Indonesia has announced an increase in the minimum equity requirement for insurance companies, setting the new threshold at 250 billion rupiah (US$16.06 million) by 2026.
A report from Reuters noted that this represents a 67% hike from the previous minimum level, as stated by the country's financial regulator. The move comes in response to recent policy defaults experienced by the sector.
Previously, insurance firms in Indonesia were required to have a minimum paid-up capital of 150 billion rupiah. In a significant policy shift, the Financial Services Authority (OJK) plans to further elevate this minimum requirement, proposing a range between 500 billion rupiah and 1 trillion rupiah by 2028.
The OJK said that limited capital capacity has been a primary concern, potentially affecting the resilience and stability of the insurance sector, especially in the face of potential economic crises.
This regulatory adjustment follows financial challenges faced by several insurance firms in Indonesia, including Asuransi Jiwasraya, a state-owned insurer, Asabri, which provides insurance for military officers, and Bumiputera, one of the country's oldest insurers. These firms have struggled with a wave of unpaid claims, prompting a reassessment of capital requirements.
Additionally, the new regulations stipulate that investors looking to start a new insurance business must invest a minimum of 1 trillion rupiah.
The OJK has also revised capital requirements for reinsurance firms. From 2026, the minimum capital for these firms will be raised to 500 billion rupiah, with a further increase to 2 trillion rupiah planned for the end of 2028. This is a significant jump from the previous requirement of 300 billion rupiah, reflecting the regulator's effort to strengthen the financial base of the insurance and reinsurance sectors in Indonesia.
Elsewhere in the country, the OJK is also promoting the introduction of mandated insurance policies for the public.
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