Cool! Bridge Bank Solutions In The Insurance Industry Can Be Praised By The Global Financial Community

Illustration (Photo: Doc. Antara)

JAKARTA - The government through the insurance BUMN holding, Indonesia Financial Group (IFG), said that the bank bridge mechanism in guaranteeing and investing in the national insurance industry received praise from the global financial community.

IFG President Commissioner Fauzi Ichsan said the bank bridge option was considered effective in dealing with problematic insurance companies. According to him, the handling of a sick insurance company divides the company into two parts.

"Borrowing the term from the banking industry, the first part is the failed origin bank, which is dubbed a bad bank and will later be liquidated," he said in a press statement on Sunday, January 22.

Second, is a new good bank formed to receive healthy assets and obligations with the highest legal status of the original bank.

It is stated that it is different from the resolution of bank bridges in banks, where bank customer deposits fail to be restructured, policies and liabilities from insurance companies that fail to be restructured before being transferred to good banks. This option is claimed to reduce the burden of injecting fresh capital into good banks.

He said, through the transfer of assets and healthy obligations, other restructuring options could be open. These options include state capital participation (PMN), inviting strategic investors, and even later the issuance of initial public offering (IPO).

"Through the option of a bridge resolution of the bank, the cost of saving a failed bank or insurance company will be cheaper, including costs that must be incurred by the state," he said.

In addition, continued Fauzi, the latest resolution guarantees the continuity of added value for policyholders and their sustainable business.

The experience of IFG in implementing bank bridge resolutions for the insurance industry is a new resolution method in the global financial world. No failed insurance company has ever been saved through the bank bridge method. A resolution step that is fairly complex, monumental, and revolutionary in the history of the world's non-bank industry, not only in Indonesia," he stressed.

For information, the bank bridge scheme in saving the insurance industry has never happened in any insurance industry.

Meanwhile, instruments for saving financial institutions that have failed are actually fully available in the banking industry. After the 1997/1998 monetary crisis, which was marked by a number of banks that were declared bankrupt and there was a mass withdrawal (rush money), the Indonesian financial system began to improve with the presence of the Deposit Insurance Corporation (LPS).

The institution is equipped with a number of failed bank resolution instruments, including a liquidation mechanism, temporary capital participation (PMS), purchase & asset options, and temporary transfer options via bank bridge.

While the insurance industry has never experienced a similar crisis. Policyholders also cannot withdraw their money in droves because the contract cannot be done.

This causes many insurance companies to lack capital, but can still be allowed to operate. On the other hand, the insurance industry also does not have an institution similar to LPS which is the final line for the solution of failed insurance companies.