Insurance firms must boost capital
Insurance firms must boost capital
Tony Hotland, Jakarta
The government would do well if it took immediate action against
insurance companies with risk-based capital (RBC) below the
minimum requirement as they had been hurting the industry as a
whole, according to an industry observer.
The latest data by InfoBank, a monthly financial magazine,
shows that there are 32 insurance companies with an RBC level
below the limit of 120 percent as stipulated by the Ministry of
Finance.
"The government seems reluctant to address the issue and is
unable to find an exit policy for these ailing companies," the
director of Infobank's research division, Eko B. Supriyanto, said
in a press conference on Monday.
He said that the government could either close down the firms,
push them to merge with healthier companies or invite new
investors.
RBC measures the minimum amount of capital that an insurance
firm needs to support its overall business operations. The
higher the RBC level, the healthier the insurance company.
Eko explained that if the problem of lack of capital in the
insurance firms was not properly addressed, it could affect the
confidence that policy holders and investors had in the industry.
There are some 163 insurance companies registered with the
Ministry of Finance.
The 32 ailing insurance companies were added to another five
companies which for sometime have been under the supervision of
the Ministry of Finance as their RBC level has gone down below
100 percent. (The government revised upward the RBC level to 120
percent earlier this year).
The five companies have been given time -- until September
this year -- to increase their RBC level. They are Asuransi
Republik, Asuransi Tugu Indo, Asuransi Raya, Pasaraya General
Insurance and Asuransi Dharma Bangsa.
Their business volume will have strict limits put on it if
they fail to meet the new RBC limit, including a ban on selling
any new policies.
There are 13 companies that have had such limits put on them
in the last two years, including PT Asuransi BHS Life, PT
Asuransi Ganesha Danamas, PT Koperasi Asuransi Jiwa Indonesia, PT
Nabasa Life Insurance and PT Asuransi Namura Life.
Their fate remains uncertain.
A senior advisor to the Singapore-based Watson Wyatt Insurance
Consulting Pte Ltd, Angger P. Yuwono, said that a country ideally
had only a maximum of 15 insurance companies to ensure fair
competition.
"Currently, the companies with large premiums are doing well
and the small ones are left with the possibility of breaking
down, which can cause adverse impacts for policy holders," Angger
said.
Eko suggested that the government set up an insurance
landscape that is similar to the Indonesian Banking Landscape to
put the industry in order.
"Based on assets and possessed premiums, it should be designed
so that companies operate on a national scale and within a
certain insurance sector, with regulations on expansion," he
said.
He added that the government needed to regulate a mandatory
merger, with incentives, for companies with RBC levels below the
required standard.