Industry hails Prudential victory<\/p>\n
Zakki P. Hakim, Jakarta<\/p>\n
The Indonesian Insurance Council (DAI) welcomed on Tuesday the
\ndecision of the Supreme Court to annul a bankruptcy ruling
\nagainst insurance firm PT Prudential Indonesia Assurance, saying
\nit would have a positive impact on the industry and encourage new
\ninvestment in the sector.<\/p>\n
\"It is the right decision,\" DAI chairman Hotbonar Sinaga told
\nThe Jakarta Post.<\/p>\n
Hotbonar said the decision would help restore the people's
\ntrust and investor confidence in the domestic insurance industry.<\/p>\n
The Supreme Court overturned the bankruptcy ruling on Monday
\nfollowing an appeal made by Prudential.<\/p>\n
A Supreme Court judge, Mariana, was quoted by the Koran Tempo
\ndaily as saying the case was a contractual dispute between
\nPrudential and its former agent, and should not have been filed
\nwith the commercial court.<\/p>\n
The commercial court declared the local insurance unit of
\nBritish financial group Prudential bankrupt on April 23 after its
\nformer agent Lee Boon Siong accused the company of failing to pay
\nhim a bonus, and demanded compensation of about Rp 366 billion
\n(US$44 million).<\/p>\n
The bankruptcy ruling was made despite the fact that
\nPrudential is a financially strong insurance firm with a risk-
\nbased capital ratio of 255 percent, well above the 100 percent
\nrequired by the Ministry of Finance.<\/p>\n
The bankruptcy ruling had disappointed not only the company
\nbut also many other parties including the Ministry of Finance and
\nthe British government.<\/p>\n
In 2002, the Supreme Court also overturned a similar
\nbankruptcy ruling against a solvent local subsidiary of Canadian
\ninsurance giant Manulife Financial Corp. which found itself
\ninvolved in a local dispute.<\/p>\n
The two cases had further damaged the image of the country's
\nweak legal system, which has been seen as one of the factors
\ndeterring badly needed new investment.<\/p>\n
Meanwhile, Prudential manager T.J. Timotius said the company
\nhad not yet received a formal letter from the Supreme Court on
\nthe ruling.<\/p>\n
Nevertheless, lawyer Amir Syamsuddin praised the Supreme Court
\nfor its decision as he asserted that the case was beyond the
\njurisdiction of the commercial court.<\/p>\n
According to Amir, Lee's case was more of a dispute instead of
\na default, or a company's failure to fulfill its maturing
\nfinancial obligation.<\/p>\n
\"The dispute should had been taken to the district court
\ninstead,\" he told the Post.<\/p>\n
Amir also said that the current amendment of Law No. 4\/1998 on
\nbankruptcy was crucial to avoid a reoccurrence of a similar case
\nin the future.<\/p>\n
The government has proposed that the Ministry of Finance have
\nthe final say in declaring an insurance company bankrupt.<\/p>\n
\"The ministry has full knowledge of the solvency of an
\ninsurance company,\" Hotbonar said, adding that the association
\nwould continue to push lawmakers to quickly complete the
\namendment.<\/p>\n
\"After the Manulife bankruptcy case in 2002, we were worried
\nthat a similar case would emerge,\" he said.<\/p>\n
According to Hotbonar, several foreign investors had planned
\nto enter the local insurance market but they decided to put on
\nhold their investment plans following the Prudential case.<\/p>\n
Hotbonar said there were at least 20 million insurance
\npolicyholders in the country with a total premium value of
\nUS$944.5 million in 2002.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/industry-hails-prudential-victory-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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