SEOJK on Valuation of Sharia Securities Investments and Calculation of Funds to Anticipate Risks of Failure in Managing Assets and/or Obligations of Sharia Insurance and Reinsurance Companies

To:

1. The Board of Directors of Sharia Insurance Companies; and
2. The Board of Directors of Sharia Reinsurance Companies,
   in your respective locations.

COPY

CIRCULAR LETTER OF THE FINANCIAL SERVICES AUTHORITY NUMBER 25/SEOJK.05/2015

CONCERNING

VALUATION OF SHARIA SECURITIES INVESTMENTS AND CALCULATION OF FUNDS TO ANTICIPATE RISKS OF FAILURE IN MANAGING ASSETS AND/OR OBLIGATIONS OF SHARIA INSURANCE COMPANIES AND SHARIA REINSURANCE COMPANIES

In relation to the mandate of Article 7 of the Minister of Finance Regulation Number 11/PMK.010/2011 concerning Financial Health of Insurance Business and Reinsurance Business with Sharia Principles, and considering the Chairman of the Capital Market Supervisory Agency and Financial Institution Regulation Number PER-07/BL/2011 concerning Guidelines for Calculating the Amount of Funds Required to Anticipate Losses from Tabarru’ Fund Management and Calculating the Amount of Funds That Companies Must Provide to Anticipate Potential Losses Arising in the Conduct of Insurance Business and Reinsurance Business with Sharia Principles, it is necessary to regulate regarding adjustments to the calculation of valuations of Sharia securities investments, including sukuk or Sharia bonds, State Sharia securities, Sharia securities issued by Bank Indonesia, Sharia securities issued by countries other than the Republic of Indonesia, and Sharia securities issued by multinational institutions where the Republic of Indonesia is one of the members or shareholders, as well as adjustments to funds for anticipating risks of failure in managing assets and/or obligations used in calculating the solvency ratio of Sharia insurance companies and Sharia reinsurance companies in the Circular Letter of the Financial Services Authority as follows:

I. GENERAL PROVISIONS

1. That the impact of current global financial conditions has resulted in the market value of Sharia securities investments owned by Sharia insurance companies and Sharia reinsurance companies showing unreasonable values.

2. That the impact of current global financial conditions has resulted in a decrease in the solvency ratio of Sharia insurance companies and Sharia reinsurance companies to less than the solvency ratio required in the Minister of Finance Regulation Number 11/PMK.010/2011 concerning Financial Health of Insurance Business and Reinsurance Business with Sharia Principles.

3. In relation to items 1 and/or 2, it is necessary to provide stimulus for Sharia insurance companies and Sharia reinsurance companies in the valuation of Sharia securities investments so that they reflect reasonable values, as well as adjustments to funds for anticipating risks of failure in managing assets and/or obligations considered in solvability calculations.

II. VALUATION OF SHARIA SECURITIES

1. Sharia insurance companies and Sharia reinsurance companies may value Sharia securities using amortized historical cost.

2. In the event that Sharia insurance companies and Sharia reinsurance companies perform the valuation of Sharia securities as referred to in item 1 above, then the valuation of those Sharia securities applies to all Sharia securities owned by the Sharia insurance companies and Sharia reinsurance companies.

III. ADJUSTMENT OF CALCULATION OF FUNDS TO ANTICIPATE RISKS OF FAILURE IN MANAGING ASSETS AND/OR OBLIGATIONS

1. The amount of funds considered in anticipating risks of failure in managing assets and/or obligations in the calculation of the solvency ratio is at least 50% (fifty percent) ...

• 3 -

percent) of the calculation of funds considered in anticipating risks of failure in managing assets and/or obligations as regulated in the Chairman of the Capital Market Supervisory Agency and Financial Institution Regulation Number PER-07/BL/2011 concerning Guidelines for Calculating the Amount of Funds Required to Anticipate Losses from Tabarru’ Fund Management and Calculating the Amount of Funds That Companies Must Provide to Anticipate Potential Losses Arising in the Conduct of Insurance Business and Reinsurance Business with Sharia Principles.

2. The percentage of funds considered in anticipating risks of failure in managing assets and/or obligations considered in the calculation of the solvency ratio as referred to in item 1 above shall be adjusted until the solvency level of the tabarru’ funds of Sharia insurance companies and Sharia reinsurance companies reaches a maximum of 30% (thirty percent).

IV. APPLICATION OF VALUATION OF SHARIA SECURITIES AND ADJUSTMENT OF CALCULATION OF FUNDS TO ANTICIPATE RISKS OF FAILURE IN MANAGING ASSETS AND/OR OBLIGATIONS

1. Sharia insurance companies and Sharia reinsurance companies that meet 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 Sharia insurance companies and Sharia reinsurance companies have performed the valuation as referred to in Roman numeral II and based on that valuation the solvency ratio already meets the provisions in the Minister of Finance Regulation Number 11/PMK.010/2011 concerning Financial Health of Insurance Business and Reinsurance Business with Sharia Principles, then the provisions as referred to in Roman numeral III become inapplicable.

V. CLOSING ...

• 4 -

V. CLOSING

The provisions in this Circular Letter of the Financial Services Authority shall take effect from the date of determination until the date of revocation of this Circular Letter of the Financial Services Authority.

Determined in Jakarta on August 31, 2015

EXECUTIVE HEAD OF SUPERVISOR
OF INSURANCE, PENSION FUNDS,
FINANCING INSTITUTIONS, AND
OTHER FINANCIAL SERVICE INSTITUTIONS
FINANCIAL SERVICES AUTHORITY,

signed
FIRDAUS DJAELANI

Copy matches the original
Legal Director 1
Legal Department

signed
Sudarmaji