In July 2023, the Financial Services Authority (“OJK”) issued OJK Regulation No. 11 of 2023 (“New Regulation”) to regulate the spin-off of sharia units of insurance and reinsurance companies. Along with the recently issued OJK Regulation No. 23 of 2023 on the licensing of conventional and sharia insurance and reinsurance companies, the New Regulation is part of the legislative framework that replaces OJK Regulation No. 67/POJK.05/2016.
Moreover, the New Regulation showcases OJK’s effort to align the insurance sector with the objectives under Law No. 4 of 2023 (the so-called Omnibus Financial Law), which mandates that insurance and reinsurance companies with sharia units must conduct a spin-off of these units upon satisfaction of certain criteria.
Generally, the New Regulation requires an insurance or reinsurance company to spin-off its sharia unit if the unit has fulfilled the criteria set by OJK, there is a spin-off request from the company, or the spin-off is carried out as part of a consolidation of insurance and reinsurance companies. Besides this requirement, the New Regulation also has other key elements that are worth highlighting.
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