2018年-IMF国际货币组织全球_Indonesia_Financial_Sector_Assessment_Program_63页_1mb

Summary of Indonesia's Insurance Sector Assessment

Core Content

This document presents a detailed assessment of the observance of the Insurance Core Principles (ICPs) in Indonesia, conducted as part of the 2016–17 Financial Sector Assessment Program (FSAP) by the International Monetary Fund (IMF) and the World Bank. The assessment was carried out by Nobuyasu Sugimoto and Anthony Randle between September 21 and October 4, 2016, and it evaluates the regulatory and supervisory framework of the insurance sector in the context of the ICPs, which were issued by the International Association of Insurance Supervisors (IAIS) in 2011 and revised in 2015.

The report highlights the rapid growth of the insurance sector, its increasing role in the financial system, and the challenges it faces in terms of regulatory oversight, solvency, and consumer protection. It also outlines the legal and institutional framework of the insurance sector and provides recommendations for improving the effectiveness of supervision.

Main Points

1. Insurance Sector Growth and Structure

• The insurance sector in Indonesia has been growing rapidly, at an average of 20% per year over the last five years.
• The sector is dominated by life insurance, which accounts for 42% of total assets, followed by social insurers (28%), general and reinsurers (16%), and compulsory insurers (14%).
• Unit-linked products are the largest source of premiums in life insurance, accounting for 46% of total life insurance premiums.
• The insurance sector is largely composed of non-life products such as property and motor insurance, which together account for 58% of non-life insurance premiums.

2. Regulatory and Supervisory Framework

• The Financial Services Authority (OJK) is the primary regulator of the insurance sector, established in 2011 as an independent and integrated financial regulator.
• OJK has implemented significant regulatory reforms since the new Insurance Law became effective in October 2014.
• These reforms include the introduction of risk-based supervision, enhanced corporate governance and risk management requirements, and the development of a more comprehensive regulatory framework.

3. Observance of ICPs

• The assessment found that while there has been progress, there are still significant shortfalls in the observance of ICPs.
• Key issues include:
  • Lack of effective group regulation and supervision, leading to potential double gearing and capital misallocation.
  • Insufficient legal clarity regarding the protection of policyholders and the role of the supervisor.
  • The need for a more robust and transparent resolution framework to address insurer failures.
  • Inadequate consideration of liability valuation in assessing the industry's profitability.
  • Insufficient thematic reviews for risk-based capital (RBC) and solvency requirements.

4. Key Risks and Vulnerabilities

• The insurance sector is vulnerable to various risks, including:
  • Catastrophic risks due to domestic reinsurance concentration and natural disasters.
  • Interconnectedness risks with the banking sector through conglomerates and intra-group transactions.
  • Market volatility affecting the sector's solvency and profitability.
  • Low interest rates impacting investment returns and the performance of life insurance products.
• The sector has experienced several insurer failures over the past decade, with some large insurers showing declining solvency ratios.

5. Case Study: Failure of BAJ (PT Assuransi Jiwa Bumi Asih Jaya)

• BAJ, a medium-sized life insurance company, faced solvency issues starting in 2007 and eventually failed in 2013.
• OJK revoked its license and sought bankruptcy, but the process was delayed due to legal challenges.
• The Supreme Court ultimately supported OJK's actions in 2015, and a liquidator was appointed.
• Policyholders have not yet received any payments, and the company is still in liquidation.
• The case led to legislative changes, including the establishment of a policyholder protection fund.

6. Recommendations

• OJK should improve the effectiveness of supervision by conducting thematic reviews of reserving practices.
• Enhance corporate governance and risk management through clearer guidance and closer dialogue with the industry.
• Strengthen legal protection for OJK and its staff to ensure operational independence.
• Introduce a framework for capital add-ons to address catastrophic risks.
• Increase the expertise of OJK's human resources, particularly in actuarial matters.
• Revise the "three strikes" approach to ensure timely regulatory actions.
• Enhance macroprudential surveillance by integrating conglomerate analysis to identify contagion risks.
• Focus more on the regulation of insurance intermediaries and market conduct.

Key Information

• Insurance Sector Growth: Rapid growth at an average of 20% per year since 2013.
• Conglomerates: About half of the insurers belong to financial conglomerates, with significant interconnectedness between banks and insurance companies.
• Regulatory Reforms: OJK has introduced risk-based supervision, enhanced corporate governance, and improved fit-and-proper requirements.
• Solvency and Capital: The average solvency ratio for the industry is well above the minimum, but some insurers, including large groups, are showing declining ratios.
• Market Conduct: OJK has made efforts to ensure fair and efficient claims payment and complaints handling.
• Legal and Institutional Reforms: The 2016 PPKSK Law established the Financial System Stability Committee (KSSK), enhancing crisis prevention and resolution capabilities.
• Consumer Protection: OJK has developed mechanisms for handling complaints and disputes, but a national policyholder protection fund is still pending.

Conclusion

The Indonesian insurance sector has made significant strides in regulatory and supervisory reforms since the establishment of OJK and the new Insurance Law. However, challenges remain in ensuring effective supervision, particularly in the context of conglomerates and intra-group transactions. The sector is exposed to various risks, including catastrophic and market-related risks, which require more robust regulatory frameworks and legal clarity. The mission recommends further improvements in supervision, legal protection, and consumer safeguards to ensure the sector's stability and sustainability.