SEOJK on Criteria for Appointment and Determination of Statutory Manager Use and Termination and Replacement of Statutory Managers for Insurance, Sharia Insurance, Reinsurance, and Sharia Reinsurance Companies

To:

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

at their respective locations.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 44 /SEOJK.05/2016

REGARDING

CRITERIA FOR APPOINTMENT AND DETERMINATION OF USE OF STATUTORY MANAGERS AS WELL AS TERMINATION AND REPLACEMENT OF STATUTORY MANAGERS FOR INSURANCE COMPANIES, SHARIA INSURANCE COMPANIES, REINSURANCE COMPANIES, AND SHARIA REINSURANCE COMPANIES

In relation to the mandate of Article 2 paragraph (6) and Article 12 paragraph (3) of Financial Services Authority Regulation Number 41/POJK.05/2015 concerning the Procedure for Determining Statutory Managers at Financial Service Institutions (State Gazette of the Republic of Indonesia Year 2015 Number 368, Additional State Gazette of the Republic of Indonesia Number 5808), it is necessary to regulate implementation provisions regarding the criteria for appointment and determination of use of statutory managers as well as termination and replacement of statutory managers for insurance companies, Sharia insurance companies, reinsurance companies, and Sharia reinsurance companies in this Financial Services Authority Circular Letter as follows:

I. GENERAL PROVISIONS

1. 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.

2. Statutory Manager is an individual or legal entity appointed by OJK to exercise the authority of OJK as referred to in Law Number 21 of 2011 concerning the Financial Services Authority and Law Number 40 of 2014 concerning Insurance.

3. Company means insurance company, Sharia insurance company, reinsurance company, and Sharia reinsurance company.

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

5. Sharia Insurance Company means Sharia general insurance company and Sharia life insurance company as referred to in Law Number 40 of 2014 concerning Insurance.

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

7. Sharia Reinsurance Company is a company that conducts risk management business based on Sharia principles against risks faced by Sharia Insurance Companies, Sharia guarantee companies, or other Sharia Reinsurance Companies.

8. Board of Commissioners is the Board of Commissioners as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

9. General Meeting of Shareholders, hereinafter abbreviated as GMS, is the general meeting of shareholders as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Companies in the form of a limited liability company or equivalent to GMS for Companies in the form of a cooperative or joint business legal entity.

10. Shareholder means shareholder as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Companies in the form of a limited liability company or equivalent to Shareholder for Companies in the form of a cooperative or joint business legal entity.

11. Board of Directors is the Company organ that performs management functions as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Companies in the form of a limited liability company or equivalent to Board of Directors for Companies in the form of a cooperative or joint business legal entity.

12. Board of Commissioners is the Company organ that performs supervision and advisory functions as referred to in Law Number 40 of 2007 concerning Limited Liability Companies for Companies in the form of a limited liability company or equivalent to Board of Commissioners for Companies in the form of a cooperative or joint business legal entity.

13. Sharia Supervisory Board is part of the Company organ that conducts business activities based on Sharia principles, which performs supervision over the implementation of insurance or reinsurance business to ensure compliance with Sharia principles.

14. Consumer means consumer as referred to in Law Number 21 of 2011 concerning the Financial Services Authority.

II. CRITERIA FOR APPOINTMENT AND DETERMINATION OF USE OF STATUTORY MANAGERS

1. OJK may conduct the appointment and determination of use of Statutory Manager in cases where:
   a. the Company's financial condition can endanger the interests of Consumers, the financial service sector, and/or Shareholders; b. the Company's business operations are not in accordance with regulations in the financial service sector;
   c. the Company has been subject to business activity restriction sanctions;
   d. the Company is utilized by certain parties to facilitate and/or commit criminal offenses in the financial service sector; e. Shareholders, Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board of the Company are suspected of committing criminal offenses in the financial service sector that can disrupt operations at the relevant Company; and/or f. the Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board of the Company are deemed unable to resolve problems occurring at the Company; and/or g. the Company does not comply with written orders to replace the Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board.

2. The Company's financial condition is deemed to endanger the interests of Consumers, the financial service sector, and/or Shareholders as referred to in letter a of number 1 above, if among other things it meets the following conditions:
   a. solvency achievement ratio is below 100% (one hundred percent); b. investment adequacy ratio is below 100% (one hundred percent); and/or
   c. equity is below the minimum amount required.

3. The Company's business operations are deemed not in accordance with regulations in the financial service sector as referred to in letter b of number 1 above if among other things:
   a. conducting business activities not in accordance with the business license granted by OJK; and/or b. placing investments in types and/or amounts of investments prohibited based on regulations in the field of insurance.

4. The Company has been subject to business activity restriction sanctions as referred to in letter c of number 1 above, which in OJK's assessment can result in the Company's failure to meet its obligations to Consumers, policyholders, and/or other parties.

5. The Company is deemed to be utilized by certain parties to facilitate and/or commit criminal offenses in the financial service sector as referred to in letter d of number 1 above if among other things the Company is used as a means or target for money laundering and/or terrorism financing.

6. The Board of Directors, Board of Commissioners, Sharia Supervisory Board, and/or Shareholders are suspected of committing criminal offenses in the financial service sector that can disrupt operations at the relevant Company as referred to in letter e of number 1 above if among other things the potential loss of the Company due to the aforementioned criminal offense is deemed material.

7. The Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board of the Company are deemed unable to resolve problems occurring at the Company as referred to in letter f of number 1 above if among other things they are unable to implement and/or resolve part or all of the financial rehabilitation plan as referred to in regulations concerning the Company's financial health within the established timeframe.

8. The Company is deemed not to comply with written orders to replace the Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board as referred to in letter g of number 1 above if among other things within the established timeframe it fails to replace the Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board meeting the criteria in accordance with applicable regulations.

III. PARTIES APPOINTED AS STATUTORY MANAGERS

1. OJK appoints an individual or legal entity as Statutory Manager.

2. An individual who can become a Statutory Manager as referred to in number 1 must be legally competent and have no conflict of interest with the Company to be managed, Shareholders, Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board of the Company to be managed, with the following conditions:
   a. possessing relevant knowledge, experience, and/or expertise, including in the fields of accounting, law, actuarial science, technology and informatics, or being an expert or other profession related to insurance; and/or b. having experience in management, rehabilitation, and/or restructuring of companies.

3. In the event that the appointed Statutory Manager is an individual functioning as Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board, the number of Statutory Managers appointed is adjusted to the Company's needs.

4. An individual or legal entity appointed as Statutory Manager may cooperate with other parties in carrying out their duties and authorities.

5. A legal entity that can become a Statutory Manager as referred to in number 1 must not have a conflict of interest with Shareholders, Board of Directors, Board of Commissioners, and/or Sharia Supervisory Board of the Company to be managed.

6. Conflict of interest as referred to in number 2 is a situation where there is a conflict between the economic interests of the Statutory Manager and the economic interests of the Company, Shareholders, members of the Board of Directors, members of the Board of Commissioners, and/or members of the Sharia Supervisory Board of the Company.

7. Conflict of interest as referred to in number 5 is a situation where there is a conflict between the economic interests of the Statutory Manager and the economic interests of Shareholders, members of the Board of Directors, members of the Board of Commissioners, and/or members of the Sharia Supervisory Board of the Company.

8. In the event that the Statutory Manager is a legal entity, the party assigned to perform the functions, duties, and authorities of the Statutory Manager must meet the requirements as referred to in number 2 and must first obtain approval from OJK.

IV. PROCEDURE FOR APPOINTMENT AND DETERMINATION OF USE OF STATUTORY MANAGERS

1. The appointment and determination of use of Statutory Manager is conducted by the Board of Commissioners based on a proposal from the Executive Head of Insurance, Pension Fund, Financing Institution, and Other Financial Service Institution Supervision.

2. The Executive Head of Insurance, Pension Fund, Financing Institution, and Other Financial Service Institution Supervision establishes the decision on the appointment and determination of use of Statutory Manager which has been approved by the Board of Commissioners as referred to in number 1.

3. The use of Statutory Manager takes effect from the date of the decision signed by the Executive Head of Insurance, Pension Fund, Financing Institution, and Other Financial Service Institution Supervision.

V. WORK PLAN AND BUDGET OF STATUTORY MANAGERS

1. The Statutory Manager prepares a work plan and budget in the course of implementing duties as Statutory Manager.

2. The work plan and budget as referred to in number 1 is reported to OJK for approval no later than 30 (thirty) days from the date of appointment and determination of use of Statutory Manager.

VI. TERMINATION AND REPLACEMENT OF STATUTORY MANAGERS

1. The use of Statutory Manager at the Company ends if:
   a. OJK decides that the use of Statutory Manager is no longer needed; or b. the Company's business license has been revoked.

2. The use of Statutory Manager is no longer needed as referred to in letter a of number 1 above, if among other things:
   a. OJK assesses that the Company's financial condition has become healthy; b. OJK assesses that the Statutory Manager has successfully resolved problems occurring at the Company and/or completed all financial rehabilitation plans as referred to in regulations concerning the Company's financial health; and/or
   c. the duration or term of use of the Statutory Manager has ended and the Company's problems have not been resolved.

3. Revocation of the Company's business license as referred to in letter b of number 1 above is among other things due to the Company being assessed as unsalvageable.

4. Termination of the use of Statutory Manager at a Company whose business license has been revoked as referred to in letter b of number 1 above takes effect from the formation of the liquidation team.

5. A Company whose business license has been revoked as referred to in letter b of number 1 above subsequently undergoes a liquidation process in accordance with regulations concerning the dissolution, liquidation, and bankruptcy of Companies.

6. OJK has the authority to replace the Statutory Manager if among other things the Statutory Manager:
   a. commits fraud, dishonesty, negligence, is incapable, and/or does not comply with regulations in the field of insurance; b. is unable to resolve existing problems at the Company;
   c. does not comply with written orders from OJK; and/or
   d. resigns.

7. Termination and/or replacement of Statutory Manager is conducted by the Board of Commissioners based on a proposal from the Executive Head of Insurance, Pension Fund, Financing Institution, and Other Financial Service Institution Supervision.

8. The Executive Head of Insurance, Pension Fund, Financing Institution, and Other Financial Service Institution Supervision carries out the termination and/or replacement of Statutory Manager after obtaining approval for the termination and replacement of Statutory Manager from the Board of Commissioners as referred to in number 7.

9. Termination and replacement of Statutory Manager takes effect from the date of the decision signed by the Executive Head of Insurance, Pension Fund, Financing Institution, and Other Financial Service Institution Supervision.

10. The Statutory Manager submits an accountability report to OJK through the Executive Head of Insurance, Pension Fund, Financing Institution, and Other Financial Service Institution Supervision.

VII. CLOSING

The provisions in this OJK Circular Letter take effect from the date of determination.

Determined in Jakarta on October 4, 2016

EXECUTIVE HEAD OF INSURANCE,
PENSION FUND,
FINANCING INSTITUTION, AND
OTHER FINANCIAL SERVICE INSTITUTION SUPERVISION FINANCIAL SERVICES AUTHORITY, signed

FIRDAUS DJAELANI

Copy in accordance with the original
Director of Law 1
Department of Law signed

Yuliana