PPSK Law: Insurance

Reformation on the Indonesian Insurance Sector

24 February 2023

On January 13th, 2023, Indonesian President Joko Widodo passed Law No. 4 of 2023 concerning the Development and Strengthening of the Financial Sector ("PPSK Law"). The law is a manifestation of the government’s commitment to improving the general welfare through the inclusive implementation of financial sector reforms in Indonesia. Sri Mulyani, the Finance Minister further stated that financial reform is necessary to build a dynamic, strong, independent, and sustainable domestic economy. Thus, the momentum is deemed appropriate to respond to global challenges such as pandemics, potential recessions, climate change, technological advances, and various upcoming global scenarios.


The PPSK Law contains 27 chapters and 341 articles that will replace 17 laws in the financial sector. For this reason, the PPSK Law includes changes related to the financial sector in the areas of (1) Strengthening the financial sector authorities institution; (2) Improving governance and gaining public trust; (3) Encouraging the accumulation of long-term funds in the financial sector for welfare and sustainable financing support for development; and (5) Consumer protection, and literacy, inclusion, as well as financial sector innovation.


In the formulation process, the government and the Indonesian House of Representatives gathered opinions through public consultations, inviting scholars, media, cooperative movements, and other parts of the society to create meaningful public participation. Subsequently, the government aims to solve fundamental issues in the financial sectors through this Law.


One of the main features of the amendment, is that the Deposit Insurance Agency (“Lembaga Penjamin Simpanan” or “LPS”) are now responsible to provide policy guarantee for policies managed by insurance companies. The PPSK Law also regulates joint insurance to provide legal certainty for the related stakeholders. Further, this article will specifically discuss more on the changes in the PPSK Law concerning the insurance sector as follows:




Law No. 40 of 2014 on Insurance (“Insurance Law”)



Scope of Application


1.       The scope of general insurance and life insurance is expanded according to the needs of the community.

2.       Expanding the scope of the general insurance, life insurance, sharia general insurance, and sharia life insurance can be in the form of additional benefits based on fund management.



1.      Expansion of the scope of the general insurance business and sharia general insurance Business can be in the form of:

a.      Providing benefits related to credit/financing activities between creditors and debtors; and

b.      Suretyship. (refers to a general insurance business line that provides guarantees for the Principal's ability to carry out obligations according to the main agreement between the principal and the obligee)


2.      Carrying out insurance business for third party legal responsibilities in accordance with the requirements set by the Financial Services Authority (“Otoritas Jasa Keuangan” or “OJK”).




The Controller or Pengendali shall be responsible for losses of the insurance company, sharia insurance company, reinsurance company, or sharia reinsurance company caused by the party in its control.



There is an emphasis that compensation shall be made if the loss is caused by the actions of the Controller, the influence of the Controller, and/or the actions of the parties in its control.





There is a prohibition for related parties to solicit or accept, permit or agree to receive without the right a reward, commission, additional money, services, money or valuables, for their personal benefit or for their family benefit in order to obtain services, services, business acquisition, investment placement, and/or disbursement of claims from the insurance company.






Everyone is prohibited from embezzling assets owned and / or managed by insurance companies, sharia insurance companies, reinsurance companies, or sharia reinsurance companies by transferring, pledging, collateralizing, using wealth, or committing other acts that are detrimental.


Prohibited Actions


Document forgery is prohibited.



Reports, documents, or business activity reports, and/ or transaction or financial reports are prohibited from such actions:

a.      Creating or causing false records;

b.      Removing, not including, or causing records to not be done; and

c.      Change, obscure, remove, hide, or tamper with a record.


Access to certain reports and analysis


Access to certain reports and the results of the analysis of reports cannot be opened by OJK to other parties, except to:

police and prosecutors for the purposes of investigation; judges for the benefit of the judiciary; tax officials for tax purposes; Bank of Indonesia for the implementation of its duties; and other parties based on laws and regulations.



There are additional parties that can be given access, namely the LPS to implement the policy guarantee program.

Premium payment


Premium or contributions may be paid directly by the policyholder or participant to the insurance company or sharia insurance company or paid through the insurance agent. The insurance agent can only receive payment of premiums or contributions from the policyholder or participants after obtaining approval from the insurance company or sharia insurance company.


In the event that the insurance company or sharia insurance company cooperates with other parties in the context of obtaining business, premiums or contributions can be paid directly by the policyholder or participants to the insurance company or sharia insurance company, or paid through other parties who cooperate. Other parties who cooperate only get premium payments when it is mentioned in the cooperation agreement.


Compulsory Insurance




The government can establish a compulsory insurance program according to needs. The government may require certain groups in the community to participate in the compulsory insurance program.


Bankruptcy and Suspension of Payment


An application for a declaration of bankruptcy against an insurance company, sharia insurance company, reinsurance company, or sharia reinsurance company under this Law can only be filed by OJK.



Also applies to suspension of payment or Penundaan Kewajiban Pembayaran.

Statuter Manager




In regard to the appointment of statuter manager:

a.       OJK considers the availability of individual personnel who will be appointed as statuter managers.

b.       The determination of the statuter manager by the OJK first goes through eligibility and propriety test.

c.       Statuter managers are required to report every decision and management action that has a material influence on the OJK periodically


Liability of a Statuter Manager


Statuter manager is liable for losses of insurance companies, sharia insurance companies, reinsurance companies, or sharia reinsurance companies and/or third parties if the losses are caused by fraud, dishonesty, or their intentionality to not comply with the provisions of laws and regulations in the insurance industry.



If the loss is not caused by the statuter manager, due to fraud, dishonesty, or intentionally not complying with the provisions of laws and regulations in the field of insurance, the Controller shall be responsible for the losses incurred.

Administrative Sanctions


There are several administrative sanctions provided.


Additional administrative sanctions in the form of a decrease in the level of company health state.


Criminal Activity




OJK has the authority to determine the start, end, or termination of investigations into insurance crimes.


Criminal Sanctions




Addition of criminal sanctions to

a.      Controllers who do not carry out their responsibilities in regards to compensation responsibility;

b.      Bribery; and

c.      Embezzlement.


Joint Insurance or Asuransi Usaha Bersama


Is not regulated in the Insurance Law.


Provides a legal basis on joint insurance business. The scope of business includes life insurance.


Policy Guarantee




The policy guarantee program is organized by LPS. In carrying out its new function, LPS is obliged to apply good governance including investment management, risk allocation, and internal control.


Following its enactment, this Law change, erase, and/or establish new provisions to the Insurance Law. Transitional provision on joint insurance prevails that insurance policy that is made prior to the enactment of this law shall remain in effect according to the provisions stated in the insurance policy. However, Extension of the insurance policy carried out after the enforcement of this Law must follow the provisions. Lastly, the establishment of the implementing regulations of this Law, including OJK regulation will soon follow after the transitional period.


Should there be any queries related to this regulation or to find out if this affects your business or personal interest, please do not hesitate to contact us.

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