The Financial Services Authority (OJK) has issued the first regulation on the dissolution, liquidation and bankruptcy of insurance companies. On 11 December 2015, enacted Regulation No. 28/POJK.05/2015 on Dissolution, Liquidation and Bankruptcy of Insurance Companies, Syariah Insurance Companies, Reinsurance Companies and Syariah Reinsurance Companies (POJK 28). Before the enactment of  POJK 28 there was no regulation within the vicinity of the insurance law on matter.

In principle, POJK 28 requires the approval of the OJK before an Insurance Company can be dissolved and liquidated, and also reserves to the OJK the right to determine whether an Insurance Company can go into bankruptcy.

Below are some of the noteworthy provisions of POJK 28.

Cessation of Business Activities

A business cessation plan must be submitted to the OJK by an insurance company intending to cease its business activities or one intending to transfer all its insurance portfolio. The OJK will approve or reject the cessation plan within 30 calendar days after receipt of a complete application. 

If the OJK approves a cessation plan, the insurance company must (a) cease its activities; (b) announce the cessation and settlement of obligations plan in an Indonesian language newspaper with nationwide circulation at the latest 10 calendar days after the date of the OJK approval on the cessation plan; (c) fulfill its obligations within four months after the date of the OJK approval; and (d) appoint a public accountant to prepare a closing balance sheet to ensure the settlement of its obligations.

In ceasing business activities of an insurance company the following should be noted:

Settlement of payments and obligations cannot reduce the rights of creditors, including policyholders, insured persons and participants.

Tabarru funds must be given to social organizations (based on a reference from the Syariah Supervisory Board) if the insurance company does not have any participants.

If policies are being transferred, the insurance company must notify the transfer plan to the policyholders, insured persons or participants by conducting an announcement in an Indonesian language national daily. The insurance company's portfolio transfer (i) must not harm the interests of the policyholders, insured persons or participants; (ii) must be conducted between insurance companies with the same business line; and (iii) must not cause the insurance companies that accept the transfer to violate any provisions of laws and regulations. However, the policyholders, insured persons or participants are still entitled to refuse the transfer of their policies, and in such circumstances the insurance company must agree to it and terminate the relevant insurance coverage, and return all policyholder's rights under the policy.

After all of the obligations of the insurance company are settled, the Board of Directors must submit a completion report to the OJK. Within 30 calendar days after the complete receipt of the completion report, the OJK will revoke the insurance company's business license.

Dissolution and Liquidation 

Dissolution is defined as a process of canceling an insurance company's legal status and the settlement of its assets and obligations as a result of the revocation of its business license. An insurance company may be dissolved and liquidated (i) if the OJK revokes its business license or (ii) the insurance company terminates its business activities. In general, the procedure to dissolve and liquidate an insurance company is similar with the procedure for dissolving and liquidating non-insurance companies.

At the latest 30 days after the business license revocation of the insurance company, the General Meeting of Shareholders (based on a 75% vote) or unanimously in circular resolutions is required by law to resolve the dissolution of the insurance company and to form the liquidation team, which must first be approved by the OJK. The insurance company must file an application with the OJK to seek approval on the dissolution plan and the liquidation team.

In a liquidation, the rights of the policyholders, participants and the insured persons receive the highest priority. After the payments to the policyholders, participants and insured persons have been completed, the remaining insurance funds can be used for payment to third parties. The investment fund of the policyholders can be used only to pay the relevant policyholders. “Tabarru” funds and investment funds of participants in a syariah insurance or reinsurance company can only be used to pay the participants. The liquidation team, to the best of its ability, must preserve insurance policies by trying to transfer the policies to other eligible insurance companies. If the policyholders or insureds refuse to be transferred, the liquidation team must refund the premium or contribution based on the remaining insurance coverage. Claims must be fully paid if the insurance company's assets are sufficient. If the assets are insufficient, payments will be made in proportion to the amounts owed. Proceeds from asset sales (except insurance fund or tabarru fund) after deducting employees' salaries and liquidation expenses will be used to pay any outstanding obligations to the policyholders, insured persons, participants or other parties that are entitled to the insurance benefits. Payment to creditors can only be from the proceeds of asset sales and must be approved by the OJK before the payments.

The liquidation team must complete the liquidation procedure within two years after its appointment. The OJK is authorized to supervise the liquidation by reviewing the liquidation team's reports. If necessary, the OJK may appoint a public accountant or other parties to supervise the liquidation. 


Bankruptcy is defined as the general seizure of the entire assets of the bankrupt debtor where the management and settlement of the assets are conducted by a curator under supervision of the commercial court, as stipulated under Law No. 37 of 2004 on Bankruptcy and Suspension of Payment (Bankruptcy Law).   

Creditors may submit a bankruptcy proposal to the OJK if the insurance company meets the requirements for bankruptcy under the Bankruptcy Law. In that case, the OJK may submit a bankruptcy proposal to the commercial court. The insurance company is not allowed to submit a bankruptcy proposal  itself (although the Company Law permits this approach). The OJK will approve or refuse the bankruptcy proposal within 30 calendar days after a complete application is received. The OJK may also submit a bankruptcy proposal to the commercial court without any proposal from the creditors, if it considers that consumer interest is being jeopardized.

For as long as the commercial court has not issued its decision, the OJK may ask the court to (a) seize all or some of the assets of the insurance company and (b) appoint a temporary curator to supervise the insurance company's management, payments to creditors, and the transfer or the realization of security over the insurance company's assets in liquidation, which are under the authority of the liquidator.

The OJK will revoke the insurance company's business license when it has gone through the bankruptcy process.