On 8 April 2014, the Financial Services Authority (OJK) issued Regulation No. 2/POJK05/2014 of 2014 on Good Corporate Governance for Insurance Companies (Regulation 2).
Loss and life insurance companies, as well as reinsurance companies must have at least 3 directors and 3 commissioners. Meanwhile, insurance and reinsurance brokerage firms are required to have 2 directors and 2 commissioners if their annual income exceeds IDR 10 billion.
Directors of insurance companies must be domiciled in Indonesia, but Regulation 2 only requires half of the board of commissioners to be domiciled in Indonesia.
Additionally, insurance companies and reinsurance companies and reinsurance companies that apply sharia principles to their business activities must establish a Board of Sharia Supervisors. All directors, commissioners and members of the Board of Sharia Supervisors are required to pass OJK's fit and proper test before their appointment.
Directors of insurance companies must form an investment committee which will provide assistance to the directors with formulating policies. Insurance companies must also have a product development committee for formulating the development and marketing of insurance products.
Commissioners of insurance companies must form an audit committee and a risk supervisory committee. The committees will support the commissioners' supervision of the internal systems of insurance companies.
Regulation 2 provides mandatory Good Corporate Governance business practices that Insurance Companies must apply covering the following matters:
- remuneration and wage policies,
- investment management,
- internal risk management policies,
- strategic planning, and
- disclosure of information.
Regulation 2 also requires insurance companies to carry out a regular self-assessment of their Good Corporate Governance.
For violations of Regulation 2, the following administrative sanctions apply:
- warnings; followed by
- limitations on the business area; and finally,
- revocation of the license.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.