The Ministry of State Owned Enterprises (BUMN) will form a holding company to rescue financially stricken Asuransi Jiwasraya,the oldest life insurance company in Indonesia.
The holding company, which will be engaged in insurance and pension fund businesses, will receive an injection of funds of IDR1.5tn ($108m) to IDR2tn, SOE Minister Erick Thohir said.Jiwasraya, a160-year-old state-owned insurance company, failed to pay holders of maturing policies under the JS Saving Plan, a unit-linked insurance product. It first announced in October 2018 of its inability to honour matured policies that at that time reached IDR802bn in value. The insurance company’s total debt is estimated at IDR49.6tn.
Jiwasraya’s president director, Mr Hexana Tri Sasongko who was appointed to the post in November 2018 after news broke of Jiwasraya’s financial difficulties, said that the insurer was affected by mispricing of the JS Saving Plan, which had been distributed through banks. The insurer promised high returns to policyholders when the market produced lower investment returns.
In addition, the company engaged in reckless investment activities. Under Financial Services Authority (OJK) rules, 30% of premiums must be invested in government securities. However, Jiwasraya placed most of the funds in mutual funds and stocks, in a bid to obtain higher returns.