In December 2023, Indonesia's Financial Services Authority (OJK) enacted Regulation No. 23 of 2023 on Business and Institutional Licensing for Insurance Companies, Sharia Insurance Companies, Reinsurance Companies, and Sharia Reinsurance Companies ("Regulation 23/2023"), reshaping the insurance sector in alignment with the objectives set forth in recent financial laws and regulations. This comprehensive regulation introduces increased minimum capital requirements across all categories of insurance and reinsurance companies, driving potential consolidation within the industry. Notably, the regulation permits strategic measures similar to those in the banking sector, allowing insurance companies to pursue mergers, acquisitions, or the formation of business groups to meet these capital demands. With only a fraction of insurance companies currently meeting the heightened equity thresholds, the prospect of consolidation emerges as a compelling solution, potentially fostering a more robust and financially resilient insurance landscape in Indonesia.
Regulation 23/2023 also introduces new foreign ownership requirements, maintaining the 80% limit while imposing additional criteria on foreign shareholders. Examples of these criteria include engagement in similar businesses, maintaining minimum equity, and attaining a minimum rating from internationally recognised agencies. Moreover, the regulation introduces various provisions aimed at enhancing corporate governance, risk management, and regulatory oversight within the insurance sector, including prohibitions on concurrent directorship positions, certification requirements for management-level officers, registration of insurance agents, and collaboration opportunities among companies under common ownership structures. This proactive regulatory approach sets the stage for transformative changes within Indonesia's insurance industry, fostering collaboration, innovation, and resilience to navigate the evolving financial landscape effectively.
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