Indonesia aims for insurance, takaful legislation in 2014

Wed Dec 11, 2013 2:11am EST
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By Bernardo Vizcaino

SYDNEY Dec 11 (Reuters) - Insurers in Indonesia, Southeast Asia's largest economy, will have to wait until at least next year for a new law that will require the spin-off of their sharia-compliant units, an official at the country's financial regulator told Reuters.

The move could reshape Indonesia's Islamic insurance, or takaful, market by spurring mergers as firms try to meet capital requirements for their full-fledged Islamic units.

A draft law is now with parliament but other legislative priorities means it won't be enacted this year as previously anticipated, said Alis Subiyantoro, head of the sharia insurance subdivision at the country's financial services authority.

"The draft is still in discussion. The government asked to look at other legislation so it was postponed until next year."

"It covers all areas - licensing, market conduct, corporate governance, consumer protection - for both takaful and non-takaful firms," he said.

Assets in Indonesian takaful firms grew 42.8 percent to 13.1 trillion rupiah ($1.1 billion) as of December 2012 from 9.15 trillion rupiah a year earlier, data from the regulator showed, representing 2.3 percent of total industry assets.

The law would give three years for insurers to comply with requirements to spin-off their Islamic units, although that timeframe is also under discussion, Subiyantoro added.

Minimum capital requirements for full-fledged takaful firms would be set at 50 billion rupiah, compared with 100 billion rupiah for conventional insurers, which could prompt smaller operations to either merge or close.   Continued...