On 17 October 2014, the Government of the Indonesia enacted Law
No. 40 of 2014 on Insurance ("New Insurance Law"), which
replaces Law No. 2 of 1992 on Insurance Business. Some of the key
provisions in the New Insurance Law relate to bankruptcy
proceedings against insurance companies.
The New Insurance Law gives the Financial Services Authority (Otoritas Jasa Keuangan/"OJK") the power to file a bankruptcy petition against insurance companies. Previously, the Minister of Finance held this authority under Law No. 37 of 2004 regarding Bankruptcy and Suspension of Debt Settlement Obligation ("Bankruptcy Law").
The New Insurance Law allows a creditor to submit an application to the OJK to apply to the commercial court for a bankruptcy petition against an insurance company. OJK must approve or reject the creditor's application no later than thirty (30) days from when the application was deemed to be completed and accepted by OJK. Any rejection of the application by OJK must be made in writing and reasons for the rejection provided.
The New Insurance Law provides that the procedures and requirements relating to a creditor's application are to be governed through the OJK regulations. To date, OJK has not issued such regulations. It is understood, however, that draft regulations have been prepared and include the following:
1. The application must be made in writing using the Indonesian language, and signed by the applicant.
2. The application must include the following information:
a. Information about the applicant which at the very least contains the applicant's full name and address;
b. Name of the insurance company; and
c. Brief summary of the underlying issues relevant to the petition for bankruptcy declaration.
3. The application is to be submitted to the Chairman of OJK's Board of Commissioner, with a copy provided to the Director of Litigation and Legal Aid.
4. The applicant must provide supporting evidence for the application, which should at least consist of the following:
a. Document regarding the applicant's identity;
b. Documentary evidence relating to the petition for bankruptcy declaration;
c. List of candidate witness and / or experts, including a brief summary of their affidavits together with statements confirming their willingness to be present during the court proceeding; and
d. List of additional evidence in the form of electronic data,
We will provide updates on this matter after the passing of the
The New Insurance Law also introduces a new provision that a bankruptcy petition cannot be filed to enforce a judicial decision. OJK has yet to provide its official view on the implementation of this provision. We believe that the primary intention of the provision is to protect insurance companies with healthy and strong financial standings from creditors looking to seek compensation by inappropriately enforcing a legal and binding court decision against them through the bankruptcy mechanism.
It is also worth noting that if the insurance company is declared bankrupt, Article 52 of the New Insurance Law gives priority rights for the payment to policyholders and beneficiaries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.