The Indonesian Financial Services Authority (OJK) has issued OJK Regulation No. 44 of 2020 on Risk Management for Non-Bank Financial Institutions. Non-bank financial institutions under this regulation include insurance companies, pension funds and financing companies. This regulation replaces OJK Regulation No. 1 of 2015 on the same subject matter. This regulation has already come into effect.
In this publication, we focus on the impact of the regulation on insurance companies and insurance intermediary companies. For the purpose of this publication, ‘insurance companies’ also refers to insurance intermediary companies.
The following are the key provisions in the regulation:
The risk committee’s main task is creating the company’s risk management strategy and policy. The risk committee provides recommendations on the risk management strategy and policy to the company’s president director.
The risk management team must be separated from the company’s business process and operational teams, and accordingly the personnel of this risk management team must not be part of the business process and operational teams. The company’s business process and operational teams are obliged to inform the risk management team about their relevant risk exposure. These requirements are new.
This requirement also indicates that in practice the board of directors and board of commissioners must work together to set up appropriate internal thresholds in order to avoid any overlapping approval requirements.
This requirement also applies to the company’s sharia supervisory board.
This provision does not apply to the insurance company’s obligation to set up the risk committee. An insurance company that is also subject to the integrated risk management framework still needs to set up a risk committee.
Mita Djajadiredja is a senior partner in the Mergers & Acquisitions Practice Group and the key contact for Technology, Media & Telecommunications in Indonesia. She has more than 20 years of experience in M&A and private equity, as well as corporate alliances, including joint ventures, shareholder agreements and strategic business alliances. Mita advises a wide range of domestic and international clients across various industry sectors, including real estate, insurance, finance, manufacturing and trading.
Gerrit is a Foreign Legal Consultant in the Mergers & Acquisitions Practice Group. Gerrit has more than 10 years of experience assisting multinational clients in cross-border transactions in both Asia and Europe. He has been involved in mergers and acquisitions work, as well as corporate restructurings and asset disposals. He has also been involved in various types of regulatory advice relating to amongst others investment structuring in Indonesia and offering of certain types of financial services in Indonesia, etc.
Abimata Putra is an associate partner in Baker McKenzie Jakarta office, in partnership with Hadiputranto, Hadinoto & Partners.
Nadya Sagita is an associate in Baker McKenzie Jakarta office, in Hadiputranto, Hadinoto & Partners.
© Copyright 2022 – Global Compliance News