To increase the strength of insurance companies in Indonesia, the Financial Services Authority (OJK) plans to increase the minimum capital of insurance companies.
OJK has not yet to decide on the new amount of minimum capital. Technical details are still being studied, reported Kontan. The current minimum capital of IDR150bn ($11m) is considered inadequate to accommodate risk.
OJK chairman Wimboh Santoso said that the capital increase will be applied immediately to newcomers to the industry while it will be increased gradually for existing insurers.
The proposed change in minimum capital is part reforms aimed at non-bank financial industry supervision reform (IKNB). Mr Wimboh said that the reform, to be undertaken over the next two years, will be accelerated and focus on: regulatory and supervisory reforms, including enhancing prudential aspects; governance; risk management as well as increasing the effectiveness of risk-based supervision.
A senior official of the OJK Oversight Department, Mr Ahmad Nasrullah, said that there are investment risks in the insurance industry that need to be taken into account.
He explained that the OJK will hold discussions with insurance associations soon about the proposed capital increase.