Government urges insurance mergers<\/p>\n
JAKARTA (JP): The government has called on domestic insurance
\nfirms to merge to increase their capital and strengthen their
\ninternational competitiveness.<\/p>\n
The Ministry of Finance's insurance director, Suyoto, said
\nyesterday Indonesian insurance companies should win more foreign
\ninsurance deals to help reduce the insurance service deficit.<\/p>\n
Suyoto said mergers were the best way to improve Indonesia's
\ninsurance capacity and competitiveness.<\/p>\n
\"Mergers would not only increase their capital, but also
\nimprove their efficiency,\" Suyoto said during a break at a
\nworkshop on mergers in the insurance industry.<\/p>\n
But he said the government needed to revise merger regulations
\nto encourage mergers.<\/p>\n
The government was preparing a new ruling on insurance
\nindustry mergers, he said.<\/p>\n
The ruling is being drafted together with a regulation
\nrequiring insurance firms to increase their capital so they can
\nunderwrite large projects and reduce Indonesia's current account
\ndeficit.<\/p>\n
Insurance and shipping services account for a big portion of
\nIndonesia's deficit.<\/p>\n
The current account deficit is projected to rise to more than
\nUS$8 billion, or 4 percent of gross domestic product, this fiscal
\nyear.<\/p>\n
Sources said the draft regulation would increase the minimum
\ncapital requirements for non-life insurance firms from Rp 3
\nbillion (US$1.23 million) to about Rp 15 billion.<\/p>\n
Yesterday's workshop addressed the challenges insurance firms
\nmight face when merging.<\/p>\n
The one-day workshop was organized by the Insurance Council of
\nIndonesia and was attended by 26 people from law firms, stock
\nexchanges, accounting firms and the tax office.<\/p>\n
The workshop's conclusion would be submitted to the government
\nas input for the new regulation, Suyoto said.<\/p>\n
The Insurance Council of Indonesia's chairman, B. Munir
\nSjamsoeddin, said many insurance companies avoided merging
\nbecause they feared losing ownership or management control.<\/p>\n
Complex technical and administrative processes also
\ndiscouraged mergers, he said.<\/p>\n
A merger requires asset reevaluation which usually results in
\nextra income tax on revalued assets, Munir said.<\/p>\n
\"The additional tax does not improve the liquidity of the
\ncompanies,\" he said.<\/p>\n
Publicly listed insurance firms also faced difficulties when
\nmerging, he said.<\/p>\n
He cited a Capital Market Supervisory Board decree requiring
\ninsurance companies to give priority to existing shareholders
\nevery time they offered new shares. (das)<\/p>",
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