News12 Jan 2018

Indonesia:Life insurers lobby for investment relaxation

| 12 Jan 2018

The Indonesian Life Insurance Association (AAJI) has asked the Financial Services Authority (OJK) to relax its stipulation for insurers to invest in government securities (SBN).

Under OJK rules, life insurance companies must place a minimum 30% of their total investment funds into SBN.

AAJI Chairman Hendrisman Rahim revealed that the ratio of investment funds placed in SBN by life insurers had exceeded 20% at the end of 2017, but this was not yet close to 30%, reported CNN Indonesia.

"So we want OJK to review this condition. In fact the industry wants to meet the SBN portfolio requirement but faces many obstacles," said Mr Hendrisman.

He said that SBN instruments are not easily obtainable by life insurance companies. In addition, the prices of these instruments are too costly, and insurers are concerned that the returns on the instruments may not be able to cover the purchase price of SBN.

While the OJK has relaxed its stance by allowing life insurance companies to invest in bonds issued by state-owned enterprises (BUMN) as a replacement for SBN, privately-held insurers find it difficult to obtain such bonds.

For this year, Mr Hendrisman is still pessimistic that life insurers would be able to meet the OJK's SBN targets for them.

He expects that the majority of life insurance companies will re-invest funds in mutual funds this year because these are still fairly stable compared to other investment types, such as stocks.

 

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