Restructuring Credit Insurance
The Financial Services Authority (OJK) has taken decisive steps to strengthen the stability of Indonesia’s financial sector through the issuance of OJK Regulation (POJK) No. 20 of 2023. This regulation governs insurance products linked to credit or Islamic financing as well as surety products, and represents an important milestone in efforts to reform the credit insurance business line, which has long been susceptible to excessive risk, overlapping coverage, and inadequate long-term management.
One of the most significant provisions in POJK 20/2023 is the limitation of insurance coverage by insurance companies to a maximum of 75%. This means that creditors, namely banks or financing institutions, must bear at least 25% of the coverage value in the event of debtor default. This model transforms the face of credit insurance, which has previously positioned general insurance companies as “absolute risk absorbers” bearing 100% of the risk burden.
Now, the risk-sharing scheme requires banks and financing institutions to be more prudent in assessing and approving credit eligibility for their debtors, whilst strengthening internal risk governance.
In essence, this shift is not merely a matter of risk proportions, but also an effort to change the industry’s mindset so that it no longer views credit insurance as a supplementary loan product, but rather as a reliable protection instrument that contributes meaningfully to maintaining the stability of the national financing system.
However, implementation is not straightforward. In the field, insurance companies still face resistance from partners who have grown accustomed to delegating nearly all protection responsibility to insurance providers.
At this stage, business model adaptation, contract renegotiation, and market education become unavoidable tasks for insurance companies. Moreover, given that credit insurance contributions over the past three years (according to AAUI data) remain one of the mainstays of general insurance premiums at Rp22.3 trillion (2023), Rp17.1 trillion (2024), and Rp19 trillion (2025)—substantial premiums second only to property and motor vehicle lines—many insurance companies will need to reconsider continuing the credit insurance business line under this new model.
Governance Challenges and Industry Readiness
POJK 20/2023 also establishes significant minimum equity requirements of Rp250 billion for general insurance companies and Rp100 billion for Islamic insurance companies. Amidst operational cost pressures, tight markets, and reinsurance support challenges, many insurance companies will likely need to reconsider whether to continue the credit insurance business line under this new pattern.
Additionally, insurance companies must have information systems integrated with the Financial Information Service System (SLIK) to assess debtor eligibility, and must employ credit insurance underwriting specialists with certification and a minimum of three years’ experience. Implementation of these provisions will require considerable investment, both in terms of information technology infrastructure and human resource development. In simpler terms, improved governance in the credit insurance line is what must currently be addressed.
This governance improvement and strengthening is inevitable. With reliable and integrated IT systems, data transparency can be achieved. All parties involved in credit insurance underwriting—from banks and financing institutions, insurance brokers, insurance companies, reinsurance brokers to reinsurance companies—will be able to access the same debtor data in real time.
Reserve practices will also become more precise and accurate, so that the risk of massive claims that has long haunted the industry can be suppressed and controlled. This is the vision of credit insurance governance for the future: governance based on data, transparency, collaboration, and accountability. This practice is expected to reduce massive claims that often become a source of industry liquidity pressure, particularly on the side of insurance as policy underwriters.
According to AAUI data, credit insurance claims over the past three years remain very high, at Rp16.8 trillion (2023), Rp15.6 trillion (2024), and Rp18.2 trillion (2025). This means that loss ratios over the past three years were respectively 75.3% (2023) and 91.2% and 95.7%, which clearly remain a collective challenge for the industry.
Ultimately, companies able to adapt to the new provisions will emerge as more professional, resilient, and market-trusted players. This regulation is truly a call for fundamental improvement, not merely administrative compliance. Governance improvement is a foundation that cannot be compromised in building a healthier and more sustainable credit insurance industry.
Momentum for Change
Although OJK has granted adjustment periods for general insurance companies to implement the credit insurance line, adaptive supervision and open dialogue between the regulator and industry players will also be key to successful implementation of the regulation in the field. Consistent and proportional oversight is essential so that the expected transformation does not merely become formality, but truly brings about real change in the field.
POJK 20/2023 is an important opportunity to repair the foundation of Indonesia’s credit insurance industry. This transformation challenges industry players to abandon instant business practices and begin building protection systems truly based on risk management. Through this, public confidence in credit insurance products can be restored, and this sector can contribute more substantially to strengthening the resilience of the national financing system.
Now, what is needed is the willingness and courage to change, not only on the insurance ecosystem side, but also on the banking and financing institution side.