DECREE OF THE MINISTER OF FINANCE NO. 135/PMK.05/2005 CONCERNING AMENDMENT TO DECREE OF THE MINISTER OF FINANCE NUMBER 424/KMK.06/2003 CONCERNING FINANCIAL SOUNDNESS OF INSURANCE AND REINSURANCE COMPANIES THE MINISTER OF FINANCE Considering : In view of : a. that in the framework of ensuring financial stability of insurance and reinsurance companies, amendment of the regulations concerning financial soundness of insurance and reinsurance companies is deemed appropriate; b. that based on the aforesaid consideration in paragraph (a), a Decree of the Minister of Finance needs to be issued concerning Amendment to Decree No. 424/KMK.06/2003 concerning Financial Soundness of Insurance and Reinsurance Companies. 1. Law No. 2 year 1992 concerning Insurance Business (State Gazette No. 13 year 1992, Supplement No. 3467); 2. Government Regulation No. 73 year 1992 on Insurance Business Conduct (State Gazette No. 120 year 1992, Supplement No. 3306), as amended by Government Regulation No. 63 year 1999 (State Gazette No. 118 year 1999, Supplement No. 3861); 3. Presidential Decree No. 187/M year 2004; 4. Decree of the Minister of Finance No. 424/KMK.06/2003 concerning Financial Soundness of Insurance and Reinsurance Companies. HAS DECIDED : To enact : DECREE OF THE MINISTER OF FINANCE CONCERNING AMENDMENT TO DECREE OF THE MINISTER OF FINANCE NUMBER 424/KMK.06/2003 CONCERNING FINANCIAL SOUNDNESS OF INSURANCE AND REINSURANCE COMPANIES Article I 1. To amend Article 11 paragraph (1) letter d so that Article 11 reads in its entirety as "Article 11 (1) The type of investment as referred to in Article 10 letter a hereof for an Insurance and Reinsurance Company shall consist of: a. time deposit and certificate of deposit with a Bank, including on call deposit and deposits having the term of less than or equal to 1 (one) month b. shares listed at the stock exchange 1/6
c. bonds and Medium Term Notes with A-rating at the lowest or its equivalent at time of placement d. securities issued or guaranteed. by the Government or Bank of Indonesia e. unit of participation funds f. direct placement (for shares unlisted at the stock exchange) g. buildings with strata title or real estate for investment h. mortgage i. policy loan (2) The non-investment type of assets as referred to in Article 10 letter b hereof for an Insurance and Reinsurance Company shall consist of the following: a. cash and bank b. direct premium written receivable c. reinsurance written receivable d. investment returns receivable e. buildings with strata title or real estate for own use f. computer hardware 2. To amend Article 13 paragraph (1) letter e so that Article 13 reads in its entirety as "Article 13 (1) Valuation of the investment assets as referred to in Article 10 letter a hereof for an Insurance and Reinsurance Company shall be conducted in the following manner: a. time deposit, based on its nominal value b. certificate of deposit, based on its cash value c. shares listed at the stock exchange, based on their market value d. bonds and Medium Term Notes, based on their market value e. securities issued or guaranteed by the Governm ent or Bank of Indonesia are valued and classified based on the standard accounting principles applied in Indonesia, namely : 1) acquisition value after premium amortization or discount, if they are classified as securities held until due date; or 2) market value or estimated fair value in the event no market value is available, if they are classified as marketable securities or available for sale f. unit of participation funds, based on their net assets value g. direct placement (for shares unlisted at the stock exchange), based on their equity value h. buildings with strata title or real estate for investment, based on their value determined by an appraisal agency registered at the relevant authorities, or their Taxable Sales Value (NJOP) in the event no appraisal is conducted by an appraisal agency i. mortgage, based on its loan balance j. policy loan, based on its balance (2) Valuation of non-investment assets as referred to in Article 10 letter b hereof for an Insurance and Reinsurance Company shall be conducted in the following manner: a. cash and bank, based on its nominal value b. direct premium written receivable, based on its balance c. reinsurance written receivable, based on its balance d. investment returns receivable, based on its balance e. buildings with strata title or real estate for own use, based on their value 2/6
determined by an appraisal agency registered at the relevant authorities, or their Taxable Sales Value (NJOP) in the event no appraisal is conducted by an appraisal agency f. computer hardware, based on its book value." 3. To amend Article 14 paragraph (4) letter c so that Article 14 reads in its entirety as "Article 14 (1) Limitation on the investment assets as referred to in Article 10 letter a hereof for an Insurance and Reinsurance Company shall be conducted as a. investment in the form of time deposit and certificate of deposit with each bank shall not exceed 20% (twenty per cent) of the total investment; b. investment in the form of shares of which the issuers are Indonesian legal entities shall not exceed 20% (twenty per cent) of the total investment for each issuer; c. investment in the form of bonds and Medium Term Notes of which the issuers are Indonesian legal entities shall not exceed 20% (twenty per cent) of the total investment for each issuer; d. investment in the form of participation funds shall not exceed 20% (twenty per cent) of the total investment for each issuer; e. investment in the form of direct placement (for shares unlisted in the stock exchange) shall not exceed 10% (ten per cent) of the total investment; f. buildings with strata title or real estate shall not exceed 20% (twenty per cent) of the total investment; g. investment in the form of mortgage loans shall not exceed 20% (twenty per cent) of the total investment subject to the following provisions 1. the loan is given to individuals 2. the loan is collateralized by the first mortgage 3. such mortgage loans comply with the prevailing laws; and 4. the amount of each loan shall not exceed 75% (seventy -five per cent) of the smallest collateral of the values determined by an appraisal agency registered with the authorities and the Taxable Sales Value (NJOP) h. investment in the form of policy loan shall not exceed 80% (eighty per cent) of the cash value of the respective policy (2) The total investment used as basis for valuation of limitation as referred to in paragraph 1 hereof shall be the value of the whole investment as referred to in Article 11 paragraph 1 hereof as at balance sheets date on the basis of the provision in Article 13 paragraph 1. (3) In the event the Insurance and Reinsurance Company possesses investment in an overseas country, the total investment used as basis for such valuation shall be the total investment as referred to in paragraph 2 hereof plus the total overseas investment. (4) Limitation on the non investment assets as referred to in Article 10 letter b hereof for an Insurance and Reinsurance Company shall be conducted as a. the age of direct premium written receivable shall not be longer than 2 (two) months since : 1) commencement of insurance for single premium policies; or 2) due date of premium for policies that allow premium installment; b. the age of reinsurance receivable shall not be longer than 2 (two) months since its due date; c. the age of investment returns receivable shall not be longer than 2 (two) months calculated from the due date of its payment; 3/6
d. buildings with strata title or real estate for own use shall not exceed 20% (twenty per cent) for a General Insurance and Reinsurance Company, or 30% (thirty per cent) for a Life Insurance Company respectively of their Equity Capital in the current period; e. all computer hardware shall not exceed 20% (twenty per cent) of the Equity Capital in the current period." 4. To amend Article 16 paragraph (1) letter d so that Article 16 reads in its entirety as "Article 16 a. The type of investment as referred to in Article 10 letter a hereof for an Insurance and Reinsurance Company with the Syariah Principle shall consist of: a. time deposit and certificate of deposit with a bank, including on call and time deposit of less than or equal to 1 (one) month term; b. shares listed at the stock exchange c. bonds and Medium Term Notes with A-rating at the lowest or its equivalent at time of placement; d. securities issued or guaranteed by the Government or Bank of Indonesia e. unit of participation funds f. direct placement (for shares unlisted at the stock exchange) g. buildings with strata title or real estate for investment h. policy loan i. financing of real estate and or buildings, vehicles and capital goods with murabahah (deferred payment transaction) scheme j. financing of working capital with mudharabah (profit sharing) scheme b. The type of non-investment assets as referred to in Article 10 letter b for an Insurance and Reinsurance Company with the Syariah Principle shall consist of: a. cash and bank b. direct premium written receivable c. reinsurance written receivable d. investment returns receivable e. buildings with strata title or real estate for own use f. computer hardware" 5. To amend Article 17 paragraph (1) letter d so that Article 17 reads in its entirety as "Article 17 (1) Valuation of the investment assets as referred to in Article 10 letter a hereof for an Insurance and Reinsurance Company with the Syariah Principle shall be conducted in the following manner: a. time deposit and certificate of deposit, based on its nominal value b. shares listed at the stock exchange, based on their market value c. bonds and Medium Term Notes, based on their market value or, in the event no market value is available, their nominal value d. securities issued or guaranteed by the Government or Bank of Indonesia are valued and classified based on the standard accounting principles applied in Indonesia, namely : 1) acquisition value after premium amortization or discount, if they are classified as securities held until due date; or 4/6
2) market value or estimated fair value in the event no market value is available, if they are classified as marketable securities or available for sale e. unit of participation funds, based on their net assets value f. direct placement, based on their equity value g. buildings with strata title or real estate for investment, based on their value determined by an appraisal agency registered at the relevant authorities, or their Taxable Sales Value (NJOP) in the event no appraisal is conducted by an appraisal agency h. In. policy loan, based on its balance i. financing of real estate and or buildings, vehicles and capital goods with murabahah (deferred payment transaction) scheme, based on the loan balance j. financing of working capital with mudharabah (profit sharing) scheme, based on the loan balance. (2) Valuation of non-investment assets as referred to in Article 10 letter b hereof for an Insurance and Reinsurance Company with the Syariah Principle shall be conducted in the following manner: a. cash and bank, based on its nominal value b. direct premium written receivable, based on its balance c. reinsurance written receivable, based on its balance d. investment returns receivable, based on its balance e. buildings with strata title or real estate for own use, based on their value determined by an appraisal agency registered at the relevant authorities, or their Taxable Sales Value (NJOP) in the event no appraisal is conducted by an appraisal agency f. computer hardware, based on its book value." 6. To amend Article 21 paragraph (2) letter f so that Article 21 reads in its entirety as "Article 21 (1) Assets and liabilities sourcing from an Insurance Program Linked to Investment shall be recorded separately from those from other life insurance programs. (2) Placement of assets and liabilities sourcing from an Insurance Program Linked to Investment as referred to in paragraph 1 hereof shall. only be made in the form of : a. cash and bank b. time deposit and certificate deposit, including on call and time deposit less than or equal to 1 (one) month term c. shares listed at the stock exchange; d. bonds and Medium Term Notes e. unit of participation funds; f. securities issued or guaranteed by the Government or Bank of Indonesia (3) The provision on limitation of asset placement stated in Article 1, paragraph 1 and or Article 19 paragraph 1 hereof shall not apply ti investment on Insurance Program Linked to Investment." 5/6
Article II 1. By virtue of this Decree of the Minister of Finance, securities guaranteed by the Government or Bank of Indonesia held by an insurance and reinsurance company are still classified as admitted assets up to 1 (one) year after this: decree takes effect. 2. This Decree of the Minister of Finance shall come into force on the date of it: enactment and with retroactive effect on September 30, 2005. For public cognizance, this Decree of the Minister of Finance shall be promulgated in the State Gazette of the Republic of Indonesia. Stipulated in Jakarta on December 27, 2005 Minister of Finance (not signed by) SRI MULYANI INDRAWATI 6/6