Capital increase no problem for insurance firms

Capital increase no problem for insurance firms

JAKARTA (JP): An increase in paid-up capital in the insurance
industry will not pose problems for local insurance firms, an
insurance executive said yesterday.

Life insurance firm Dharmala Manulife's vice president, Adi
Purnomo, said he was optimistic that local insurance firms would
be able to meet the planned rise in capital requirement.

"I don't think the planned new capital requirement will force
smaller local insurance firms to close down, as predicted by
people. I am sure they will be able to find an alternative to
raise their paid-up capital," Adi said.

The government plans to raise the capital requirement of
insurance companies in order to strengthen their underwriting
capacity. The minimum paid-up capital for non-life insurance
companies will, for example, be raised to Rp 15 billion (US$6.14
million) from the current Rp 3 billion.

Adi said small insurance companies would more likely merge
with local firms or foreign insurance firms to enable them to
meet the new capital requirement.

However, the Insurance Council of Indonesia's chairman, B.
Munir Sjamsoeddin, said earlier that some local insurance firms
were opposed to merging because they feared losing ownership or
management control.

Complex technical and administration processes also
discouraged mergers, Munir said.

Adi said these challenges were relatively minor problems.

"Merging is not as complicated as it sounds, if there is a
problem, it probably would be nontechnical," he said.

It is unlikely the government will impose the new regulation
right away, it will probably give companies time to raise
capital, he said.

Insurance firms will be given a grace period -- for example
for five years -- before they have to come up with the required
capital, he said.

Adi said Dharmala's paid-up capital totaled Rp 4.5 billion,
with equity reaching Rp 55.4 billion.

Adi was speaking after the signing of a cooperation agreement
between Dharmala and Bank Central Asia's (BCA) Master and Visa
cards yesterday.

Under the agreement, Dharmala's clients can pay their premiums
by BCA Mastercard or Visa credit card.

This is the second cooperation between the two companies after
the first one in 1995, which allowed Dharmala's clients to pay
premiums using BCA ATM cards.

Adi said the company aimed at improving its services to
clients, of which 70 percent were holders of BCA Visa or
Mastercard.

Dharmala, which claims to cover 9 percent of the country's
life insurance market, is 51 percent owned by The Manufacturers
Life Insurance Company of Canada, 40 percent by Dharmala Group,
and 9 percent by the International Finance Corporation.

The company recorded Rp 20.5 billion in net profit last year,
up from Rp 17.8 billion in 1995.

Its assets rose 52.7 percent last year to Rp 375 billion and
its premiums grew 27.53 percent to Rp 167.7 billion.

Its underwriting value rose 23.4 percent last year to Rp 7.9
trillion.

The company expects to collect Rp 53 billion in new premiums
this year, up 30 percent from Rp 39.5 billion last year. (das)