The Jiwasraya case is an opportunity to totally reform the insurance industry. After the 1997-1998 economic crisis, the sector has yet to be reformed thoroughly in order to strengthen its industrial structure.
By
Kompas Team
·4 minutes read
JAKARTA, KOMPAS – The corruption and claim default cases that hit state insurer PT Asuransi Jiwasraya (Persero) must serve as an important reminder for total reform for the non-banking financial industry, including insurance companies.
“Right now is the moment to reform nonbanking financial institutions, including in terms of regulations, monitoring and capital,” President Joko “Jokowi” Widodo” said in his speech at the 2020 Financial Service Industry Annual Meeting in Jakarta on Thursday (16/1/2020).
The President said reform would be necessary to restore public trust in the financial industry, which includes insurance and pension fund companies. Public distrust in this industry can disrupt the economy in general.
Jiwasraya suffered a claim default of Rp 12.4 trillion (US$910.23 million) as of December 2019. Jiwasraya had already suffered a loss of Rp 15.83 trillion in 2018. An audit by the Supreme Audit Agency (BPK) showed that the state-owned enterprise’s capital was minus Rp 27.7 trillion as of November 2019. Jiwasraya’s huge losses were a result of poor governance, corruption and a series of frauds related to investment management.
Right now is the moment to reform nonbanking financial institutions, including in terms of regulations, monitoring and capital.
The Attorney General’s Office (AGO) has named five suspects in the case. They are former Jiwasraya president director Hendrisman Rahim, former finance and investment director Harry Prasetyo, former investment and finance division head Syahmirwan, PT Hanson Internasional Tbk president director Benny Tjokrosaputro and PT Trada Alam Minera Tbk commissioner Heru Hidayat.
State and clients’ losses are believed to reach Rp 27 trillion.
The BPK said Jiwasraya had been losing money since 2006. Poor monitoring and regulations are among the factors the resulted in the case’s protraction and ballooning of the company’s losses.
Since the 1997-1998 economic crisis, the financial industry, including insurance companies, have yet to undergo total reform to strengthen their industrial structure. Since the economic crisis, the government has implemented total reform only in the banking sector.
OJK’s move
Chairman of Financial Services Authority’s (OJK) board of commissioners, Wimboh Santoso, ensured that the authority would release a good governance guideline for the financial industry as part of the its reform. The guideline will encompass corporate risk management and investment performance public report guides.
Wimboh said there would be an updated on the data-reporting requirement for financial businesses, including on financial balance.
“Other than the position of financial balance, the instruments used [to place the funds] must be reported to the OJK at least once a month,” he explained.
This means that insurance companies are required to report all investment exposures, including instruments such as stocks and mutual funds, in detail to the OJK. Through such a mechanism, the OJK can observe problems directly without having to wait for public reports.
The insurance holding company the government is about to establish is also hoped to help.
OJK’s financial industry monitoring chief Riswinandi said the AGO was still legally processing the Jiwasraya case and the BPK was investigating the company.
“Shareholders are responsible for business risks. The State-Owned Enterprises Ministry as a shareholder is in the process of resolving this issue,” he said.
According to Riswinandi, Jiwasraya’s management is now trying to attract a number of strategic investors to establish subsidiaries that are hoped to generate profit the company could use to pay customers’ claims.
“The insurance holding company the government is about to establish is also hoped to help,” he said.
Other than Jiwasraya, Indonesia’s oldest insurance company Asuransi Jiwa Bersama (AJB) Bumiputera is also having financial troubles. The OJK has requested Bumiputera to immediately hold a general meeting soon after the President signs on the regulation on insurance joint ventures.
The general meeting will facilitate the authority in its monitoring on the insurance joint venture.
“The OJK will not get in the way if it is decided in the general meeting that the company’s structure is transformed into a limited company,” he said.
Finance Ministry state wealth director general Isa Rachmatarwata said the State-Owned Enterprises Ministry and the Finance Ministry would attempt to rescue Jiwasraya using common means in the insurance industry. The rescue effort will rely on a business-to-business (B2B) scheme.
Isa said Jiwasraya would not obtain an allocation of state capital participation (PMN) in 2020.
Guarantee
Coordinating Political, Legal and Security Affairs Minister Mahfud MD said the government guaranteed that the insurance funds of military and police personnel were still safe.
He said this in the wake of rising allegations of fund misuse and losses at PT Asuransi Sosial Angkatan Bersenjata Republik Indonesia (Asabri).
State-Owned Enterprises Minister Erick Thohir said Asabri’s financial condition remained stable. He reaffirmed that there was no proof of a loss of around Rp 10 trillion in the company.
PT Asabri president director Sonny Widjaja said there was no issue at Asabri.
“I reassure and guarantee that the money managed by Asabri is safe. It is neither missing nor corrupted,” Sonny said.
Sonny urged those who spoke about Asabri to rely on verified facts and data. (KRN/DIM/FAI/SHR/IAN/NTA/AGE)