To Consolidate Capital-Strapped Insurance, How About State-Owned Enterprises?

The discourse on insurance classification based on capital is said to be pushing for consolidation among players in the industry. Reza Y Siregar, Senior Executive Vice President of the state-owned insurance holding institution IFG Progress, from Think Tank Insurance, stated that the classification of insurance based on capital will make consolidation inevitable.

"If they (insurance companies) ultimately cannot meet the capital requirements, they will automatically have to merge or consolidate. It's natural. This is a new standard, and the natural process is happening," Reza said when interviewed by reporters at Grha CIMB Financial Hall on Wednesday, September 13, 2023.

Reza also did not rule out the possibility of a reduction in the number of companies after the implementation of this regulation due to many mergers or acquisitions. However, he is uncertain whether this will happen in state-owned insurance companies.

"I haven't heard about it. But this process is happening in the state-owned sector. Like in our case, there's Jasindo, Jasa Raharja, and others. Under one holding, we can create better strategies," he concluded.

Additionally, he acknowledged that the discourse on this classification is an urgency in the industry, considering that previous payment failures were caused by a lack of working capital.

"I see the tier and capital system as a way to categorize and regulate our insurance industry better," he said.

Previously, the Financial Services Authority (OJK) proposed the classification of insurance companies into two classes, similar to the classification of Business Groups Based on Core Capital (KBMI) already applied in the banking industry.

Ogi Prastomiyono, the Executive Head of Insurance Supervision, Pension Funds, Financing Institutions, and the OJK Institution, explained that the classification would be based on the amount of capital.

"There will be differences between insurance companies with class 1 and class 2 capital, including allowing class 1 companies to sell complex products, while those with lower capital can only offer simple products," Ogi said some time ago.