The Ministry of State-Owned Enterprises (BUMN) has said that the imminent establishment of a state owned insurance holding company, expected at the end of this month, would not include financially stricken Asuransi Jiwasraya as a subsidiary in the group.
BUMN deputy minister Mr Kartika Wirdjoatmojo clarified yesterday that the insurance holding company would transform the state owned insurance sector as a whole, and not merely rescue Asuransi Jiwasraya.
The insurance group will be led by securities firm Bahana Pembinaan Usaha Indonesia and its formation is almost finalised, he said. The group members will include Asuransi Kredit Indonesia (Askrindo), Jasa Raharja, Perum Jamkrindo (Jamkrindo) and Asuransi Jasa Indonesia (Jasindo).
Mr Kartika said that the group would be tapped gradually to rescue Asuransi Jiwasraya policyholders.He said that the structure of the holding company was discussed with the Working Committee of the House of Representatives.
According to a report by The Jakarta Post, the BUMN Ministry still needs to discuss plans for Asuransi Jiwasraya with the Finance Ministry and the Financial Services Authority (OJK).
“The holding company is not just for saving Jiwasraya, but to strengthen the insurance industry’s transformation starting from its finance, risk management, investment management and product management to its actuarial aspects so we won’t repeat the same mistakes as Jiwasraya did with its JS Saving Plan product,” he told the press.Previously, BUMN Minister Erick Thohir stated that the establishment of the insurance holding company would be one of the government’s steps to improve Asuransi Jiwasraya’s finances. From the holding company, he said that he expected cashflows for Jiwasraya to reach at least IDR1.5tn ($109m) a year.
Other cashflows are expected to be channelled from Jiwasraya Putra, a new life subsidiary of Asuransi Jiwasraya. The government plans to sell stakes in Jiwasraya Putra to raise funds to cover a portion of Asuransi Jiwasraya’s liabilities to policyholders.
Four state-owned firms, engaged separately in pawnshop, telecom, rail and banking activities, have committed to cooperating with Jiwasraya Putra to take stakes in the new life insurer and to help it sell insurance products to their customers. Asuransi Jiwasraya will hold a majority stake.
The question hovering around the new company is when it would start operations.
Industry observers say that Jiwasraya Putra should not be seen as a quick solution to Asuransi Jiwasraya’s financial problems which are the result of mismanagement and poor investment decisions. They point out that what is needed in the short term is fresh funds.