The Ministry of State-Owned Enterprises is continuing to work on forming state-owned insurance holding companies. The goal is to enhance the companies' capability to raise capital and achieve greater operational efficiency.
The plan, deliberated on since last year, to set up insurance holding companies is in line with the government's moves to form a holding company which will manage four state-owned banks. Other sectors in which the government is establishing holding companies are oil and gas, highways, and housing, according to local media reports.
Deputy Minister for SOEs Gatot Trihargo said that it has been proposed for Jasa Raharja to become the holding company for several state-owned insurers.
The original plan had been for state-owned Asuransi Jasindo to be the holding company. This has since been changed because the balance sheet of Jasa Raharja is seen as better than that of Jasindo.
Mr Gatot said that the proposal for the insurance holding company is in its early stages. The green light for an insurance holding company is still to be given by the Financial Services Authority (OJK). Discussions on the subject have begun. Once OJK approval is received, the authorities will pass and publish the necessary regulations to enable the consolidation.
State-owned insurers that can be included in the proposed Jasa Raharja umbrella include Asuransi Kredit Indonesi, Reasuransi Indonesia Umum Indonesia and Jasindo.
An insurance holding company, because of its larger capital, could also reduce the amount of business ceded to foreigh reinsurers.