Indonesia’s State Own Enterprises (SOEs) ministry is planning to merge three reinsurance companies to create an entity with a combined capital of Rp 10 trillion ($714.29 million) by 2017.
As a first step, the ministry approved the merger of PT Reasuransi Umum Indonesia (RUI) into PT Reasuransi Indonesia Utama (RIU). The new entity will manage two subsidiaries, general insurance PT Asuransi Asei Indonesia and PT Reindo Syariah.
The agreement was signed by chief executive officer of RIU Frans Sahusilawane and Director of RUI A. Sya’roni, in the presence of SOE minister Rini M. Soemarno and executive Chair of Financial Services Agency (OJK) Firdaus Djaelani on Friday.
According to the minister, the decision is part of government’s commitment in 2013 to establish a strong national reinsurance company. The merger will be followed by the incorporation of another reinsurance firm PT Reasuransi Nasional Indonesia in 2017.
Meanwhile, deputy minister for financial sectors Gatot Trihargo said, the new entity will have a total capital Rp1.5 trillion, targeting to reach Rp10 trillion by 2018.
He said, Indonesia Re will raise capital from insurance companies such as PT Asuransi Kredit Indonesia (Askrindo), PT Jaminan Kredit Indonesia (Jamkrindo), PT Asuransi Jasa Indonesia (Jasindo) and PT Asuransi Sosial Angkatan Bersenjata Republik Indonesia (ASABRI).
”We want the reinsurance firm to get stronger with market share touching 50% by 2019. We expect the merger process will complete by 2017,” Gatot said.
Firdaus said, to OJK has released new rule for the insurance business in Indonesia and will support the creation of market in the country.
Currently, he said, most of the insurance premium worth Rp30 trillion is placed in foreign reinsurance. Total reinsurance premium this year will reach Rp35 trillion with a net deficit $1 billion.
RIU Chief Executive Frans Sahusilawane said, the company expects to raise insurance premium of Rp 3 trillion with net income Rp500 billion this year and targets a corresponding figure of Rp5 trillion with net income Rp1 trillion next year.
To finance the plan, RUI has issued mandatory convertible bonds Rp900 billion bought by accident insurance PT Jasa Raharja, Jamkrindo and PT TASPEN. Currently, he said, the three parties have a commitment to invest up to Rp3 trillion to Indonesia Re until 2017.