Indonesia Financial Services Authority Brahma Setyowibowo

Transcription

1 Indonesia Financial Services Authority Brahma Setyowibowo Any views, expressed in this presentation are those of the author, and are not the official views of the Indonesian FSA 1

2 Scheme of Presentation Chapter 1 This chapter will elaborate the OJK s organization structure, insurance market, and insurance supervisory framework in Indonesia. Chapter 2 This chapter will explain briefly my area of interest which I would like to learn during the GLOPAC Fellowship Program. 2

3 CHAPTER 1 3

4 Indonesia s Macro Economics Nominal GDP GDP Per Capita Inflation Rate Population Real GDP Growth Source: AMBest Country Risk Report

5 What is OJK? After long years of discussions, the OJK Law was enacted in November This enactment has born a new era in the regulation and supervision of Indonesia s financial sector. Supervisory roles on financial sector, previously conducted by Bank Indonesia and Ministry of Finance, are to be held by OJK. OJK establishment was triggered by some features developing in financial sector. Business conglomeration Globalization & IT development Problems in cross-sectoral coordination Cross-sectoral interconnectedness Regulatory arbitrage Mandate of BI Law (1999) Need for integrated regulation & supervision Institutional reform in regulating & supervising financial sector OJK has three objectives as stipulated in the Law Assuring that activities in the financial services sector are conducted in an organized, fair, transparent, and accountable manner Creating a sustainable and stable financial services sector Protecting the interests of consumers and the public The transfers of supervisory roles from predecessor institutions were conducted gradually November The enactment of OJK Law 31 December Transfer of Capital Market & NBFIs supervision from Ministry of Finance 31 December Transfer of Banking supervision from Bank Indonesia 1 January Supervision on Social Security Agency (BPJS) for Health 1 January Supervision on Social Security Agency (BPJS) for Workers Supervision on micro-finance institutions 5

6 Governance and Financing OJK is led by a Board of Commissioners consisting of nine members, including two ex-officio members from Bank Indonesia and Ministry of Finance. The OJK Law has stipulated that OJK s financing would be from the State Budget and/or levies from players in the financial sector. Board of Commissioners (BOC) of OJK The levies are to be collected by OJK by adhering to three principles. Chairman Member (Chief Executive, Banking Supervision) Member (Chief Executive, Capital Market Supervision) Member (Chief Executive, NBFI Supervision) BOC of OJK Collective and collegial Equal voting rights Enacting regulations Monitoring Chief Executive Vice-Chairman Ex-Officio Member (BI) Ex-Officio Member (MoF) Flexibility Value-Added Creation Tariffs imposed should not unnecessarily burden players in the financial sector, or disrupt the soundness of individual financial institutions. Charges will be paid back to industry in the form of more effective supervision and regulation, higher financial literacy and consumer protection, and more developed markets. Member (Consumer Education and Protection) Member (Chairman of the Audit Council) Accountability & Transparency OJK implements a double-edged control mechanism: internally through internal audits and externally through Audit Board & House of Representatives. 6

7 Organization Structure of NBFI Supervisor Chief Executive of NBFI Supervisor Deputy Commissioner of NBFI Supervisor I Deputy Commissioner of NBFI Supervisor II NBFI Supervision Department 1A NBFI Supervision Department 1B NBFI Supervision Department 2A NBFI Supervision Department 2B Institutional & Product of NBFI Directorate NBFI Statistics & Information Directorate Insurance and & Health Social Security Board Supervision Directorate Financing Institution Supervision Directorate NBFI Regulation, Research & Development Directorate NBFI Supporting Services Directorate Pension Fund & Social Security Employment Agency Supervision Directorate Specialized Financial Services Institution Supervision Directorate Microfinance Institution Supervision Directorate Sharia NBFI Directorate 7

8 KSSK Programs Crisis Management Protocol Coordination : Crisis Management Group Ministry of Finance Fiscal Policy & Debt Management Crisis management Fiscal cost for crisis resolution Bank Indonesia Monetary & Macro Prudential Policy, Payment System Lender of last resort Indonesia Financial Services Authority Regulation & Supervision Micro prudential & market conduct Consumer protection Indonesia Deposit Insurance Corp. Deposit Insurance Resolution of failed banks Insure depositor s fund The KSSK manages the Nationwide Crisis Management Protocol (CMP) Framework as guidance and procedures for national crisis prevention and mitigation measures. Coordination meeting is conducted regularly to discuss and assess the current level of financial system stability and current issues related to the financial system. KSSK meeting (ministerial level) KSSK deputies meeting Meetings of KSSK Secretariat & technical team Crisis simulation Working groups on financial stability issues National crisis binder SOP on crisis management 8

9 OJK Office Network Regional Office-5 North Sumatera (Medan): 1. KOJK Prov. Aceh 2. KOJK. Prov. West Sumatera 3. KOJK Prov. Riau 4. KOJK Prov. Kep. Riau 5. KOJK Bagan Siapi-api 6. KOJK Padang Sidempuan Regional Office-3 Central Java and Special Region of Yogyakarta: 1. KOJK Prov. DI Yogyakarta 2. KOJK Solo 3. KOJK Purwokerto 4. KOJK Tegal Regional Office-8 Kalimantan: 1. KOJK Prov. East Kalimantan 2. KOJK Prov. West Kalimantan 3. KOJK Prov. Central Kalimantan 4. KOJK Prov. North Kalimantan Regional Office-6 Sulawesi, Maluku, and Papua: 1. KOJK Prov. North Sulawesi 2. KOJK Prov. Central Sulawesi 3. KOJK Prov. Southeast Sulawesi 4. KOJK Prov. West Sulawesi 5. KOJK Prov. Maluku 6. KOJK Prov. North Maluku 7. KOJK Prov. Papua 8. KOJK Gorontalo 9. KOJK Prov. Papua Barat Regional Office-7 South Sumatera (Palembang): 1. KOJK Prov. Bengkulu 2. KOJK Prov. Jambi 3. KOJK Prov. Lampung REGIONAL OFFICES Regional Office-1 DKI Jakarta: 1. KOJK Prov. Banten Regional Office-2 West Java: 1. KOJK Cirebon 2. KOJK Tasikmalaya 3. KOJK Sukabumi Regional Office-4 East Java: 1. KOJK Malang 2. KOJK Jember 3. KOJK Kediri 4. KOJK Sumenep Regional Office-9 Bali and Nusa Tenggara: 1. KOJK Prov. NTB 2. KOJK Prov. NTT SUB REGIONAL OFFICES 9

10 MARKET STRUCTURE 4% 1% 2% 38% 54% Description Life Non-Life Reinsurance Social Compulsory National Joint Venture Total Source: OJK 10

11 Foreign Investors of Indonesia s Insurance Companies Insurance law allows a foreign entity to invest in insurance companies through joint-venture scheme. 80% at maximum It is possible within a joint venture company has one or more of the foreign shareholders 6 11

12 Industry Market Share (2016) Life Insurance Total Asset (in Million Rupiahs) Gross Written Premium (in Million Rupiahs) % Asset of Industry % GWP of Industry Prudential Life (JV) ,24% 19,26% AIA Financial (JV) ,81% 6,62% AXA Mandiri Financial ,58% 5,89% Service (JV) Asuransi Allianz Life ,67% 6,60% Indonesia (JV) Asuransi Jiwa Sinarmas MSIG (JV) ,01% 4,39% Non-Life Insurance Companies Total Asset (in Million Rupiahs) Gross Written Premium (in Million Rupiahs) % Asset of Industry % GWP of Industry Asuransi Jasa Indonesia ,70% 9,77% (Persero) Asuransi Astra Buana ,58% 7,99% Asuransi Central Asia ,02% 5,57% Asuransi Sinar Mas ,74% 8,40% Asuransi Adira ,98% 3,85% Source:OJK 12

13 Breakdown of LIFE and NON-LIFE Product Life Insurers Non-Life Insurers Source : Life Insurance Association of Indonesia and General Insurance Association of Indonesia 13

14 Supervisory Cycle ENTRY Business Establishment Requirements: Minimum Capital Ownership Structure of Organization Expert Business Plan etc OPERATIONAL Institutional Management Experts, etc. Financial Soundness Investment, Non Investment The ratio of financial soundness, etc. Business Implementation Product Policy Reinsurance, etc. On-site and Off-site Supervision Administrative sanctions EXIT Transfer of insurance portfolio Revocation of business license 14

15 Solvency Regime RBC > 120% There is no obligation to arrange Financial Restructuring Plan 100% RBC <120% Financial Restructuring Plan need to be arranged + Prohibition give dividends or compensation to the Shareholders RBC < 100% RBC < 40% Financial Restructuring Plan need to be arranged + Prohibition give dividends or compensation to the Shareholders + Sanctions Considered to revoke the license OJK may ask the insurers to increase the target level of solvency by considering risk profile and stress test 15

16 Issues 1. FDI restriction 2. Limited number of actuaries 3. Plan to set up a holding company for stateowned non-life insurers 4. Mandate to set up policyholder compensation institution 16

17 CHAPTER 2 17

18 Area of Interest : Set Up the Policyholders Compensation Institution Some REASONS Why I Choose This Topic: 1. ICPs issued by IAIS requires that primary objective of supervisors should be the protection of policyholders. 2. Indonesia Insurance Law (Law No. 40 of 2014) has mandated to set up a policyholder compensation scheme that shall be realized not later than October, Some jurisdictions have implemented Policyholders Compensation Scheme, included Japan. 4. In the FSAP Mission (2016), there are lots of discussions with the assessor about a plan to establish Policyholders Compensation Institution. 18

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