Member Article

Decree of the Minister of Finance No. 424/KMK.06/2003 (as amended) which contains the guidelines on the financial condition of insurance and reassurance companies has been further amended by Regulation of the Ministry of Finance No. 158/PMK.010/2008. Under this new regulation, insurance and reassurance companies may evaluate bonds, other marketable securities issued by the state or others (which they invest as security funds) using other reasonable valuation methods, if those documents have previously been over- or under-valued unreasonably. However, the alternative value must be restored to the original value if the documents prove it to be a reasonable value. However, when the market improves and returns to normal, Bapepam-LK will determine the reasonable value and then insurance and reassurance companies must use that value.

A life insurance and reassurance company must have security funds (dana jaminan) amounting to at least the greater value of 20% of the required own capital (modal sendiri) and a total of 2% of the premium reserves for insurance products which relate to the investment and 5% of the premium reserves for other products, including reserves for premiums which are not yet earning.

A loss insurance and reassurance company must have security funds (dana jaminan) amounting to at least the greater value of 20% of the required own capital (modal sendiri); and a total of 1% of net premiums and 0.25% of reinsurance premiums.

Security funds may only be placed as a term deposit, bonds and/or other marketable securities issued by the Government. Bonds and/or other marketable securities issued by the Government must expire at least 3 years after the date of the placement. All security funds must be maintained by a Custodian Bank, a commercial bank in Indonesia which is not an affiliate of the insurance or reinsurance company.

Insurance and reinsurance companies must also submit a security funds report to the Insurance Bureau on 31 March, 30 June, 30 September, and 31 December together with the quarterly report, which must contain at least the following information:

 -  name of the custodian bank;

 -  types of security funds;

 -  bilyet number and name of the issuing bank for deposits;

 -  serial number of marketable securities issued by the state;

 -  the total value of the security funds;

 -  the due date.

 

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