurance companies.
(2) Automatic reinsurance support from foreign reinsurance companies as referred to in paragraph (1) letter c may be conducted by General Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (1); and/or b. it does not obtain automatic reinsurance support from all domestic Reinsurance Companies and 2 (two) domestic General Insurance Companies.
Article 13
(1) In obtaining automatic reinsurance support as referred to in Article 10, Life Insurance Companies must follow the priority order as follows:
a. automatic reinsurance support is obtained from at least 2 (two) domestic Reinsurance Companies; and b. in the event that automatic reinsurance support as referred to in letter a is not obtained, automatic reinsurance support may be obtained from foreign reinsurance companies. (2) Automatic reinsurance support from foreign reinsurance companies as referred to in paragraph (1) letter b may be conducted by Life Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (2); and/or b. it does not obtain automatic reinsurance support from all domestic Reinsurance Companies.
Article 14
(1) In obtaining automatic reinsurance support as referred to in Article 10, Sharia General Insurance Companies must follow the priority order as follows:
a. automatic reinsurance support is obtained from at least 2 (two) domestic Sharia Reinsurance Companies; b. in the event that automatic reinsurance support as referred to in letter a is not obtained, automatic reinsurance support is obtained from at least 1 (one) domestic Sharia Reinsurance Company and 1 (one) domestic Sharia General Insurance Company; and
c. in the event that automatic reinsurance support from domestic reinsurers as referred to in letters a and b is not obtained, automatic reinsurance support may be obtained from foreign sharia reinsurance companies.
(2) Automatic reinsurance support from foreign sharia reinsurance companies as referred to in paragraph (1) letter c may be conducted by Sharia General Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (1); and/or b. it does not obtain automatic reinsurance support from all domestic Sharia Reinsurance Companies and 2 (two) domestic Sharia General Insurance Companies.
Article 15
(1) In obtaining automatic reinsurance support as referred to in Article 10, Sharia Life Insurance Companies must follow the priority order as follows:
a. automatic reinsurance support is obtained from at least 1 (one) domestic Sharia Reinsurance Company; and b. in the event that automatic reinsurance support as referred to in letter a is not obtained, automatic reinsurance support may be obtained from foreign sharia reinsurance companies. (2) Automatic reinsurance support from foreign sharia reinsurance companies as referred to in paragraph (1) letter b may be conducted by Sharia Life Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (2); and/or b. it does not obtain automatic reinsurance support from all domestic Sharia Reinsurance Companies.
Article 16
Insurance Companies and Sharia Insurance Companies that do not obtain automatic reinsurance support from domestic reinsurers due to technical factors must improve the causes of not obtaining such automatic reinsurance support no later than 1 (one) year since such automatic reinsurance support was not obtained.
Article 17
(1) Automatic reinsurance support as referred to in Article 10 paragraph (1) may be exempted because it is not obtained or not required in the event that:
a. there are no reinsurers willing to provide automatic reinsurance support, inter alia due to the specific risk characteristics of the insurance business line; b. Insurance Companies or Sharia Insurance Companies are about to start marketing a new insurance business line;
c. Insurance Companies or Sharia Insurance Companies market insurance products only to fulfill policyholder requests for comprehensive insurance packages and do not market them separately; and/or
d. the risks managed do not exceed the own retention capacity.
(2) Insurance Companies and Sharia Insurance Companies are required to have evidence of the causes for not obtaining or not requiring automatic reinsurance support.

Fourth Section
Facultative Reinsurance
Article 18
(1) Insurance Companies and Sharia Insurance Companies are required to obtain facultative reinsurance support in the event that:
a. automatic reinsurance support is not obtained or not required due to circumstances as referred to in Article 17 paragraph (1); or b. automatic reinsurance support is insufficient for risks accepted by Insurance Companies or Sharia Insurance Companies. (2) Facultative reinsurance support as referred to in paragraph (1) must be conducted by prioritizing placement to domestic reinsurers. (3) The placement of facultative reinsurance support prioritized to domestic reinsurers as referred to in paragraph (2), for coverages other than coverages with simple risks as referred to in Article 7, must follow the minimum size of placement of facultative reinsurance support prioritized to domestic reinsurers. (4) Further regulations regarding the minimum size of placement of facultative reinsurance support prioritized to domestic reinsurers as referred to in paragraph (3) are regulated in a Financial Services Authority Circular.
Article 19
(1) In obtaining facultative reinsurance support as referred to in Article 18, General Insurance Companies must follow the priority order as follows:
a. facultative reinsurance support is obtained from at least 2 (two) domestic Reinsurance Companies; b. in the event that facultative reinsurance support as referred to in letter a is not obtained, facultative reinsurance support is obtained from at least 1 (one) domestic Reinsurance Company and 1 (one) domestic General Insurance Company; and
c. in the event that facultative reinsurance support from domestic reinsurers as referred to in letters a and b is not obtained, facultative reinsurance support may be obtained from foreign reinsurers.
(2) Facultative reinsurance support from foreign reinsurers as referred to in paragraph (1) letter c may be conducted by General Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (1); and/or b. it does not obtain facultative reinsurance support from all domestic Reinsurance Companies and 2 (two) domestic General Insurance Companies.
Article 20
(1) In obtaining facultative reinsurance support as referred to in Article 18, Life Insurance Companies must follow the priority order as follows:
a. facultative reinsurance support is obtained from at least 2 (two) domestic Reinsurance Companies; and b. in the event that facultative reinsurance support as referred to in letter a is not obtained, facultative reinsurance support may be obtained from foreign reinsurance companies. (2) Facultative reinsurance support from foreign reinsurance companies as referred to in paragraph (1) letter b may be conducted by Life Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (2); and/or b. it does not obtain facultative reinsurance support from all domestic Reinsurance Companies.
Article 21
(1) In obtaining facultative reinsurance support as referred to in Article 18, Sharia General Insurance Companies must follow the priority order as follows:
a. facultative reinsurance support is obtained from at least 2 (two) domestic Sharia Reinsurance Companies; b. in the event that facultative reinsurance support as referred to in letter a is not obtained, facultative reinsurance support is obtained from at least 1 (one) domestic Sharia Reinsurance Company and 1 (one) domestic Sharia General Insurance Company; and
c. in the event that facultative reinsurance support from domestic reinsurers as referred to in letters a and b is not obtained, facultative reinsurance support may be obtained from foreign sharia reinsurance companies or foreign reinsurance companies.
(2) Facultative reinsurance support from foreign sharia reinsurance companies or foreign reinsurance companies as referred to in paragraph (1) letter c may be conducted by Sharia General Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (1); and/or b. it does not obtain facultative reinsurance support from all domestic Sharia Reinsurance Companies and 2 (two) domestic Sharia General Insurance Companies.
Article 22
(1) In obtaining facultative reinsurance support as referred to in Article 18, Sharia Life Insurance Companies must follow the priority order as follows:
a. facultative reinsurance support is obtained from at least 1 (one) domestic Sharia Reinsurance Company; and b. in the event that facultative reinsurance support as referred to in letter a is not obtained, facultative reinsurance support may be obtained from foreign sharia reinsurance companies or foreign reinsurance companies. (2) Facultative reinsurance support from foreign sharia reinsurance companies or foreign reinsurance companies as referred to in paragraph (1) letter b may be conducted by Sharia Life Insurance Companies, with the following provisions:
a. it is an insurance product as referred to in Article 8 paragraph (2); and/or b. it does not obtain facultative reinsurance support from all domestic Sharia Reinsurance Companies.
Article 23
General Insurance Companies and Sharia General Insurance Companies are required to place facultative structured (layer basis) reinsurance across the board for all layers.

Fifth Section
Special Provisions
Article 24
Insurance Companies and Sharia Insurance Companies are required to select domestic Reinsurance Companies or Sharia Reinsurance Companies as the leader of the automatic reinsurance panel.
Article 25
(1) In the event that automatic reinsurance support and/or facultative reinsurance support is obtained from foreign reinsurers or foreign sharia reinsurers as referred to in Article 12 paragraph (1) letter c, Article 13 paragraph (1) letter b, Article 14 paragraph (1) letter c, Article 15 paragraph (1) letter b, Article 19 paragraph (1) letter c, Article 20 paragraph (1) letter b, Article 21 paragraph (1) letter c, and Article 22 paragraph (1) letter b, Insurance Companies and Sharia Insurance Companies are required to obtain support from foreign reinsurers or foreign sharia reinsurers that have at least a BBB rating or its equivalent from internationally recognized rating agencies. (2) In the event that the rating of foreign reinsurers or foreign sharia reinsurers as referred to in paragraph (1) is issued by more than one rating agency, the rating used is the lowest rating.
Article 26
(1) Insurance Companies and Sharia Insurance Companies are required to have and submit evidence of not obtaining domestic automatic reinsurance support as referred to in Article 12 paragraph (2) letter b, Article 13 paragraph (2) letter b, Article 14 paragraph (2) letter b, and Article 15 paragraph (2) letter b, to the OJK. (2) Insurance Companies and Sharia Insurance Companies are required to have evidence of not obtaining domestic facultative reinsurance support as referred to in Article 19 paragraph (2) letter b, Article 20 paragraph (2) letter b, Article 21 paragraph (2) letter b, and Article 22 paragraph (2) letter b.

Article 27
(1) In the event that automatic reinsurance support and/or facultative reinsurance support is assessed by the OJK as endangering and/or worsening the financial health condition of Insurance Companies and Sharia Insurance Companies, or may cause Insurance Companies and Sharia Insurance Companies to fail to perform their functions as Insurance Companies or Sharia Insurance Companies, the OJK may order Insurance Companies and Sharia Insurance Companies to change their reinsurance support programs to be more in line with the conditions of the Insurance Companies and Sharia Insurance Companies. (2) Insurance Companies and Sharia Insurance Companies are required to implement the OJK's orders as referred to in paragraph (1).

CHAPTER IV
OBLIGATIONS OF REINSURANCE COMPANIES

Article 28
(1) Reinsurance Companies and Sharia Reinsurance Companies are required to have adequate, safe retrocession programs supported by a retrocession panel with a BBB rating or equivalent from an internationally recognized rating agency. (2) In the event that the rating of members of the retrocession panel as referred to in paragraph (1) is issued by more than one rating agency, the rating used is the lowest rating. (3) Reinsurance Companies are required to submit proof of rating as referred to in paragraph (1) in the automatic reinsurance program report.

Article 29
All Reinsurance Companies and Sharia Reinsurance Companies must consolidate capacity to provide reinsurance support to Insurance Companies and Sharia Insurance Companies.

Article 30
(1) Reinsurance Companies and Sharia Reinsurance Companies are required to increase capacity and service quality in providing reinsurance support to Insurance Companies and Sharia Insurance Companies. (2) The capacity increase as referred to in paragraph (1) must be done by having a rating of at least A-Idn or equivalent from an internationally recognized rating agency. (3) The service quality improvement as referred to in paragraph (1) must be done at least through activities:
a. organizing education and training (knowledge transfer) to Insurance Companies and/or Sharia Insurance Companies in risk management improvement; and b. organizing service and claims settlement activities properly. (4) Reinsurance Companies and Sharia Reinsurance Companies are required to submit confirmation of acceptance or rejection of reinsurance support to Insurance Companies and/or Sharia Insurance Companies, at the latest 10 (ten) working days from the date the complete reinsurance support request letter from the Insurance Companies and/or Sharia Insurance Companies is received. (5) Reinsurance Companies and Sharia Reinsurance Companies are required to settle claims, at the latest 20 (twenty) working days from the date the complete claim submission documents from the Insurance Companies and/or Sharia Insurance Companies are received, unless otherwise regulated in the automatic reinsurance treaty.

CHAPTER V
REPORTING OF AUTOMATIC REINSURANCE/RETROCESSION PROGRAMS AND REPORTING OF REINSURANCE PLACEMENT EXECUTION

Article 31
(1) Companies are required to submit reports on automatic reinsurance/retrocession programs to the OJK every year, at the latest by January 15.
(2) In the event that the automatic reinsurance/retrocession support agreement does not start in January, the automatic reinsurance/retrocession program report is submitted at the latest 15 (fifteen) days from the date the automatic reinsurance/retrocession support agreement becomes effective. (3) If the final deadline for submitting reports as referred to in paragraph (1) and paragraph (2) falls on a holiday, the final deadline for submitting reports becomes the first working day following it. (4) The automatic reinsurance/retrocession program report is accompanied by a graph depicting self-retention and automatic reinsurance/retrocession support received as well as reinsurance support limits. (5) The automatic reinsurance program report must be completed with reinsurance treaties that have been signed by the Insurance Company and Reinsurance Company in the last 1 (one) year.

Article 32
Further provisions regarding the form, structure, and method of submitting reports on automatic reinsurance/retrocession programs as referred to in Article 31 are regulated in an OJK Circular Letter.

Article 33
(1) Companies are required to submit reports on the execution of reinsurance placement every year, at the latest by April 30 of the following year.
(2) Further provisions regarding the form, structure, and method of submitting reports on the execution of reinsurance placement as referred to in paragraph (1) are regulated in an OJK Circular Letter.

Article 34
Companies are exempted from the obligation to submit reports on automatic reinsurance/retrocession programs as referred to in Article 31 paragraph (1) and reports on the execution of reinsurance placement as referred to in Article 33 paragraph (1) if the Company in question:
a. is subject to business activity restrictions for all insurance business lines; and/or b. is in the process of restoring its business license.

CHAPTER VI
SANCTIONS

Article 35
(1) Violations of the provisions of Article 2, Article 4, Article 7, Article 10 paragraph (1), paragraph (2), paragraph (3), Article 11 paragraph (1), paragraph (4), Article 12 paragraph (1), Article 13 paragraph (1), Article 14 paragraph (1), Article 15 paragraph (1), Article 16, Article 17 paragraph (2), Article 18 paragraph (1), paragraph (2), paragraph (3), Article 19 paragraph (1), Article 20 paragraph (1), Article 21 paragraph (1), Article 22 paragraph (1), Article 23, Article 24, Article 25 paragraph (1), Article 26, Article 27 paragraph (2), Article 28 paragraph (1), paragraph (3), Article 30, Article 31 paragraph (1), paragraph (5), and/or Article 33 paragraph (1) of this OJK Regulation are subject to administrative sanctions. (2) Administrative sanctions as referred to in paragraph (1) consist of:
a. written warnings; b. fines;
c. obligations for the Board of Directors or equivalent to undergo re-assessment of competence and propriety;
d. business activity restrictions; and/or e. revocation of business licenses.
(3) Sanctions as referred to in paragraph (2) letters b, c, d, or e, may be imposed with or without prior imposition of written warning sanctions as referred to in paragraph (2) letter a. (4) The amount of fines as referred to in paragraph (2) letter b is determined by the OJK based on regulations regarding administrative sanctions in the form of fines applicable to Companies. (5) The OJK may announce the imposition of administrative sanctions as referred to in paragraph (2) to the public.

CHAPTER VII
TRANSITIONAL PROVISIONS

Article 36
(1) Reinsurance Companies and Sharia Reinsurance Companies are required to adjust to the provisions of Article 30 paragraph (2) at the latest 2 (two) years from the date this OJK Regulation is promulgated. (2) General Insurance Companies and Sharia General Insurance Companies that have existing automatic reinsurance support agreements with foreign reinsurers prior to the promulgation of this OJK Regulation are required to adjust to all provisions in this OJK Regulation at the latest 1 (one) year from the date this OJK Regulation is promulgated. (3) Life Insurance Companies and Sharia Life Insurance Companies that have existing automatic reinsurance support agreements with foreign reinsurers prior to the promulgation of this OJK Regulation, the following provisions apply:
a. for all existing business using the existing automatic reinsurance support agreements until the end of the agreement period; and b. for new business, must adjust to all provisions in this OJK Regulation at the latest 1 (one) year from the date this OJK Regulation is promulgated.

CHAPTER VIII
CLOSING PROVISIONS

Article 37
At the time this OJK Regulation takes effect, all regulations regarding reinsurance support and self-retention are subject to the provisions of this OJK Regulation.

Article 38
This OJK Regulation takes effect from January 1, 2016.

In order for everyone to know it, order the promulgation of this OJK Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta on November 3, 2015

CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY, signed
MULIAMAN D. HADAD

Promulgated in Jakarta on November 10, 2015
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2015 NUMBER 265 Copy in accordance with the original Legal Director 1 Ministry of Law signed Sudarmaji

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 14 /POJK.05/2015
CONCERNING
SELF-RETENTION AND DOMESTIC REINSURANCE SUPPORT

I. GENERAL
Law Number 21 of 2011 concerning the Financial Services Authority mandates that the supervisory and regulatory functions over all activities in the financial services sector operating in Indonesia are carried out by the OJK, and the purpose of establishing the OJK is so that all financial services activities are conducted in an orderly, fair, transparent, and accountable manner, and are able to realize a financial system that grows sustainably and stably and is able to protect consumer and public interests.

In line with the OJK's objectives, the establishment of Law Number 40 of 2014 concerning Insurance aims to create a healthier, more reliable, trustworthy, and generally competitive insurance industry, done both through the establishment of new regulations and through the improvement of existing regulations. Such efforts are carried out among others by improving regulations regarding financial health.

In Article 19 of Law Number 40 of 2014 concerning Insurance, it is regulated that Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies are required to comply with regulations regarding financial health. One of the factors that must be considered in maintaining financial health is the application of risk mitigation.

The application of risk mitigation can be done in several ways, namely by setting self-retention based on a risk and loss profile that is created systematically, regularly, relevantly, and accurately, and applying reinsurance program strategies to have sufficient capacity to meet liabilities.

In order to carry out the aforementioned objectives, the OJK has been mandated to regulate self-retention and domestic reinsurance support. Therefore, this OJK Regulation is expected to provide guidelines for Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies in applying self-retention and reinsurance support strategies in order to optimize the utilization of insurance, Sharia insurance, reinsurance, and/or Sharia reinsurance capacity.

II. ARTICLE BY ARTICLE

Article 1
Clearly sufficient.

Article 2
Paragraph (1)
What is meant by "every risk managed" is every risk that receives automatic reinsurance support or facultative reinsurance support.

Paragraph (2)
Clearly sufficient.

Article 3
Clearly sufficient.

Article 4
Clearly sufficient.

Article 5
Clearly sufficient.

Article 6
Clearly sufficient.

Article 7
What is meant by "100% (one hundred percent) reinsurance support from domestic reinsurers" in these regulations is the full placement of automatic and/or facultative reinsurance support on domestic reinsurers. Simple risks in these regulations can generally be assessed from the sum insured and/or the object of insurance. These simple risks are generally found in motor vehicle insurance, health insurance, personal accident insurance, credit insurance, death insurance, and suretyship business lines. However, it is possible that simple risks exist in business lines other than those mentioned above, such as legal liability risks in liability insurance business lines implemented based on Law Number 34 of 1964 concerning the Compulsory Road Traffic Accident Compensation Fund.

Article 8
Paragraph (1)
Letter a
What is meant by "products that are global (worldwide)" in these regulations are insurance products whose coverage area applies internationally. Examples include: health insurance products offering benefits for treatment in hospitals abroad, and international travel insurance products.

Letter b
Clearly sufficient.

Paragraph (2)
The exclusion criteria referred to in these regulations do not exempt Life Insurance Companies and Sharia Life Insurance Companies from the obligation to place reinsurance support with domestic reinsurers, even if they fall under the exclusion criteria, there must still be reinsurance support from domestic reinsurers.

Paragraph (3)
Clearly sufficient.

Article 9
Clearly sufficient.

Article 10
Paragraph (1)
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Coverage other than coverage with simple risks in these regulations is generally found in property insurance, cargo insurance, hull insurance for ships, hull insurance for aircraft, satellite insurance, onshore energy insurance, offshore energy insurance, engineering insurance, liability insurance, and miscellaneous insurance business lines.

Paragraph (4)
Clearly sufficient.

Article 11
Clearly sufficient.

Article 12
Clearly sufficient.

Article 13
Clearly sufficient.

Article 14
Clearly sufficient.

Article 15
Clearly sufficient.

Article 16
What is meant by "technical factors" in these regulations includes among others poor underwriting results.
What is meant by "at the latest 1 (one) year" is 1 (one) year from the date of the rejection letter from the Domestic Reinsurer.

Article 17
Paragraph (1)
What is meant by the exception in these regulations is the exception in the event that automatic reinsurance support is not obtained or not needed, whether obtained from domestic or foreign reinsurers.

Paragraph (2)
What is meant by "proof of reasons for not obtaining automatic reinsurance support" in these regulations can be in the form of rejection letters from domestic and foreign reinsurers regarding automatic reinsurance support. Whereas what is meant by proof of not needing automatic reinsurance support in these regulations can be in the form of a statement letter that the risk managed does not exceed the self-retention capacity, signed by the Board of Directors or equivalent and the company actuary.

Article 18
Paragraph (1)
Letter a
What is meant by "not obtaining or not needing automatic reinsurance support" in these regulations includes not obtaining automatic reinsurance support from both domestic and foreign reinsurers.

Letter b
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Coverage other than coverage with simple risks in these regulations is generally found in property insurance, cargo insurance, hull insurance for ships, hull insurance for aircraft, satellite insurance, onshore energy insurance, offshore energy insurance, engineering insurance, liability insurance, and miscellaneous insurance business lines.

Paragraph (4)
Clearly sufficient.

Article 19
Clearly sufficient.

Article 20
Clearly sufficient.

Article 21
Clearly sufficient.

Article 22
Clearly sufficient.

Article 23
Clearly sufficient.

Article 24
Clearly sufficient.

Article 25
Clearly sufficient.

Article 26
Clearly sufficient.

Article 27
Paragraph (1)
Examples of changes to reinsurance support programs include:
a. changing facultative reinsurance to automatic reinsurance, or vice versa; and b. changing non-proportional reinsurance to proportional reinsurance, or vice versa.

Paragraph (2)
Clearly sufficient.

Article 28
Clearly sufficient.

Article 29
Clearly sufficient.

Article 30
Paragraph (1)
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Letter a
Clearly sufficient.

Letter b
What is meant by "organizing service and claims settlement activities properly" includes among others clarity of process, transparency, and speed of service and claims settlement.

Paragraph (4)
Clearly sufficient.

Paragraph (5)
Clearly sufficient.

Article 31
Clearly sufficient.

Article 32
Clearly sufficient.

Article 33
Clearly sufficient.

Article 34
Letter a
Clearly sufficient.

Letter b
What is meant by "in the process of restoring the business license" in these regulations is that the Company has submitted an application for the restoration of its business license to the OJK.

Article 35
Clearly sufficient.

Article 36
Paragraph (1)
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Letter a
What is meant by "until the end of the agreement period" in these regulations is the end date of the automatic reinsurance support agreement with the foreign reinsurer.

Letter b
What is meant by "new business" in these regulations is new business from insurance products that have already had automatic reinsurance support from foreign reinsurers.

Article 37
Clearly sufficient.

Article 38
Clearly sufficient.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 5754