Encourage Insurance Industry And Retirement Funds, OJK Issues 4 New Rules

JAKARTA - The Financial Services Authority has issued four OJK Regulations (POJK) as an effort to strengthen regulations in encouraging the transformation of the insurance industry and pension funds.

Meanwhile, the four POJKs issued at the end of 2023 are, first POJK Number 20 of 2023 concerning Insurance Products which are associated with Sharia Credit or Financing, and Sharia Suretyship Products.

Second, POJK Number 23 of 2023 concerning Business and Institutional Licensing of Insurance Companies, Sharia Insurance Companies, Resurance Companies, and Sharia Resurance Companies.

Third, POJK Number 24 of 2023 concerning Business and Institutional Licensing of Insurance Cup Companies, Resurance Auction Companies, and Insurance Losses Assessment Companies. Furthermore, fourth, POJK Number 27 of 2023 concerning the Implementation of Pension Fund Businesses.

Head of the Department of Literacy, Financial Inclusion and OJK Communications, Aman Santosa, said that the issuance of the four POJKs was intended to accelerate the transformation process in the insurance sector and pension funds to become a healthy, strong, and able industrial sector. to grow sustainably.

"So that it can make a more significant contribution to supporting national economic growth," he explained in his official statement, quoted on Thursday, January 11.

Safe to convey to the insurance industry sector, the limited capital capacity is one of the main issues that has the potential to disrupt the resilience and stability of the industrial sector in anticipating the potential economic crisis that can optimally hinder the growth and development of insurance industry players.

Therefore, one of the main substances regulated in POJK Number 23 of 2023 and POJK Number 24 of 2023 is the adjustment of the provisions for the minimum paid-up capital for new business actors (new entry) as well as the increase in minimum equity for business actors who have obtained business licenses.

In addition, based on developments that occurred in crisis conditions due to the previous COVID-19 pandemic, one of the main issues that interfere with the financial health level of insurance companies is the practice that is not prudent in the management of insurance product portfolios associated with credit or sharia financing.

Therefore, Aman conveyed that the issuance of POJK Number 20 of 2023 aims to encourage insurance companies to implement a more optimal mitigation mechanism for risk exposure borne by insurance companies from marketing these types of insurance products.

In this regard, some of the main substances contained in the provisions include regulating the provision of insurance company access to credit/financing distribution data, sharing of risk between insurance companies and banks/financing institutions, and the maximum limit of credit insurance premiums allocated as commissions or acquisition fees.

Meanwhile, for the pension fund industry sector, POJK Number 27 of 2023 concerning the Implementation of Pension Fund Businesses contains implementation provisions of several mandates for the regulation of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector.

"The POJK is meant to be an adjustment to several existing POJKs, regarding funding pension funds, investing in pension funds, and POJK regarding contributions, pension benefits, and other benefits," he explained.

In terms of investment, Aman explained that the POJK contains provisions aimed at encouraging the strengthening of investment governance for pension funds so that they are held more prudently, through competency requirements for pension fund managers, as well as additional requirements related to investment placements that tend to be high risk, including: Limited Participation Funds (RDPT), Infrastructure Investment Funds (DINFRA), Medium-Term Notes (MTN), and Repurchase Agreement (REPO).

Meanwhile, in terms of paying the pension benefits, the POJK also contains provisions regarding the payment of periodic pension benefits that can be paid directly by pension funds, or by buying a post-agency product that provides the shortest pension benefits payment for 10 years.

"For 2024, one of the OJK priority programs for the insurance industry sector is the improvement of regulations related to insurance products and insurance product channels," he said.

It is safe to convey that the arrangement of insurance products and marketing channels is urgent to be perfected in order to follow the development of varied and dynamic insurance product innovations, but while still strengthening prudential aspects and market behavior.

The improvements in the main arrangements include the simplification of insurance product approval and recording mechanisms that are adjusted to the complexity and risk level of insurance products, and simultaneously encourage the strengthening of the insurance company's internal functions, especially in terms of the development and monitoring of insurance products.

In addition, Aman said that the OJK will also organize the guarantee industry as an effort to strengthen and develop the guarantee industry sector, which plays a strategic role in the financing ecosystem for business actors in the MSME segment.

"The structuring efforts are carried out, among others, by compiling a roadmap for the guarantee industry, and strengthening the framework for arrangements related to licensing and business administration in the industrial sector," he concluded.