Revoking Kresna Life's Business License, OJK Gives Shocking Reasons

Head of the Literacy Department, Financial Inclusion and Communications of OJK Aman Santosa. (Photo: Doc. ANTARA)

JAKARTA - The Financial Services Authority (OJK) emphasized that the step to revoke the business license of PT Asuransi Jiwa Kresna (Kresna Life), as well as giving written Orders to certain parties on June 23, 2023, was a step in accordance with the provisions to protect consumers.

"It is based on the right supervision regulations and also aims to protect consumers from increased losses and to prevent the increasing number of new consumer candidates who are harmed," said Head of the Department of Literacy, Financial Inclusion and Communications OJK Aman Santosa in an official statement, Friday, July 5.

The steps for revocation of Kresna Life's business license have been preceded by the OJK supervision process for a long time through direct or indirect examinations.

During the examination, it was found that there was a concentration of Kresna Life insurance funds invested in shares that were considered affiliated with the Kresna group, and that the recording of obligations was smaller than should have caused the solvency ratio (risk based capital) to be lower than the provisions.

Before revoking the business license, OJK has provided a long opportunity for improvement to the board of directors and shareholders in order to improve the company's financial condition.

In addition, OJK also consistently issues sanctions for every type of violation of provisions that occur gradually.

However, of all the opportunities given, Kresna Life was unable to meet the solvency ratio according to the provisions and could not close the financial deficit through a capital deposit by the controlling shareholder (PSP) or invite potential investors.

"From the results of the examination, PSP Kresna Life did not issue fresh funds to make the company healthy. Payments to policyholders claimed to be proof of the responsibility of shareholders came from the existing Kresna Life assets," he said.

Previously, Kresna Life had made efforts to restore it by offering a conversion of policyholder obligations into subordination loans (Subordinated Loans/SOLs).

The effort was conveyed in the Financial Restructuring Plan, but still could not be carried out because there were most policyholders who refused and there was no SOL conversion agreement that had been declared, in accordance with applicable regulations.

In addition, the results of an analysis of the SOL conversion program submitted by Kresna Life to OJK show that there is still a deficit that must be closed with additional capital from PSP. However, OJK's request to PSP to close the estimated remaining deficit after the SOL conversion program was carried out was never fulfilled.

In fact, the SOL program offered by the board of directors is not a loan subordinator, which is generally a loan from shareholders to improve the financial health of troubled companies.

If the SOL conversion program offered by Kresna Life is implemented, the legal standing of policyholders is due which is entitled to the payment of benefits (claims) for insurance will be a lender.

Thus, the company's equity will increase without the flow of fresh funds that enter which should be PSP's responsibility to make the company healthy.

Meanwhile, regarding the SOL program plan offered by Kresna Life, OJK has tried to provide an understanding to policyholder representatives that the position and rights of policyholders with SOL holders on Kresna Life's assets are different.

OJK explained that policyholders have higher priorities, while SOL holders are legally aligned with shareholders, namely as the last party has the right to the company's assets in liquidation.

Then related to the provision of a Written Order, this is the authority of the OJK in ordering certain parties to compensate Kresna Life for the actions of these certain parties.

The Issuance of Written Orders is one of the OJK's efforts to protect consumers, because there are indications of actions by certain parties that cause losses

Regarding the decision of the Jakarta State Administrative High Court (PTTUN) on the results of the OJK's appeal against the lawsuit of PT Duta Makmur Sejahtera and Michael Steven, OJK stated that it respects the decision and will take further legal action by filing an appeal to the Supreme Court.