JAKARTA - Indonesia Financial Group (IFG) sees a plan to increase insurance capital by the Financial Services Authority (OJK) aimed at encouraging the company's business to grow bigger.
IFG President Director Hexana Tri Sasongko said companies must have a large equity to withstand risks (risk retention). Meanwhile, insurance companies have an economic scale similar to the principle of mutual cooperation, which is that the larger the population that receives insurance protection, the less likely it is to fail.
"That's why it needs strengthening in capital, so that the scale doesn't play on a small scale, but plays on a larger scale so that the risk retention becomes bigger," said Hexana during a press conference in Jakarta, Tuesday.
In addition, continued Hexana, insurance companies in Indonesia are faced with the risk of a deficit in importing insurance services which reached US$1.9 billion due to the lack of capital. This condition makes IFG believe the domestic insurance industry needs strengthening capital.
Hexana added, although currently the capital of IFG subsidiaries is relatively large, the IFG will also apply capital strengthening to subsidiaries as conveyed by the OJK.
It is known, OJK plans to tighten the minimum capital provisions of insurance and reinsurance companies, both conventional and sharia.
The plan departs from the capital regulations stipulated in OJK Regulation Number 67 of 2016 which is considered still low when compared to the risk of the insurance and reinsurance business.
In detail, the minimum capital of conventional insurance companies is planned to be set to IDR 500 billion in 2026. Then, the minimum capital will be increased to IDR 1 trillion in 2028.
For the minimum capital of conventional reinsurance companies, it is planned to be increased from Rp200 billion to Rp1 trillion in 2026 and Rp2 trillion in 2028.
Meanwhile, the minimum capital of Islamic insurance companies will be increased from IDR 50 billion to IDR 250 billion in 2026 and IDR 500 billion in 2028.
Finally, the minimum capital of Islamic reinsurance companies will be pushed from IDR 100 billion to IDR 500 billion in 2026 and IDR 1 trillion in 2028.
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