Indonesia's Deposit Insurance Corporation (LPS) is finalising regulations to implement its expanded mandate as an insurance policy guarantor, in a move aimed at strengthening the financial sector and enhancing protection and legal certainty for policyholders. The scheme is targeted to take effect in 2027.
According to Bambang S. Hidayat, Head of the LPS II Surabaya Representative Office, the agency is currently drafting a Government Regulation (RPP) that will set out the technical framework for policy guarantees, including parameters for determining coverage limits.
The regulation is expected to be completed in 2026 ahead of implementation.
“In 2026, we are intensively drafting a draft regulation (RPP) that will regulate the technical details of the guarantee, including the formula for limiting the amount of protected deposits,” Mr Bambang said on Monday (June 22).
He added that under a preliminary proposal, guaranteed claims could range between IDR500m and IDR700m ($32,000 - $45,000) though the figure remains subject to review and is not yet final.
He noted that the introduction of a policy guarantee framework has become increasingly important given the distinct risk profile of Indonesia’s insurance sector.
Unlike global trends where general insurers tend to account for most failures, Indonesia’s past cases have been concentrated in the life insurance segment.
“In Indonesia, failures are dominated by the life insurance sector. Based on our historical data, nine life insurance companies have failed, compared to eight general insurance companies,” he said, reported InsideLombok.
Under the draft submitted to the government, all life and general insurance companies will be required to participate in Indonesia’s proposed insurance policy guarantee programme.
However, participation will be conditional on insurers meeting financial soundness criteria set by the Financial Services Authority (OJK). These include maintaining a Risk-Based Capital (RBC) ratio above 150% and not being placed under special supervision or subject to restrictions on business activities.
The requirements are intended to ensure that only financially stable insurers are included in the scheme as Indonesia moves towards establishing a formal policyholder protection framework.