IMF published a report on the detailed assessment of observance (DAO) of Insurance Core Principles (ICPs) in Indonesia, as part of the Joint IMF-World Bank Financial Sector Assessment Program (FSAP) mission. The report highlights that insurance regulation and supervision have improved since the establishment of OJK n 2011 and the enactment of the new Insurance Law in October 2014. However, the assessment identified a significant number of shortfalls in observance with the ICPs. Out of the 26 ICPs, the assessment found that Indonesia Observed 6, Largely Observed 13, and Partially Observed 7 ICPs.
The report reveals that Indonesian insurance sector is still vulnerable to a number of material risks. A number of insurers have failed in the last 10 years. OJK has taken prompt action, after its establishment, to reduce the loss to policyholders by taking strong actions against four insurers with material deficits. OJK has monitored the capital adequacy of insurers through its risk-based supervision scheme. During the recent market turmoil in 2015, the solvency requirement was relaxed for nine months while introducing the temporary suspension of mark to market valuation rules. The Indonesian insurance industry is exposed to significant catastrophic risk with domestic concentrations through mandatory reinsurance programs. The low interest rate environment in advanced economies is also affecting the life insurance sector, as insurers have some underwriting denominated in USD.
Furthermore, the report states that some deficiencies are due to the lack of effective group regulation and supervision of insurance groups. The mission identified that the laws need to be amended to enhance the clarity of legal protection and the primary objective of the supervisor. Setting the protection of policyholders as the primary objective of OJK will enhance the operational independence of OJK. Improvement of legal protection of OJK with clearer internal guidance for applying sanctions will help it to take more prompt and effective regulatory actions to problem insurers. The mission also recommends that OJK should improve the effectiveness of supervision. Focus on the regulation of insurance intermediaries and market conduct should increase. Enhanced disclosure requirements for intermediaries and close coordination with insurance associations will improve the quality of intermediaries.
Related Link: Report on Assessment of ICPs
Previous ArticleOSFI Issues Information Guide on Solvency Information Return
FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.
MAS revised Notices 637 and 1111 on the risk-based capital adequacy requirements, along with Notice 656 on the exposures to single counterparty groups for banks incorporated in Singapore.
ISDA is consulting on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and for the USD LIBOR ICE Swap Rate.
SEC announced that the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.
BIS and BoE launched the BIS Innovation Hub Center in London, which is the fourth new Innovation Hub Centre to be opened in the past two years.
ESRB published recommendations on the reciprocation of macro-prudential measures in Belgium, France, Luxembourg, Norway, and Sweden.
MAS revised multiple notices that are applicable to banks and merchant banks in Singapore and have been issued pursuant to the Banking Act (Cap 19).
EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver.
BCBS is consulting on preliminary proposals for the prudential treatment of cryptoasset exposures of banks.
EBA issued a revised list of validation rules under the implementing technical standards on supervisory reporting.