OJK: Unhealthy insurers will not immediately enter policy guarantee programme
The Financial Services Authority (OJK) has stated that insurance companies which have not met the required level of financial health will not be admitted directly into the Policy Guarantee Programme (PPP) when the scheme takes effect by 2028 at the latest.
Ogi Prastomiyono, Chief Executive of Insurance, Guarantee and Pension Fund Supervision at OJK, said that under the scheme currently being prepared, insurance companies must meet a number of requirements to participate in the policy guarantee programme. One of the key indicators is a solvency level or Risk Based Capital (RBC) of at least 120 percent, in accordance with OJK regulations.
“If they do not meet the requirements when the policy guarantee takes effect, it means they must be rehabilitated outside the system, because it could have an impact on the others. So they are rehabilitated outside the policy guarantee programme, in this case under the OJK,” Ogi said during a Focus Group Discussion with media editors in Lombok, West Nusa Tenggara (NTB), on Thursday (27/8).
This is considered important to prevent unhealthy companies from entering the guarantee scheme. If a troubled company were admitted directly into the policy guarantee programme, there would be a risk of moral hazard as well as an impact on other insurance companies.
Ogi said there are currently eight insurance companies under special supervision. The condition of these companies is one of the concerns in preparing for the implementation of the policy guarantee programme.
The Policy Guarantee Programme is targeted to take effect in 2028, as mandated by the Financial Sector Development and Strengthening Law (UU P2SK). The scheme will be managed by the Indonesia Deposit Insurance Corporation (LPS), with mechanisms including the payment of initial contributions and periodic contributions from participating insurance companies.
In the latest discussions, Ogi said the guaranteed benefit value under the programme is estimated to reach a maximum of Rp500 million per policy. This figure is said to cover more than 80 percent of policyholders.
“So if bank deposit insurance is Rp2 billion, our policy guarantee is Rp500 million,” he said.
The guarantee coverage does not include all insurance products or benefits. The investment portion of unit-linked products, suretyship, social insurance, and credit insurance are not included in the guaranteed coverage, according to Ogi.
The policy guarantee programme is targeted to be activated no later than 2028, as mandated by the Financial Sector Development and Strengthening Law (UU P2SK) through Law Number 4 of 2026.
Under the scheme, based on Ogi’s presentation, insurance companies participating in the Policy Guarantee Programme are still required to establish a Guarantee Fund. This fund serves as one of the instruments in the implementation of the guarantee programme to provide protection to policyholders if an insurance company experiences problems that prevent it from meeting its obligations.
OJK has also opened the possibility for the programme to be activated earlier than the 2028 deadline, as part of strengthening policyholder protection while maintaining stability in the insurance industry.