Draft Government Regulation on Policy Guarantee to Govern Bailout Mechanisms for Troubled Insurance and Selective Participation

The government, together with the Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) and the Indonesia Deposit Insurance Corporation (Lembaga Penjamin Simpanan – “LPS”), is accelerating the formulation of implementing regulations for the Policy Guarantee Program (Program Penjaminan Polis – “PPP”). Ogi Prastomiyono, Chief Executive for Insurance, Guarantee Institutions, and Pension Funds Supervision at OJK, explained that the program is being designed by adopting the banking deposit insurance mechanism administered by LPS, including rescue schemes for insurance companies experiencing financial difficulties.

“Together with the Ministry of Finance and LPS, we are preparing the Government Regulation, as it will serve as the legal basis for implementing the Policy Guarantee Program,” Ogi stated.

Unlike the banking deposit insurance program, which automatically applies to all licensed banks, participation in the PPP is designed not to be automatic and will instead be implemented selectively. To support this mechanism, OJK is finalizing a Draft OJK Regulation (“Draft Regulation”) on Solvency Calculation, which will revoke several provisions under OJK Regulation No. 26 of 2025 (“POJK 26/2025”). OJK is also implementing the New Risk-Based Capital (“New RBC”) framework, which is aligned with the adoption of PSAK 117 or IFRS 17, the Insurance Capital Standard, and the Insurance Core Principles issued by the International Association of Insurance Supervisors (IAIS).

“Since the Government Regulation has not yet been issued and will subsequently be followed by OJK regulations and LPS Regulations, we hope the process can be completed earlier than January 2028, allowing the program to be activated in 2027,” he added.