SEOJK No. 24/SEOJK.05/2015 on Investment Valuation of Debt Securities and Risk-Based Minimum Capital Adjustment for Insurance and Reinsurance Companies

To:

1. Board of Directors of Insurance Companies; and
2. Board of Directors of Reinsurance Companies,
   At your location.

COPY
CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 24/SEOJK.05/2015 CONCERNING INVESTMENT VALUATION OF DEBT SECURITIES AND RISK-BASED MINIMUM CAPITAL ADJUSTMENT FOR INSURANCE AND REINSURANCE COMPANIES

In accordance with the mandate of Article 5 paragraph (2) of the Minister of Finance Regulation Number 53/PMK.010/2012 concerning the Financial Health of Insurance and Reinsurance Companies and considering the Chairman of the Capital Market Supervisory Agency and Financial Institutions Board Regulation Number PER08/BL/2012 concerning Guidelines for the Calculation of Risk-Based Minimum Capital for Insurance and Reinsurance Companies, it is necessary to regulate adjustments to the calculation of debt security investment valuation, including corporate bonds, corporate sukuk, securities issued by the Republic of Indonesia, securities issued by countries other than the Republic of Indonesia, securities issued by Bank Indonesia, and securities issued by multinational institutions of which the Republic of Indonesia is a member or shareholder, as well as adjustments to the risk-based minimum capital used in calculating solvency ratios for insurance and reinsurance companies in this Financial Services Authority Circular as follows:

I. GENERAL PROVISIONS

1. That the impact of current global financial conditions has resulted in the market value of debt security investments held by insurance and reinsurance companies showing unreal values.
2. That the impact of current global financial conditions has resulted in the solvency ratio of insurance and reinsurance companies falling below the solvency ratio required in the Minister of Finance Regulation Number 53/PMK.010/2012 concerning the Financial Health of Insurance and Reinsurance Companies.
3. In relation to items 1 and/or 2, it is necessary to provide stimulus for insurance and reinsurance companies in valuing debt security investments to reflect fair values, as well as adjustments to the risk-based minimum capital calculated in the solvency ratio calculation.

II. DEBT SECURITY VALUATION

1. Insurance and reinsurance companies may value debt securities using amortized cost.
2. In the event that insurance and reinsurance companies perform debt security valuation as referred to in item 1, such valuation applies to all debt securities held by the insurance and reinsurance companies.

III. RISK-BASED MINIMUM CAPITAL ADJUSTMENT

1. The amount of risk-based minimum capital calculated in the solvency ratio calculation is at least 50% (fifty percent) of the risk-based minimum capital calculation as regulated in the Chairman of the Capital Market Supervisory Agency and Financial Institutions Board Regulation Number PER-08/BL/2012 concerning Guidelines for the Calculation of Risk-Based Minimum Capital for Insurance and Reinsurance Companies.
2. The percentage of risk-based minimum capital calculated in the solvency ratio calculation as referred to in item 1 is adjusted until the company's solvency reaches a maximum of 120% (one hundred twenty percent).

IV. APPLICATION OF DEBT SECURITY VALUATION AND RISK-BASED MINIMUM CAPITAL ADJUSTMENT

1. Insurance and reinsurance companies meeting the conditions as referred to in Roman numeral I items 1 and 2 may apply the provisions of Roman numeral II and/or Roman numeral III.
2. In the event that insurance and reinsurance companies have performed valuation as referred to in Roman numeral II and based on such valuation the solvency ratio already meets the provisions in the Minister of Finance Regulation Number 53/PMK.010/2012 concerning the Financial Health of Insurance and Reinsurance Companies, then the provisions as referred to in Roman numeral III do not apply.

V. CLOSING

The provisions in this Financial Services Authority Circular take effect from the date of determination until the date this Financial Services Authority Circular is revoked.

Determined in Jakarta on August 31, 2015

EXECUTIVE HEAD OF INSURANCE, PENSION FUND,
LENDING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTIONS SUPERVISOR FINANCIAL SERVICES AUTHORITY,

signed
FIRDAUS DJAELANI

Copy matches the original
Legal Director 1
Legal Department

signed
Sudarmaji