Head of the Finance Ministry’s Advocacy Bureau Tio Serepina Siahaan delivering a statement on behalf of the Government in the judicial review hearing of Insurance Law, Tuesday (3/3) in the Plenary Courtroom of the Constitutional Court. Photo by Humas MK/Gani.

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JAKARTA, Public Relations of the Constitutional Court—Another follow-up judicial review hearing of Law No. 40 of 2014 on Insurance was held by the Constitutional Court (MK)  on Tuesday (3/3/2020) to hear the statements of the House of Representatives (DPR) and the Government. The hearing was presided over by Chief Constitutional Justice Anwar Usman. The House was absent while the Government was represented by the Head of the Finance Ministry’s Advocacy Bureau Tio Serepina Siahaan.

In response to the petition, the Government stated that the insurance industry will grow if it can better support the people in dealing with everyday risks and when they start and run a business.

"The Insurance Law stipulates that insurance objects in Indonesia can only be insured with insurance companies or sharia insurance companies in Indonesia and the shutting down of insurance objects must pay attention to optimizing the capacity of insurance companies, sharia insurance companies, reinsurance companies, [and] domestic sharia reinsurance companies," said Tio.

In order to offset the policy, Tio added, the Government and/or the Financial Services Authority (OJK) made an effort to improve the capacity of domestic insurance and reinsurance. With insurance protection, it is hoped that peace will be created for the public in carrying out activities and encouraging business innovations, which will ultimately create mutual prosperity.

"Insurance companies as financial institutions that collect public funds also allow the accumulation of funds that can be used in the framework of financing national development activities," said Tio.

According to the Government, surety business by insurance companies has been carried out since 1978 through PT Jasa Raharja (Persero). At that time, PT Jasa Raharja (Persero) is the only nonbank financial institution that can issue surety bonds through Government Regulation No. 34 of 1978 concerning the Amendment to Government Regulation No. 8 of 1965 concerning the Establishment of the General Insurance Company Jasa Raharja.

"The aim is [to establish] the Government\'s role to improve the welfare of [small] entrepreneurs by easing the arrangement of guarantees through surety bond products as an alternative to bank guarantees," Tio said. 

Also read…

Surety Business Unclear, Insurance Association Challenges Insurance Law

Petitioner of Insurance Law Affirms Legal Standing 

The petition No. 5/PUU-XVIII/2020 was filed by the Association of Indonesian General Insurance Companies (AAUI), represented by Dadang Sukresna, Silvy Setiawan, Rigo Patra Puana, Widyawati, and Achmad Sudiyar Dalimunthe as AAUI administrators.

The Petitioner challenges Article 5 paragraph (1) of the Insurance, which reads "The business scope of General Insurance Business and Life Insurance Business as referred to in Article 2 paragraph (1) and paragraph (2) and Sharia General Insurance Business and Sharia Life Insurance Business as referred to in Article 3 paragraph (1) and paragraph (2) can be expanded according to the need of the society."

The Petitioner believes that the a quo norm states that surety business is the expansion of insurance business. Surety business is only based on the a quo norm, which authorizes the Financial Services Authority (OJK) to expand the insurance business line. The Petitioner believes it resulted in legal uncertainty. The association argued that the a quo article is unconstitutional and does not have legal force insofar as not be interpreted as “prescribing that surety business is the expansion of insurance business based on public needs.” (Nano Tresna Arfana/RA/NRA)

Translated by: Yuniar Widiastuti

Translation uploaded on 3/4/2020

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