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The Indonesian government has no intention to bail out a troubled state-owned life insurer, according to the finance ministry. Instead, it will probe the firm for possible fraud.
Asuransi Jiwasraya, which has been in financial trouble since late 2018, needs over US$2 billion in additional capital to return to operating shape, according to a Reuters report. Furthermore, the report added that the company’s asset investments, which included risky cheap stocks, did not pan out, leading to a delay in paying out claims.
The insurer, which is now being watched closely by the Financial Services Authority (OJK), needs a IDR32.9 trillion (US$2.33 billion) bailout to reach the minimum risk-based capital ratio of 120%, the company told the Indonesian parliament.
“As of now, the state-owned enterprises (SOE) ministry is leading the effort to resolve the problems of Jiwasraya. We at the finance ministry fully support this if changes in capital structure and or in ownership are needed,” finance ministry spokesman Nufransa Wira Sakti told Reuters.
Furthermore, the SOE ministry has requested the attorney general’s office to launch an investigation to see if there was any fraudulent activity in the management of Jiwasraya.
Hexana Tri Sasongko, president and director of Jiwasraya, said in a statement that the company will respect the legal process, and asked for policyholders’ patience as it works to overcome its financial difficulties.
Aside from Jiwasraya, another major Indonesian insurer, Bumiputera, also ran into financial trouble. The government tried to bail out Bumiputera, but it was unable to complete a deal, leaving the company’s fate unclear. Both Jiwasraya and Bumiputera were formed over a hundred years ago, during the Dutch colonial period. Combined, the insurers have millions of policyholders.
