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The Petitioner’s witnesses Cindra Parma and Manahara Siahaaan giving statements in the judicial review hearing of the Insurance Law, Tuesday (25/8) in the Plenary Courtroom of the Constitutional Court. Photo by Humas MK/Gani.

JAKARTA, Public Relations of the Constitutional Court—The Constitutional Court (MK) held another judicial review hearing of Law No. 40 of 2014 on Insurance on Tuesday, August 25, 2020. The seventh hearing of case No. 5/PUU-XVIII/2020 had been scheduled to hear the statements of witnesses for the Petitioner, the Association of Indonesian General Insurance Companies (AAUI).

Contractor Manahara Siahaaan, the Petitioner’s witness, said that compared to guarantee products from banks, suretyship products make it easier for them to finance a project. The former chairman of Gapeknas (Indonesian National Contractor Association) revealed that 90% of contractors are medium-scale companies. So, his company needs a financing guarantee since the initial tender to the submission of a project, which, if using bank insurance, his company must enter into a credit agreement which requires large fees.

“For example, in the agreement we need 40 billion in cash, we’ll have to spend 100 million rupiah. When small companies want to ask a bank for guarantee, they must provide a collateral. Small companies like ours do not have assets to turn over to the bank,” said Siahaaan, who has been a contractor since 2000. 

Without Collateral

The other witness Cindra Parma said suretyship has been around a long time. Contractors always use suretyship for guarantee and maintenance of projects because, he said, it doesn’t require need collateral. "[We only need] to pay the premium and it remains unconditional," he said regarding the petition that argues the unconstitutionality of Article 5 paragraph (1) of the Insurance Law.

He also revealed that the Financial Services Authority (OJK) has formed three consortia to provide guarantees for various projects to support the development promoted by the government until 2024. They are the Project Guarantee Consortium (KPP), the Surety Bond Guarantee Consortium (KJSB), and the Indonesian Guarantee Consortium (KPI). Insurance companies that provide guarantee of the contractors’ projects. Cindra hopes for legal support for these consortia so that guarantees needed by contractors continue to be available.

"[Their] products provide convenience to contractors and guarantees to the government because they are unconditional," he said before the Court presided over by Chief Justice Anwar Usman along with the other eight constitutional justices. 

Also read…

Surety Business Unclear, Insurance Association Challenges Insurance Law

Petitioner of Insurance Law Affirms Legal Standing

Government’s Role in Improving Insurance Capacity

House Absent Again, Judicial Review Hearing on Insurance Law Delayed

OJK: Surety and Insurance Companies Can Operate Surety Business 

House: Insurance Law Already Includes Suretyship 

The Petitioner believes that the a quo norm does not clearly state that suretyship is an expansion of insurance business. Suretyship is only based on the a quo norm, which authorizes the OJK to expand the insurance business. The Petitioner believes it has resulted in legal uncertainty. They argued that the a quo article is unconstitutional and does not have legal force insofar as not be interpreted as “prescribing that suretyship is the expansion of insurance business based on public needs.” Before concluding the session, Chief Justice Anwar informed that the hearing would resume on Thursday, September 10, 2020 at 11:00 WIB to hear the statements of experts for the Petitioners and the Court.

Writer: Sri Pujianti
Editor:  Nur R.
PR: Raisa Ayuditha
Translator: Yuniar Widiastuti (NL)

Translation uploaded on 8/26/2020 14:06 WIB

Disclaimer: The original version of the news is in Indonesian. In case where any differences occur between the English and the Indonesian version, the Indonesian version will prevail.

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