FINANCIAL SERVICES AUTHORITY REGULATION NO. 14/POJK.05/2020 YEAR 2020

July 28, 2020 | Regulatory Updates


The emergence of COVID-19 disease has rapidly spread throughout the world and causing dramatic disruption in the nation’s economy. Therefore, as one of the efforts by our Government in optimizing performances of Non-Bank Financial Institutions which includes insurance companies, pension funds, financial institutions and other financial services institutions (“NBFI”), and for the purpose of maintaining financial system and supporting economic growth, on 14 April 2020 the Financial Services Authority (“OJK”) issued the OJK Regulation No. 14/POJK.05/2020 on Countercyclical Policy in relation to the Impact of COVID-19 for Non-Bank Financial Institutions (“POJK 14/2020”).

Countercyclical Policies Implementation Period

Pursuant to POJK 14/2020, there are several countercyclical policies provided hereunder which may be implemented for a certain period of time as follows:

No.

Policy

Implementation Period

1.

Deadlines for submission of periodic reports

during COVID-19 emergency period*)

2.

Implementation of fit and proper tests

during COVID-19 emergency period

3.

Determination of assets quality in the form of credit and debt restructuring

up to 17 April 2021

4.

Calculation of solvability level of insurance companies, sharia insurance companies, reinsurance companies and sharia reinsurance companies

up to 31 December 2020

5.

Calculation of credit rating for pension fund with fixed benefit pension program

up to 31 December 2020

6.

Implementation of life cycle fund for pension fund undertaking fixed benefit pension program

up to 31 December 2020

7.

Other policies which may be determined by OJK through Chief Executive of the Insurance Supervisor, Pension Fund, Financing Institution and other Financial Services Institutions

-

*) in accordance with Presidential Decree No. 11 Year 2020 concerning Stipulation of Public Health Emergency COVID-19

The foregoing policies may be implemented while concurrently still complying with the prudential principles, risk management, proper corporate governance and sharia principles provisions (as applicable) in accordance with the prevailing OJK regulation.

Implementation of Countercyclical Policies

1. Deadlines for submission of periodic reports

During COVID-19 emergency period, due date for submission of periodic report to OJK, announcement and/or publication of the relevant report by NBFI (save for public companies) shall be extended as of the corresponding due date under the following details:

(i) 14 (fourteen) business days extension - for monthly and quarterly reports;

(ii) 1 (one) month extension - for semiannual reports;

(iii) 2 (two) months extension - for annual reports.

The periodic report must be submitted through OJK data communication network system and should the relevant submission deadline falls on public holiday, it shall be submitted on the next business day.

2. Implementation of fit and proper tests

Presentation and clarification during fit and proper test for NBFI primary parties candidates (i.e. controlling shareholders, insurance company controller board of directors/executives/officers, board of commissioners/supervisors, sharia supervisory board, company actuary, and internal auditor) may be conducted through video conference and must be provided with statement letter issued by the board of directors or its equivalent which oversees the compliance function stating that: (i) NBFI and/or the primary party candidate is equipped with reliable infrastructure to participate in the video conference, (ii) the relevant primary party candidate attending the video conference is not represented, and (iii) undertaking to maintain confidential all information used under the presentation and clarification.

3. Determination of assets quality in the form of credit and debt restructuring

NBFI may implement certain policies for debtors affected by COVID-19 outbreak by preparing certain internal policies (standard operational procedures - “SOP”) which shall cover clear criteria of what would constitute of “affected debtors by COVID-19” such as:

(i) debtor is an individual declared as patient infected by COVID-19, patient/person under surveillance, which result in difficulties to fulfill its obligation under the prevailing contract;

(ii) business owned by the debtor is engaging in economic sector impacted by COVID-19 (whether directly or indirectly).

(hereinafter referred to as “Affected Debtors”)

Determination of assets quality in the form of credit and debt restructuring for Affected Debtors with credit of up to IDR10,000,000,000 (ten billion Rupiahs) may be based on punctual payment over principal amount and/or interest or margin/profit sharing/ujrah while concurrently implemented in accordance with prevailing OJK Regulation regarding assets determination quality for each NBFI, along with its implementing regulations.

Debt restructuring for Affected Debtors may be undertaken subject to the following consideration:

(i) In respect of funding under joint-financing and channeling, availability of process and policy for debt restructuring provided by the funder and executed by authorized officials;

(ii) debt restructuring application submitted by the Affected Debtors;

(iii)restructuring feasibility assessment by NBFI.

Assets quality in the form of credit for Affected Debtors that are being restructured shall be deemed liquid thereafter and this provision shall be valid for funding that are (i) granted to Affected Debtors and (ii) restructured after the debtor is affected by COVID-19.

4. Calculation of solvability level of insurance companies, sharia insurance companies, reinsurance companies and sharia reinsurance companies

Calculation of solvability level for assessment over Admitted Assets in the form of investment for insurance companies, sharia insurance companies, reinsurance companies and sharia reinsurance companies (“Insurance Company”) in the form of listed corporate bonds, listed sukuk or sharia bonds, Government Paper (Surat Berharga Negara) and Sharia Government Paper (“Assets”) may be conducted based on amortized acquisition value (nilai perolehan yang diamortisasi), provided that implementation of the foregoing assessment method must apply to all Assets owned by Insurance Companies.

Relaxation policy on calculation of solvability level in regards to restriction over non-investment Admitted Assets which was previously based on 2 (two) months billing life is extended to 4 (four) may be granted for Insurance Companies that are giving 4 (four) months extension over premium/contribution maturity date to the policy holder and for premium/contribution that are due since February 2020 with details as follow:

(i) Admitted Assets in the form of premium bills for insurance and reinsurance companies:

a. direct premium bills (including coinsurance premium bills), with billing life not more than 4 (four) months as of the beginning of insurance date - for policy with single premium; or premium payment maturity date - for policy with installment premium;

b. reinsurance premium bills, with billing life not more than 4 (four) months as of the maturity date.

(ii) Admitted Assets in the form of contribution bills (tagihan kontribusi) for sharia insurance/reinsurance and sharia unit in insurance/reinsurance companies:

a. direct tabarru’ and ujrah contribution bills (including coinsurance contribution bills), with billing life not more than 4 (four) months as of the beginning of insurance date – for policy with single contribution; or contribution payment maturity date – for policy with installment contribution

b. reinsurance contribution and ujrah bills, with billing life not more than 4 (four) months as of the maturity date

In addition, Insurance Companies may also include asset value derived from finance lease contracts up to the liability amount arising from the same, as part of non-investment Admitted Assets.

5. Calculation of credit rating for pension fund with fixed benefit pension program

Calculation of credit rating and assessment over investment for pension fund with fixed pension benefit program in the form of Assets may be conducted based on amortized acquisition value, provided that implementation of the foregoing assessment method must apply to all Assets owned by the pension fund. The foregoing provision shall only apply for pension fund affected by COVID-19 (which may be proven among others by the decrease of solvability ratio) and must not result in higher credit rating than the credit rating under previous actuary valuation.

6. Implementation of life cycle fund for pension fund undertaking fixed benefit pension program

Implementation of life cycle fund for participants ranging from 2 (two) to 5 (five) years before normal retirement age may be postponed for up to 1 (one) year.

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