Indonesia: OJK issues new rules on insurance admin sanctions
Source: Asia Insurance Review | Jun 2017
The Financial Services Authority (OJK) has issued guidelines on administrative sanctions in the insurance sector and freezing of assets of insurance companies, takaful companies, reinsurers and retakaful companies that became effective on 25 April 2017.
Known as Regulation 17, the rule sets out the following administrative sanctions under the insurance law:
- warning letters
- limitations imposed on business activities (in part or in full) restrictions to distribute certain products
- revocation of business licences
- cancellation of business licenses (for insurance broking companies, reinsurance broking companies and insurance agents)
- cancellation of registrations (for actuary consultants, public accountants, loss adjusters or other parties providing services to insurance companies)
- cancellation of approvals (for mediation board or association)
- fines placing a person on a blacklist to become a director, a commissioner, a member of a Shariah supervisory board or a senior management officer (one level below board of directors) in insurance companies (conventional or Shariah), reinsurance companies (conventional or Shariah), insurance broking companies, reinsurance broking companies or loss adjuster companies.
As a general rule, the OJK would issue administrative sanctions incrementally (eg the OJK should issue a warning letter before it escalates the sanctions including ultimately to the revocation of business licenses). However, there are now exceptions to this general rule, said Mr Mark Innis is a Foreign Legal Consultant at Hadiputranto, Hadinoto & Partners writing in Global Compliance News.
Further sanctions now are more wide ranging, onerous and, while many require that there is a proven case (sometimes in court (eg criminal acts)), the sanctions should give pause to how companies, shareholders and broader management attend to matters, deal with the OJK and deal with customers.
Among key provisions of Regulation 17, the OJK can revoke a business licence without issuing even a warning letter if the OJK is of the view that:
- the company’s financial condition has significantly worsened;
- the company’s shareholders are not cooperative (eg the shareholders do not implement a recommendation given by the OJK);
- the board of directors, the board of commissioners, or the Shariah supervisory board do not present a solution to settle any issues that could negatively impact customers’ interests. A ?