Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) has issued a regulation that requires insurance companies in Indonesia to appoint a controller by June 2017 at the latest.
OJK Regulation No. 67/POJK.05/2016 regarding Business Licensing and the Organization of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies and Sharia Reinsurance Companies, dated December 23, 2016 (“POJK 67”), requires insurance companies to report the appointment of a controller to the OJK, as required by the Insurance Law (Law No. 40 of 2014 regarding Insurance).
POJK 67 defines a controller as a party who has the ability, either directly or indirectly, to appoint the directors and commissioners of an insurance company, and can control the decisions or actions taken by directors or commissioners. The controller can be a shareholder, most likely the majority shareholder, or another party who fulfills the above criteria, and will be held responsible for the business continuity of the insurance company under its control. This means the controller must support the insurance company’s business development and fulfillment of financial soundness criteria, and fulfillment of the insurance company’s obligations to its insured or policyholders.
Once appointed as controller, such party cannot cease to be controller without the approval of the OJK. Any changes to the controller must be reported to the OJK. The OJK is authorized to appoint another party as an additional controller to the insurance company, joining the company-appointed controller.
Insurance companies must ensure that prospective controllers pass the fit and proper test conducted by the OJK, as per the procedure stipulated in OJK Regulation No. 27/POJK.03/2016 regarding Fit and Proper Test for Primary Party of Financial Services Institutions dated July 22, 2016. The fit and proper test criteria for a prospective controller differ depending on whether or not the prospective controller is a shareholder in the insurance company in question. If by this June the prospective controller has not passed the fit and proper test, a report of appointment of controller must be submitted to the OJK along with the application for the fit and proper test.