LPS Targets Policy Guarantee Program To Take Effect Before 2028

Illustration: Photo: Doc. ANTARA

JAKARTA - The Deposit Insurance Corporation (LPS) is intensifying the implementation of the Policy Guarantee Program (PPP) which is expected to be activated before 2028.

A member of the Board of Commissioners for the LPS Policy Guarantee Program, Ferdinand D Purba, said that LPS is currently formulating policies for implementing PPP and policies for resolution of insurance companies and sharia insurance companies.

"If prerequisites can be achieved according to the target time, life insurance companies and general insurance need to be prepared to start registering for PPP membership in the third quarter of 2026," he said in a statement to the media, Friday, November 7.

He added that an important factor in the implementation of PPP is the close coordination between LPS and OJK, especially in terms of exchanging insurance data.

LPS targets the exchange of insurance data through the Integrated Information Exchange Facility (SAPIT) between the two institutions to be able to go-live in 2025.

Meanwhile, the PPP design in Indonesia which is currently being designed by LPS certainly refers to best practices and basic principles that apply internationally.

LPS also welcomes the process of changing Law number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK) which is currently taking place and considers it an opportunity to strengthen the PPP design, namely regarding mandates.

LPS assesses that the mandate as Risk Minimizer will increase the effectiveness of the guarantee function and resolution in order to protect policyholders and maintain the stability of the financial sector.

Then, the coverage and maximum value of PPP guarantees need to be limited to minimize the cost of handling insurance companies and funding needs and prevent moral hazard.

"LPS is reviewing the products or business lines that will be guaranteed in PPP, with considerations including product characteristics, loss ratio, and market share," he explained.

Furthermore, regarding the dues, based on the survey of The International Forum of Insurance Guarantee Schemes (IFIGS), the majority of policy guarantor authorities apply the premium system regularly or flatly.

However, LPS is currently considering options for implementing a risk-based premium system in the next few years.

This is a form of encouragement and incentive for insurance companies that implement good and prudent risk management practices.

Later, he continued, one of the key elements in the credible implementation of PPP is the availability of policy data based on policyholders, beneficiaries and participants.

The policy data is defined as comprehensive information that includes details regarding policyholders, beneficiaries and reserves, value of claims and benefits guaranteed by LPS in accordance with PPP provisions.

"The P2SK Law requires insurance companies to submit policy data based on policyholders, beneficiaries, and/or participants to LPS. This data will be the basis for LPS in determining policies that are entitled to guarantee or are payable," he added.

LPS's serious efforts to intensify PPP, one of which was also attended by close collaboration between LPS and insurance associations, where on October 18, 2025, LPS signed a Memorandum of Understanding on Cooperation in the Context of Implementing a Policy Guarantee Program, between LPS and the Indonesian Life Insurance Association (AAJI), the Indonesian General Insurance Association (AUI), the Indonesian Sharia Insurance Association (AASI), and the Indonesian Insurance Management Expert Association (AAMAI).

The scope of cooperation will include the provision of experts, cooperation in organizing educational activities, socialization and publication, education and training cooperation in the insurance sector, and research cooperation related to the insurance industry.

"LPS believes that with the support of the strategic initiative of the industry, the positive impact of PPP activation that occurs in various countries, such as increasing public trust, premium income, and so on, can finally be realized in Indonesia with the existence of PPP organized by LPS later," concluded Ferdinand.