INDONESIA Law and Practice Contributed by: Emir Nurmansyah, Monic N. Devina, D. Meitiara P. Bakrie and Nesya Ashari, ABNR Counsellors at Law
8. Insurtech 8.1 Underwriting Processes
One concern with the use of high-frequency and algo - rithmic trading is the potential breach of the market- manipulation rule under the Indonesian Capital Market Law, which prohibits action that is misleading with regard to trading activity and manipulation of securi - ties prices.
By virtue of the new OJK Regulation No 28 of 2022, which is an amendment to its predecessor, OJK Reg - ulation No 70/POJK.05/2016 on Business Opera - tions of Insurance Brokers, Reinsurance Brokers and Insurance Loss Assessor Companies (“OJK Reg 28”), insurtech is finally covered by a comprehensive regu - latory regime. Previously, the insurtech business was largely unregulated, classified as a fintech cluster, and categorised as an FSTI under the OJK. OJK Reg 28 defines the concept of “insurtech” as a digital insurance brokerage service, which is one of the activities carried out by an insurance broker company with prior approval from the OJK. A party that can carry out such activities includes either a duly licensed insurance broker or one that has not secured a business licence as an insurance broker at that time but is in the process of filing an applica - tion for an insurance broker business licence. Certain requirements are imposed by the OJK for an insurance broker to secure approval, including meeting equity requirements – ie, by submitting: • the last two quarters of the company’s financial statements for a licensed insurance broker; or • an audited financial statement by a public account - ant for a party that has not been licensed as an insurance broker. As regards the underwriting process, OJK Reg 28 clarifies that the underwriting of a digital insurance broker must be minimal – ie, a process that does not require a direct or face-to-face survey over risks, a health check, etc. For example, in motor vehicle insur - ance, there is no requirement for physical checking of the vehicle, and no medical examination would be required for life insurance for underwriting within guar - anteed acceptance criteria. 8.2 Treatment of Different Types of Insurance Insurance products in Indonesia are generally grouped into two categories from an insurance regulatory per - spective: life insurance and general insurance prod - ucts.
7.2 Requirement To Be Licensed or Registered as a Market Maker When Functioning in a Principal Capacity
Market-makers in Indonesia are only recognised for trading in commodities futures. A market-maker is defined as a party continuously quoting sell or purchase orders during trading hours. The futures exchange and futures clearing house will jointly determine parties appointed as market-makers with the approval of the head of Bappebti. However, there are no specific registration requirements for market- makers within the context of high-frequency and algo - rithmic trading in commodities futures. For securities trading, the OJK is still preparing a regulation that will require the registration of market- makers at the stock exchange. 7.3 Regulatory Distinction Between Funds and Dealers This is not applicable in Indonesia. See 7.1 Creation and Usage Regulations . 7.4 Regulation of Programmers and Programming There is still no specific regulation in Indonesia on the development and creation of trading algorithms. To the extent that programmers are only involved in the creation of the system but not actual trades, it is unlikely that they would fall under the supervision of the OJK, Bappebti, the BI or the IDX. However, if the activities progress to involvement in actual trades, they may fall within the ambit of the OJK’s digital finance innovation rule and would thus need to be registered with the OJK.
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