Dissecting the RPOJK for Unit-Linked Insurance: How Significant are the Changes?

Jakarta, CNBC Indonesia - The Financial Services Authority (OJK) is preparing a new draft regulation regarding Investment-Linked Insurance Products (PAYDI), more commonly known as unit-linked products.

The Draft Regulation of the OJK (RPOJK) introduces several significant changes compared to the previous regime, ranging from core capital requirements, the competence of investment managers, Sub-fund design, asset and liability management, cost structures, Custodian Banks, to investment performance transparency.

These changes are part of the evolution of PAYDI regulations, following the OJK’s previous issuance of SEOJK Number 5/SEOJK.05/2022 regarding Investment-Linked Insurance Products and the subsequent strengthening of insurance product regulations through POJK Number 8 of 2024.

One of the most striking changes in the RPOJK is the core capital requirement for companies marketing PAYDI. In the draft, conventional insurance companies marketing PAYDI are required to have a minimum core capital of IDR 500 billion until 31 December 2028. After that period, the requirement will increase to IDR 1 trillion.

For Sharia insurance companies, the minimum core capital is set at IDR 200 billion until 31 December 2028, increasing to IDR 500 billion thereafter.

The RPOJK also provides a transition period. Companies that have been marketing PAYDI before the regulation is enacted but have not yet met the core capital provisions may continue to market PAYDI until 31 December 2028.

In the draft, the term ‘core capital’ refers to the sum of unlimited tier 1 capital and limited tier 1 capital, as specified in the OJK provisions regarding the solvency calculation of insurance and reinsurance companies.

Consequently, companies wishing to maintain their PAYDI business must ensure their capital capacity is adequate, while smaller-scale companies may face pressure to strengthen capital or adjust their business strategies.

Investment Management Personnel

OJK is also tightening the requirements for PAYDI investment management personnel. Under Article 2 of the RPOJK, companies providing PAYDI must at all times possess actuaries, investment management personnel, adequate information systems, and resources capable of supporting PAYDI management.

For investment managers, the draft requires a valid expertise certificate as an investment management representative, a minimum of three years of experience in a managerial position in the field of investment management, and no dual roles within the insurance company.

Furthermore, investment managers must act as the person in charge of the investment management function and report directly to the Board of Directors.

This implies that the PAYDI investment function is increasingly being positioned as a strategic corporate function, rather than merely a supporting function of the insurance business.

The RPOJK also encourages the improvement of digital infrastructure quality. Adequate information systems must, at a minimum, be able to provide coverage illustrations for each insured party, daily NAV and NAV per unit information for unit-based Sub-funds, daily Cash Value information for each insured party, reports on Cash Value progress, Sub-fund progress reports, as well as information and reports to monitor PAYDI performance.

In other words, companies are required not only to have policy administration systems but also systems that allow for more real-time monitoring of investment developments and Cash Values.

Coverage Period

In terms of product design, PAYDI must have a proportion of protection against death risks and benefits linked to investment results, a specific coverage period, and specific investment strategies.

The RPO_JK also sets a minimum coverage period of five years. This provision is best understood as an affirmation of the character of PAYDI as a medium-to-long-term insurance product.

The RPOJK also provides space for the development of PAYDI investment strategies. One interesting aspect is the opportunity to use gold ETF and/or other commodity ETF instruments in accordance with the provisions in the draft. This development is relevant to the direction of OJK’s capital market policies.

In February 2026, OJK implemented POJK Number 2 of 2026 regarding mutual funds in the form of collective investment contracts whose participation units are traded on the exchange with gold as the underlying asset.

OJK also mentioned the development of gold-based instruments, including gold ETFs, as part of the development of the bullion ecosystem. Thus, the inclusion of gold ETFs in the development of PAYDI regulations aligns with the increasing openness of gold-based investment instruments in the capital market.

Premium Adequacy

Another important change is the strengthening of product governance. The RPOHT directs companies to ensure premium adequacy to pay all costs throughout the insurance period and to build cash value. Evaluation is not only required when the product is first designed but also throughout the product life cycle.

Evaluations must be conducted periodically every year and under certain conditions, including when there are changes to riders, sum assured, premium holidays, or withdrawals.

This approach is vital because the cash value of PAYDI is heavily influenced by the relationship between incoming premiums, costs, protection benefits, and investment returns. Thus, companies are required to ensure that the product structure remains sustainable when the policyholder’s conditions change.

Investment governance is also being strengthened. Investment strategies must be evaluated periodically and can be re-evaluated if significant internal or external changes occur.

Furthermore, the implementation and performance of investments will become part of the oversight of the investment committee with increased frequency. This policy direction shows that OJK intends to ensure that the investment risks of PAYDI do not merely become a burden.