The Financial Services Authority (OJK) is pushing the life insurance industry to invest in bonds of State-Owned Enterprises (BUMN) undertaking the development of national infrastructure projects.
Mr Ahmad Nasrullah, Director of Insurance Supervision, said that over the next five years, the government needs funds for investment in the infrastructure sector totalling IDR5,519 trillion (US$410 billion). He said that opportunities for insurers include providing loss protection to infrastructure projects and investing in securities related to government infrastructure projects.
Last month, the OJK revised a regulation first implemented in January last year that required insurance companies, pension funds and other non-bank financial institutions to keep a minimum percentage of government bonds in their portfolio to help provide stability to the debt market. In the revised version, the OJK expanded the options for required investment products to include instruments issued by state- owned companies and their subsidiaries used to finance government infrastructure projects, reported Reuters.
The World Bank has estimated that Indonesia would have to spend US$500 billion to meet its infrastructure needs in the next five years and public spending alone would not be enough.
The overall amount of government-linked securities the OJK requires non-bank financial institutions must keep as a minimum percentage of their investments remains unchanged from last year. Such securities must make up at least 30% of pension funds' and life insurance companies' investments, and 20% of general insurance firms' investments.