The government of Indonesia stated that it is necessary to improve the regulation for “capital increase” of Insurance Companies whose share percentage of foreign ownership exceeds 80% (eighty percent) at the time of the enactment of Government Regulation Number 14 of 2018 concerning Foreign Ownership in Insurance Company (hereinafter referred to as “GR No. 14/2018”), furthermore, in order to support and maintain the growth and development of Indonesia’s insurance business industry, and also to pay closer attention to the ability of domestic capital capacity, the Government of Indonesia issued Government Regulation No. 2 of 2020 concerning Amendment of Government Regulation No. 14 of 2018 concerning the Foreign Ownership of Insurance Companies (hereinafter referred to as “GR No. 2/2020”).
The amendment within GR No. 2/2020 consists of several changes to the rules governing foreign-ownership capital, and they are as follows:
1. Conventional/sharia insurance/reinsurance companies, as well as insurance/reinsurance brokerage companies and insurance loss-appraisal companies (herein-after will be collectively referred to as “Insurance-Related Companies”)
GR No. 2/2020 prohibits non-publicly listed Insurance-Related Companies from increasing their foreign-ownership percentage for when their paid-up capital is being increased. If no Indonesian legal entities and/or Indonesian citizens are taking part in the aforementioned stock shares increase, then the relevant non-publicly-listed Insurance-Related Companies shall increase their paid-up capitals through the process of Initial Public Offering (IPO) which should in turn be undertaken in Indonesia.
2. Sharia insurance/reinsurance companies resulting from spin-offs.
GR No. 2/2020 stated that provisions which specifically address the foreign-ownership capital for any sharia insurance/reinsurance companies which is the resultant of spin-offs from the sharia units of insurance/reinsurance companies (“Sharia Insurance Companies”). The foreign-ownership capital, in this case, is to be treated/considered the same as the capital which has now been set for conventional insurance/reinsurance companies, as per outlined in the previous section.
GR No. 2/2020 also states that any Sharia Insurance Companies which are found to be in violation of the foreign-ownership provisions, set out under this amendment, shall then be subject to administrative sanctions such as (i) written reprimands; (ii) limitation of business activities; (iii) revocation of business licenses; and/or (iv) fines.