Indonesia: Insurers with foreign shareholders told to divest stakes
Source: Asia Insurance Review | Jun 2016
The Financial Services Authority (OJK) has called upon insurance joint ventures with significant foreign ownership to go public through an initial public offering (IPO).
OJK Commissioner for the Non-banking Financial Industry, Mr Firdaus Djaelani, said that alternatively, such insurers might choose to divest their shares by directly seeking local strategic investors, reported The Jakarta Post.
“They can start small by floating 10-15% of their shares on the stock market. Finding local partners can be another option for them to reduce foreign ownership,” he said recently.
New foreign ownership ceiling cap not decided
The call is a follow-up to a 2014 law on insurance that caps foreign ownership, but does not stipulate the exact percentage of the foreign holdings. During past deliberations of the law, legislators asked for a 49% foreign ownership cap, but dropped the ceiling altogether when discussions reached the final stage.
The OJK is waiting for the government to stipulate the ceiling. As this will be issued in 2017, the authority has reinstated a previous regulation – issued in 2008 – that limits maximum foreign ownership to 80% in an insurance company. It means that companies with foreign shareholdings exceeding 80% will have to divest the stake which is above the ceiling.
According to data from the OJK, there are more than 10 life and general insurance companies with foreign ownership shareholdings standing above 80%.
According to the Indonesian Life Insurance Association (AAJI), the call to float the insurers’ shares on the stock market will be ineffective as 70% of stocks on the local bourse are owned by foreign investors.