LAW OF THE REPUBLIC OF INDONESIA
NUMBER 2 OF 1992
CONCERNING
SYSTEMS OF INSURANCE UNDERTAKINGS
BY THE MERCY OF GOD
THE PRESIDENT OF THE REPUBLIC OF INDONESIA
Considering:
a. that in order to create a fair and prosperous society, based on Pancasila and the 1945 Constitution, the development in all areas needs to be implemented continuously;
b. that in the development implementation could happen all kinds of risks which have to be tackled by society;
c. that a sound insurance undertaking is one of the efforts to tackle risks faced by members of society and at the same time forms one of the institutions that accumulates community’s funds, so that it has a strategic position in the development and in economic life, in the effort to improve public welfare;
d. that in the framework of increasing the role of the insurance undertakings in the development, there is a need to give wider opportunities to parties wanting to do business in the area of insurance, without neglecting the principle of a sound and responsible business, which at the same time could stimulate economical activities in general;
e. that in relation to those things mentioned, it is considered to be important to establish Law concerning Insurance undertakings.
In view of:
1. Article 5 paragraph (1), Article 20 paragraph (1), and Article 33 paragraph (1) of the 1945 Constitution;
2. Code of Civil Law (Statute Book of 1847, No. 23);
3. Code of Commercial Law (Statute Book of 1847 No. 23) as have been altered several times, the last time with Law no. 4 of 1971 concerning Amendments and Additions to the Stipulation of Article 54 Code of Commercial Law (Gov. Official Gazette Of 1971 No. 20, Additional Gazette No. 2959);
4. Law No. 12 of 1967 concerning Subjects of cooperative systems (Gazette 1967 No. 23, Additional Gazette No. 2832);
5. Law No. 9 of 1967 concerning the Stipulation of the Government regulation replacing Law No. 1 of 1969 concerning Forms of State undertakings (Gazette of 1969 No. 16, Addition of Gazette No. 2890) to become Law (Gazette of 1969 No. 40, Additional Gazette No. 2904).
By Agreement
THE INDONESIAN LEGISLATIVE ASSEMBLY
HAS DECIDED:
To enact: THE LAW CONCERNING INSURANCE UNDERTAKINGS
CHAPTER 1
GENERAL STIPULATIONS
Article 1
In this Law what is mean by:
1. Insurance or Guarantee is an agreement between two or more parties, in which the guarantor party commits itself to the insured party, by receiving insurance premium, to give compensations to the insured party, due to financial losses, damages or losses of anticipated profits, or give legal responsibility to a third party that could cause anguish to the insured party, due to an uncertain occurrence, or give repayment based on the death or life of an insured person.
2. Insurance objects are properties and services, body and soul, human health, legal responsibility, and all other interests that could be lost, damaged, suffer losses and or decreasing in value.
3. A Social Insurance Program is an obligatory organized insurance program based on a Law, with the aim of giving basic protection for the welfare of society.
4. An Insurance undertaking is an Insurance Company against Financial losses, a Life Insurance Company, a Reinsurance Company, a Broker Company, a Reinsurance Broker Company, an Insurance Agent, a company that appraises insurance losses, and an Actuary Consultant Company.
5. An insurance Company against Financial Losses is a company that gives services in dealing with risks to financial losses, advantages losses, and legal responsibility to a third party, arising from an uncertain occurrence.
6. A Life Insurance Company is a company that gives services in dealings with risks related to the life or death of an insured person.
7. A Reinsurance Company is a company that gives services in re-guarantees matters against risks faced by an Insurance Company against Financial Losses and or a Life Insurance Company.
8. A Broker Company is a company that gives intermediary services in concluding an insurance deal and handling an insurance compensation settlement by acting for the interest of the insured person.
9. A Reinsurance Broker Company is a company that gives intermediary services in the placing of re-insurance and handling of the re-insurance compensation settlement by acting for the interest of the insurance company.
10. An Insurance Agent is a person or a legal body which activities are giving services in marketing insurance services for and on behalf of the guarantor.
11. A company that appraises Financial Losses is a company that gives services in appraising the losses on guaranteed insurance objects.
12. An Actuary Consultant Company is a company that gives actuary services to insurance companies and pension funds in the framework of founding and managing an insurance program and or a pension program.
13. An affiliation is a relation between a person or a legal body and another or several persons, or another legal body, in such a way that one of them could influence the management or policy of the other person or the other legal body, or just the opposite, could exploit the existence of a joint ownership of shares or a joint management of an company.
14. The Minister is the Minister of Finance of the Republic of Indonesia.
CHAPTER II
THE AREA OF INSURANCE UNDERTAKINGS
Article 2
An insurance undertaking is a business effort, which is active in the area of:
a. Insurance initiatives, meaning financial service initiatives which by accumulating funds of society, through collecting insurance premium, give protection for society members ho use insurance services against the possibility of financial losses due to uncertain occurrences or against a person’s life or death.
b. supporting insurance companies, by organizing intermediary services, appraising insurance losses and by giving actuary services.
CHAPTER III
CATEGORIES OF INSURANCE UNDERTAKINGS
Article 3
The categories of insurance undertakings cover:
a. Insurance initiatives that consist of:
1. Insurance companies against financial losses, which give services in dealing with risks of financial losses, advantages losses, and legal responsibility to a third party, arising from uncertain occurrences;
2. Life insurance companies which give services in dealing ith risks related to the life or death of an insured person;
3. Reinsurance companies, which give services in dealing with risks faced by an Insurance Company against Financial losses and/ or by a Life Insurance Company.
b. Supporting companies for insurance businesses consist of:
1. Insurance Broker companies that give intermediary services in the concluding of an insurance deal and the handling of an insurance compensation settlement, by acting for the interest of the insured party;
2. Reinsurance broker companies that give intermediary services n placing the reinsurance and handling reinsurance compensation settlements, by acting for the interest of the insurance company;
3. Appraiser companies on insurance losses, that give appraisal services concerning guaranteed insurance objects;
4. Actuary consultant companies that give actuary consultation services;
5. Insurance agent companies that give intermediary services in the framework of marketing insurance services for and on behalf of insurance companies.
CHAPTER IV
THE SCOPE OF THE INSURANCE BUSINESS
Article 4
An insurance business as mentioned in Article 3 under a, shall only be executed by an insurance business system, with an activity scope as follows:
a. An insurance company for financial losses can only organize a business in the area of financial losses, including reinsurance;
b. A Life Insurance can only organize a business in the area of insurances in relation with life, health, personal accidents, annuity matters, and be a founder and board of a pension fund, pursuant to a valid legislation regulation concerning pension funds;
c. A reinsurance company can only organize a reinsurance business.
Article 5
A supporting business for insurance companies as mentioned in article 3 under b, can only be executed by an insurance business system ith a business activity scope as follows:
a. A broker Insurance Company can only organize a business by acting as a representative of the insured party in the framework of a transaction related to the insurance contract;
b. A reinsurance broker company can only organize a business by acting as a representative of the insurance company in the framework of a transaction related to the reinsurance contract;
c. A company to Appraise insurance losses can only execute a business by giving appraisal services concerning financial or property losses or damages ere occurring to the objects of the insurance against losses.
d. An Actuary Consultant Company can only execute a business that gives services in the actuary area;
e. An Insurance Agent Company can only give insurance marketing services for one insurance company that owns a business license from the Minister.
CHAPTER V
CONCLUDING AN INSURANCE OBJECT
Article 6
(1) The concluding of an insurance object has to be based on the guarantor’s freedom of choice, except for a Social Insurance Program.
(2) The concluding of an insurance object as mentioned in paragraph (1) has to be done whilst considering the capacity of the insurance company and the domestic reinsurance company.
(3) Further regulations concerning paragraph (2) are settled by Government Regulations.
CHAPTER VI
FORMS OF INSURANCE UNDERTAKINGS
Article 7
(1) Insurance undertakings shall only be organized by legal bodies that have the form of:
a. A Partnership Company;
b. A Cooperation
c. A Joint Venture (Mutual).
(2) Without prejudice the stipulation as mentioned in paragraph (1), the actuary consultant company and the insurance agent company could be organized by an individual company.
(3) The stipulations concerning insurance companies that have the form of a Joint Venture (Mutual) are further settled by Law.
CHAPTER VII
THE OWNERSHIP OF INSURANCE UNDERTAKING
Article 8
(1) An Insurance undertaking shall only be founded by:
a. Indonesian citizens and or Indonesian legal bodies fully owned by Indonesian citizens or Indonesian legal bodies;
b. An insurance company of which the owner is as mentioned under a, together with an insurance company obeying a foreign law.
(2) An Insurance undertaking founded as mentioned in paragraph (1) under b, must be:
a. An insurance company that has the same kind of activity as the business activity of the Insurance Company that founded or owns it;
b. An Insurance Company against Losses or a Reinsurance Company, of which its founders or owners are Insurance Company for Losses and or Reinsurance Company.
(3) Further stipulations concerning ownership of Insurance Undertakings as mentioned in paragraph (2) are settled with Government Regulations.
CHAPTER ABOUT VISION
COMPANY LICENSING
Article 9
(1) Every party that organizes an insurance company is obliged to obtain a business license from the Minister, except for companies organizing a Social Insurance Program.
(2) To obtain a business license as mentioned in paragraph (1), one has to meet provisions concerning:
a. Statutes;
b. Organizations structures;
c. Capitalization;
d. Ownerships;
e. Expertise in the insurance system area;
f. Work program worthiness;
g. Other things needed to support a healthy growth of an insurance company.
(3) In the event that there is a foreign party ownership as mentioned in Article 8 paragraph (1) under b, then for the effort to obtain a business cense as mentioned n paragraph (1) one must meet the provisions as mentioned n paragraph (2) and the stipulations concerning the ownership and management limits of the foreign party.
(4) Further stipulations concerning provisions concerning business censing as mentioned n paragraph
(2) and paragraph (3) are settled by Government Regulations.
CHAPTER IX
THE PROCESS OF FOUNDING AND SUPERVISION
Article 10
The process of founding and supervision concerning insurance companies are executed by the Minister.
Article 11
(1) The process of funding and supervision concerning insurance companies cover:
a. Financial soundness for Insurance Companies against Losses, Life Insurance companies and Reinsurance Companies which consist of:
1. Solvency level limit;
2. Retentions of their own;
3. Reinsurance;
4. Investment;
5. Technical resources; and
6. Other stipulations related to financial soundness;
b. Company Organizing which covers:
1. Insurance policy provisions;
2. Premium levels;
3. Claims of settlements;
4. Provisions Competence in the area of insurance;
5. Other stipulations relating to the organizing of companies.
(2) Every Insurance company is obliged to maintain its soundness, pursuant to the stipulations as mentioned in paragraph (1) and is obliged to do business pursuant to healthy insurance principles.
(3) Further stipulations concerning financial health in the organizing of the company as mentioned in paragraph (1) are settled by Government Regulations.
Article 12
An Insurance Broker Company is prohibited to place a deal of concluding insurance at an insurance company that does not have a business license as mentioned in Article 9.
Article 13
(1) An Insurance Broker Company is prohibited to place a deal of concluding an insurance at an insurance company which is an affiliation of the Insurance Broker Company in question, except if the aspirant insured party had beforehand been advised in writing, and agreed to the existence of that Affiliation.
(2) An Insurance Company that appraises Insurance Losses is prohibited to make evaluations concerning insurance objects already insured ith an Insurance Company against Losses, which is an affiliation of the Insurance Company in question that appraises Insurance Losses.
(3) An Actuary Consultant Company is prohibited to give services to a Life Insurance or a pension fund, which is an Affiliation of the Actuary Consultant Company in question.
(4) An Insurance Agent is prohibited to act as an agent of an Insurance Company, which does not possess a business license as mentioned in Article 9.
Article 14
(1) A Social Insurance Program shall only be organized by A State Owned Company.
(2) For a company that organizes a Social Insurance Program as mentioned in paragraph (1) the stipulation prevails concerning the process of founding and supervision in this Law.
Article 15
(1) In executing the process of founding and supervision, the Minister carry out an periodical or regularly examination, f necessary, on the insurance company.
(2) Every insurance company is obliged to show its books, records and reports, and give necessary information in the framework of the examinations as mentioned in paragraph (1).
Article 16
(1) Every Insurance Company against Losses, Life Insurance Company, Reinsurance Company, Insurance Broker Company and Reinsurance Broker Company is obliged to submit its balances and balance sheet, complete with the clarifications to the Minister.
(2) Every Insurance Company is obliged to submit its operational reports to the Minister.
(3) Every Insurance Company against Losses, Life Insurance Company, and Reinsurance Company is obliged to announce its balances and balance sheet in a daily newspaper in Indonesia with a wide circulation.
(4) Besides the duties as mentioned in paragraph (1), paragraph (2), and paragraph (3), every Life Insurance Company is obliged to submit its investment reports to the Minister.
(5) The form, structure and schedule of the delivery of the company’s reports and the announcement of its balance and balance sheet as mentioned in paragraph (1), paragraph (2), paragraph (3), and paragraph (4) are determined by the Minister.
Article 17
(1) In the event of occurring a violation concerning the stipulations in this Law or the implementation of the regulations, then the Minister could take measures in the form of giving admonitions, delimitating the company’s activity, or annulling its business license.
(2) The measures as mentioned in paragraph (1) are applied in phases, as follows:
a. Giving admonitions;
b. Delimitating the company’s activity;
c. Annulling its business license
(3) Before annulling the business license, the Minister could order the company in question to compose a program in the framework of overcoming the cause the restriction on its activity.
(4) The process of the implementation of the stipulation as mentioned in paragraph (1), and the period for the company to meet the stipulation as mentioned in paragraph (3), are settled by Government Regulations.
Article 18
(1) In the event that the composing of a program as mentioned in Article 17 paragraph (3) has been implemented, but it turned out that the company in question is not able or not willing to erase the things that caused the restriction as mentioned, and then the Minister ill annul the company’s business license.
(2) The revocation of the business license will be announced by the Minister in a daily newspaper in Indonesia with a wide circulation.
Article 19
In the event that the company has succeeded in taking measures in the framework of overcoming the cause of the restriction on its activity in the period of time as mentioned in Article 17 paragraph (4), then the company in question ill run its business again.
CHAPTER X
BANKRUPTCY AND LIQUIDATION
Article 20
(1) Without prejudice the validity of the stipulation in the Bankruptcy Regulation, in the event of annulment of a business license as mentioned in Article 18, the Minister, based on the interest of the public, could ask the Court to declare the company in question as bankrupt.
(2) The right of the policyholder concerning the division of wealth of an Insurance Company against Losses or a Life Insurance Company that had been declared bankrupt, is a priority right.
CHAPTER XI
STIPULATION ABOUT CRIME
Article 21
(1) Whoever commits or orders someone else to run an insurance company without a business license as mentioned in Article 9, will be threatened with a criminal jail sentence for 15 (fifteen) years at the longest and a fine of Rp. 2.500.000.000,- (two billions and five hundred rupiahs) at the most.
(2) Whoever embezzles an insurance premium is threatened with a criminal jal sentence for 15 (fifteen) years at the longest and a fine of Rp. 2.500.000.000 (two billion five hundred million rupiah) at the most.
(3) Whoever commits an act of embezzling by replacing, giving as guarantee, and or mortgaging without right, the wealth of a Life Insurance Company or an Insurance Company against Losses or a Reinsurance Company, is threatened with a criminal jail sentence for 15 (fifteen) years at the longest and a fine of Rp.2.500.000,- (two billion and five hundred million rupiahs)
(4) Whoever accepts, receives stolen goods, or mortgages, or resells company’s wealth as mentioned in paragraph (3), while he knows or should know that those goods are assets of an Insurance Company against Losses or a Life Insurance Company or a Reinsurance Company, is threatened with a criminal jail sentence of 5 (five) years at the longest and a fine of Rp. 500.000.000/ (five hundred million rupiahs) at the most.
(5) Whoever either individually or collectively commits an act of falsifying documents of an Insurance Company against Losses or a Life Insurance Company or a Reinsurance Company, is threatened with a criminal jail sentence of 5 (five) years at the longest and a fine of Rp. 250.000.000/ (two hundred and fifty million) rupiah at the most.
Article 22
Without prejudice the criminal stipulation as mentioned in Article 21, an Insurance Company that does not fulfill the stipulations in this Law and the regulations of Implementation, is subjected to an administrative sanction, indemnity, or a fine of which its stipulation ill be determined by Government Regulations.
Article 23
The criminal act as mentioned in Article 21 is a felony.
Article 24
In the event that the criminal act as mentioned is Article 21 has been committed by or on behalf of a legal body or an undertaking which is not a legal body, then the criminal indictment is executed toward that body or toward them ho gave orders to commit that criminal act or ho acted as leader of that crime, or toward both.
CHAPTER XII
STIPULATION CONCERNING CHANGE
Article 25
(1) An Insurance Company that has obtained a business license from the Minister at the moment this Law as established, is declared to have got a business license based on this Law.
(2) An Insurance Company as mentioned in paragraph (1) is obliged to adapt itself with the stipulations in this Law.
(3) The stipulation concerning the adaptation as mentioned in paragraph (2) and the Minister determines the period.
Article 26
The laws and regulations concerning insurance companies which already exist at the moment this Law commenced to be valid, as long as they do not contradict this Law, are declared to remain valid until the laws and regulations that replaced them are established, based on this Law.
CHAPTER XIII
CLOSING STIPULATIONS
Article 27
With this Law being validated, the Ordinance on Life Insurance companies (Gazette of 1941 No. 101) is declared not to be valid anymore.
Article 28
This Law comes into effect on the date it was enacted.
For public cognizance, it is instructed to promulgate this Circular by inserting the same in the State Gazette of the Republic of Indonesia.
Ratified in Jakarta
On the 11th of February 1992
THE PRESIDENT OF THE REPUBLIC OF INDONESIA
[signed]
SOEHARTO
Promulgated in Jakarta
On of February11, 1992
MINISTER/SECRETARY OF THE STATE OF THE REPUBLIC OF INDONESIA
[signed]
MOERDIONO
THE GAZETTE OF THE REPUBLIC OF INDONESIA OF 1992, NO. 13
