PORTALJABAR, BANDUNG CITY - The Financial Services Authority issued four OJK Regulations (POJK) as an effort to strengthen regulations in encouraging the transformation of the insurance and pension fund industries.

The four POJKs issued at the end of 2023 are:

POJK Number 20 of 2023 concerning Insurance Products linked to Sharia Credit or Financing, and Sharia Suretyship or Suretyship Products;

POJK Number 23 of 2023 concerning Business and Institutional Licensing of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies and Sharia Reinsurance Companies;

POJK Number 24 of 2023 concerning Business and Institutional Licensing of Insurance Broker Companies, Reinsurance Broker Companies and Insurance Loss Appraisal Companies;

and POJK Number 27 of 2023 concerning the Implementation of Pension Fund Businesses.

Head of the OJK Literacy, Financial Inclusion and Communication Department, Aman Santosa, said that the issuance of the four POJKs was aimed at accelerating the transformation process in the insurance and pension funds sector to become an industrial sector that is healthy, strong and able to grow sustainably, so that it can make more contributions. significantly supports national economic growth.

"In the insurance industry sector, 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 a potential economic crisis which could hamper the optimal growth and development of players in the insurance industry sector," he said.

According to Aman, one of the main substances regulated in POJK Number 23 of 2023 and POJK Number 24 of 2023 is adjusting the provisions for minimum paid-up capital for new business actors (new entry) as well as increasing the minimum equity for business actors who have obtained a business license.

"Based on developments that occurred in the crisis conditions resulting from the previous COVID-19 pandemic, one of the main issues that disrupted the level of financial health of insurance companies was unprudent practices in managing insurance product portfolios that were linked to credit or sharia financing," he said.

According to Aman, the issuance of POJK Number 20 of 2023 aims to encourage insurance companies to implement more optimal mitigation mechanisms for the risk exposure borne by insurance companies from marketing this type of insurance product.

"Some of the main substances contained in the provisions include, among other things, regulating the provision of insurance companies' access to credit/financing distribution data, sharing of risk between insurance companies and banks/financing institutions, and maximum limits on credit insurance premiums allocated as commissions or acquisition costs, " he explained.

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

The POJK in question is an adjustment to several previously existing POJKs, regarding pension fund funding, pension fund investment, as well as POJK regarding contributions, pension benefits and other benefits.

From the investment side, the POJK contains provisions that aim to encourage strengthening the governance of pension fund investments so that they are carried out more prudently, through competency requirements for pension fund administrators, as well as additional requirements regarding the placement of investments that tend to be high risk, including: Limited Participation Mutual Funds ( RDPT), Infrastructure Investment Fund (DINFRA), Medium-Term Notes (MTN), and Repurchase Agreement (REPO).

In terms of payment of pension benefits, the POJK also contains provisions regarding regular payment of pension benefits which can be paid directly by pension funds, or by purchasing an annuity product that provides payment of pension benefits for a minimum of 10 years. For 2024, one of the OJK's priority programs for the insurance industry sector is improving regulations related to insurance products and insurance product channels.

It is urgent to improve the regulation of insurance products and marketing channels so that they can keep up with the varied and dynamic development of insurance product innovation, while still strengthening prudential aspects and market behavior.

The main improvements in these regulations include, among other things, simplifying the mechanism for approving and recording insurance products to suit the complexity and level of risk of insurance products, and simultaneously encouraging the strengthening of internal functions of insurance companies, especially in terms of developing and monitoring insurance products.

Apart from that, 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. These structuring efforts include, among other things, preparing a road map for the guarantee industry, and strengthening the regulatory framework related to licensing and business operations in this industrial sector.