Government plans to close nine insurance companies
Dadan Wijaksana, The Jakarta Post, Jakarta
The Ministry of Finance is set to close nine ailing insurance companies before the end of the year as part of its efforts to clean up the country's messy financial industry.
The director for insurance at the ministry, Firdaus Jaelani, said on Tuesday that the nine firms had so far failed to improve their financial condition, therefore liquidation would be unavoidable.
"Out of that total, three firms voluntarily returned their licenses claiming they would no longer pursue the insurance business," Firdaus told The Jakarta Post.
The remaining six firms, Firdaus said, have been suspended and are banned from seeking new policyholders because of their poor financial state.
The six firms are: PT Sakarukma Sinukarta, PT Asuransi Jiwa Buana Putra, PT Asuransi Jiwa Namura Tata Life, PT Nasaba Life, PT Asuransi Jiwa Berkah Harda Sentosa and PT Pura Nusantara.
Firdaus did not say how many policyholders would lose their investments.
Unlike bank depositors, the government does not give a guarantee to insurance policyholders.
Elsewhere, Firdaus said that the planned closure of weak insurance firms was aimed at cleaning up the industry before it was put under the supervision of the Financial Sector Authority Institution (FSAI).
"We want the FSAI to perform well. So financial institutions, including insurance firms to be supervised by the institution, must be financially healthy," he said.
The FSAI is an institution that will be in charge of supervising the country's financial industries, and it is expected to come into effect in early 2004.
FSAI will take over the supervision of industries within the financial sector, including the banking sector, which is now supervised by the central bank.
It will also oversee other service-based financial industries, such as insurance, pension funds, securities and other institutions or corporations managing public funds.
The establishment of the institution was based on the need to anticipate increasing challenges in financial service industries, which face more complex problems from time to time.
In a related development, a survey conducted by the monthly magazine Infobank disclosed that dozens of the country's insurers were in serious danger of failing to meet the capital requirement.
It said last week that 33 insurers would find it difficult to fulfill the government's requirement of insurance firms having a minimum 75 percent risk-based capital (RBC) by the end of the year.
"This would force several of them to consider the option of a merger and acquisition or else risk liquidation," it said, adding that 19 were classified as life insurers.