After years of waiting, on 18 April 2018, the Indonesian Government finally issued Government Regulation No. 14 of 2018 on Foreign Ownership in Insurance Companies (“GR 14/2018”).
The previous regimes of the Indonesian insurance laws and regulations issued during 1992 through 2008 have experienced several changes, one of which is concerned with Foreign Ownership in Insurance Companies. Upon the enactment of Law No. 40 of 2014 on Insurance (“Insurance Law”), the previous insurance law of 1992 was repealed. The newly-issued GR 14/2018 now serves as one of the implementing regulations of the Insurance Law, and this new regulation at the same time revokes Government Regulation No. 73 of 1992 on General Provisions for the Insurance Business, including all of its amendments (“GR 73/1992”).
GR 14/2018 lays down significant changes to the limit on foreign ownership in Indonesian Insurance Companies, as summarized below:
- GR 14/2018 strictly limits foreign ownership (whether direct or indirect) to a maximum of 80% in Indonesian insurance companies. In contrast, the previous GR 73/1992 establishes the maximum 80% limit only on direct foreign ownership (meaning foreigners were still allowed to indirectly hold the remaining percentage of the relevant insurance company’s stock through another PT company).
- GR 14/2018 exempts publicly listed insurance companies from the above requirement.
- GR 14/2018 contains a grandfather rule for existing insurance companies. It allows existing insurance companies with more than 80% foreign ownership (through direct and indirect control in the company) existing prior to the enactment of GR 14/2018 to maintain their foreign shareholding composition. Please note, however, that these foreign shareholders are not allowed to increase their existing shareholding. If a grandfathered insurance company wishes to increase its issued and paid-up capital, GR 14/2018 requires that at least 20% of the total amount of the newly issued capital to be offered either to: (i) Indonesian entities or Individuals; or (ii) the public through the initial public offering.
GR 14/2018 is more relaxed in terms of the composition of the Board of Directors (“BOD”) and Board of Commissioners (“BOC”) of insurance companies. This new regulation removes the previous stipulation that requires insurance companies owned by foreigners to have at least one Indonesian BOD/BOC member.
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