Insurers record growth

JAKARTA (JP): In spite of the recession, the life insurance industry in Indonesia grew by 20 percent in 1998 when measured by its premium income, down from 22 percent in 1997, a finance ministry official said on Thursday.

Firdaus Djaelani of the Insurance Directorate also disclosed the plan to establish a guarantee fund scheme to protect policy holders against insolvent insurance companies.

He likened this role to that of the government guarantee of all bank deposits against bank closures but said that the fund would be privately managed eventually.

Firdaus was speaking to reporters at the inauguration of a sales and service center of PT Asuransi Jiwa Bumiputera John Hancock.

Asked about the government's plan to better secure policy holders by enacting Risk-Based Capital (RBC), he said the enactment of RBC should be gradual so as not to impose too stringent a standard on domestic insurance companies.

RBC is a strict measurement of an insurance company's solvency relative to its investment risk.

"RBC will be 30 to 40 percent effective at the most for the first four years in order for companies to adapt to it before they can meet the criteria of 100 percent," Firdaus said.

The new Bumiputera John Hancock facility underscores the confidence of the Indonesian-American joint venture company in prospects in Indonesia. The company boasted a 40 percent increase in its premium income to Rp 25 billion in 1998.

A branch manager present at the launching said that life insurance has become an alternative investment instrument to bank deposits at a time of uncertainties about the safety of the latter. (02)