logo-ahplogo-ahplogo-ahplogo-ahp
  • Home
  • Firm
    • About Us
    • Careers
    • Linked Stream
  • Solutions
      • Anticorruption & Good Corporate Governance
      • Banking & Finance
      • Capital Markets
      • Competition Law
      • Debt & Corporate Restructuring
      • Dispute Resolution
      • Energy, Oil & Gas
      • Foreign Direct Investment
      • Fraud & Forensics Investigation
      • Intellectual Property
      • Islamic Finance
      • Labor Law
      • Mergers & Acquisitions
      • Projects & Natural Resources
      • Real Property
      • Shipping & Aviation
      • Tax & Customs Services
      • Telecommunications & Media
  • Members
  • Events
    • News & Insights
  • Rajah Tann Asia
✕
            No results See all results

            After Push from the Industry, Government Relaxes the Foreign Ownership Restrictions in Insurance Companies

            Previously, recognising the role of foreign insurance companies and foreign investors with their capital, experience and technology, the Indonesian government issued Government Regulation No. 14 of 2018 (“Regulation 14/2018“) to allow up to 80% of foreign ownership in a non-publicly listed insurance company. Recently, this allowance was relaxed even further under Government Regulation No. 3 of 2020 (“Regulation 3/2020“), which allows a foreign investor to hold more than 80% of the shares of a non-publicly listed insurance company in Indonesia.

            Foreign Ownership Limit

            Under Regulation 14/2018, foreign citizens and entities were precluded from owning more than 80% (“Foreign Ownership Limit“) of the paid-up capital of an insurance company (which covers a non-publicly listed insurance company, Sharia insurance company, reinsurance company, Sharia reinsurance company, insurance brokerage company, reinsurance brokerage company and insurance loss adjuster company). If an insurance company wishes to increase its paid-up capital, at least 20% of the additional paid-up capital must be obtained from an Indonesian entity and/or citizen, or through an initial public offering (“IPO“) in Indonesia.

            In Regulation 3/2020, this exclusion was clarified and in effect, a non-publicly listed insurance company whose foreign ownership has exceeded the 80% threshold will be exempted from the Foreign Ownership Limit. This means that foreign investors can increase their shareholding in proportion to their existing ownership percentage.

            Illustration

            In Regulation 14/2018, an insurance company that has exceeded the Foreign Ownership Limit on the date that Regulation 14/2018 came into force may be exempted from the Foreign Ownership Limit provided that its then foreign ownership percentage does not increase. As such, a non-publicly listed insurance company with an 85% foreign shareholding at the date when Regulation 14/2018 came into force may continue to retain that foreign shareholding percentage.

            Nevertheless, as Regulation 14/2018 prescribes that at least 20% of the additional paid-up capital must be obtained from an Indonesia legal entity and/or citizen or through an IPO, the foreign shareholders in the said company may subsequently end up holding less than 85% of the share capital post-capitalisation. This is because foreign shareholders are not permitted to subscribe for additional shares in accordance with their existing shareholding percentage pre-capitalisation.

            With the introduction of Regulation 3/2020, foreign shareholders may continue to retain their 85% shareholding as at the date the Regulation 3/2020 came into force even after the proposed additional capitalisation, provided that an Indonesian citizen and/or legal entity subscribes for the remaining 15% of the additional capital. If, however, no Indonesian citizens and/or legal entities participate in the capital increase, the capital increase must be conducted through an IPO in Indonesia.

            Applicability of the Foreign Ownership Limit

            Under Regulation 14/2018, the Foreign Ownership Limit only applied to the insurance companies mentioned above. However, Regulation 3/2020 has expanded the applicability of the Foreign Ownership Limit (and the associated exemptions as set out above) to Sharia insurance companies and Sharia reinsurance companies resulting from a spin-off of a Sharia unit.

            By way of illustration, if the Sharia insurance company or Sharia reinsurance company with 88% foreign shareholding has been exempted from the Foreign Ownership Limit, the foreign ownership percentage of the Sharia insurance company or Sharia reinsurance company resulting from a spin-off of a Sharia unit must not exceed 88%.

            Conclusion

            The enactment of Regulation 3/2020 received a warm welcome from the insurance industry, which has long accepted that development in the industry cannot rely solely on domestic investment. It is hoped that the government’s recognition of this fact, and the accommodation made by it to solve the needs of domestic insurance companies will allow the local insurance industry to achieve and continue good sustainability and stability.

             

             

             

             

            ***

            AHP Client Alert is a publication of Assegaf Hamzah & Partners. It brings an overview of selected Indonesian laws and regulations to the attention of clients but is not intended to be viewed or relied upon as legal advice. Clients should seek advice of qualified Indonesian legal practitioners with respect to the precise effect of the laws and regulations referred to in AHP Client Alert. Whilst care has been taken in the preparation of  AHP  Client Alert, no warranty is given as to the accuracy of the information it contains and no liability is accepted for any statement, opinion, error or omission.

             

             

            More Articles

            • OJK Announced Guidelines to Implement Offerings Classified as Non-Public Offerings
              February 7, 2023
            • Regional Trade Highlights 2022
              January 30, 2023
            • Indonesia Expands Its Anti-Tax-Avoidance Measures: A Development to be Aware of in Tax Planning and Compliance
              January 27, 2023
            • Dissecting the Amendment to the Omnibus Law: Which Sectors are Affected and How?
              January 20, 2023
            • A New Rule Requires Importers of Software or Other Digital Products via Electronic Transmission to Fulfil Customs Obligations
              January 16, 2023
            • Rajah & Tann Asia Member Firms, Members of Lifesciences Asia-Pacific Network (LAN), Contribute to the Singapore and Indonesia Chapters of Comparative Study: Patent Linkage Systems in APAC
              January 13, 2023
            • Indonesia’s New Criminal Code Introduces Corporate Crime
              January 4, 2023
            • A Practical Guide to Getting Your Organisation PDP Law-Ready
              December 1, 2022
            • Shipping Law Updates
              November 16, 2022
            • Arb-Med-Arb: An Effort to Enhance Amicable Dispute Resolution
              September 30, 2022
            By Practice Area
            • Projects & Energy
            • Technology Media & Telecommunications
            • Intellectual Property
            • Real Property
            • Banking & Finance
            • Capital Markets
            • Competition
            • Mergers & Acquisitions
            • Dispute Resolution
            • Tax and Customs

            Jakarta Office

            Capital Place, Level 36 & 37
            Jalan Jenderal Gatot Subroto Kav. 18
            Jakarta 12710,
            Indonesia

            Phone: +62 21 2555 7800
            Fax: +62 21 2555 7899
            Email: info@ahp.id


            Subcribe

            Surabaya Office

            Pakuwon Center, Superblok Tunjungan City
            Lantai 11, Unit 08
            Jalan Embong Malang No. 1, 3, 5,
            Surabaya 60261
            Indonesia

            Phone: +62 31 5116 4550
            Fax: +62 31 5116 4560

            Assegaf Hamzah & Partners


            © 2001 - 2022 Assegaf Hamzah & Partners. All rights reserved.

            Rajah & Tann Asia is a network of legal practices based in Asia.

            Member firms are independently constituted and regulated in accordance with relevant local legal requirements. Services provided by a member firm are governed by the terms of engagement between the member firm and the client.

            This website is solely intended to provide general information and does not provide any advice or create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on this website.