Indonesia does not intend to bail out a state-owned life insurer that needs an injection of more than $2 billion, the finance ministry said on Wednesday, after reports that the attorney general’s office has been asked to probe possible fraud.Asuransi Jiwasraya has faced financial woes since late 2018, when asset investments, including in risky cheap stocks, turned sour, prompting a delay in paying maturing policies.
The company, which has been put under scrutiny by the Financial Services Authority’s (OJK), needs a 32.9 trillion rupiah ($2.33 billion) fund injection to boost its risk-based capital ratio to a minimum requirement of 120%, according to company documents submitted to parliament’s finance commission.
The insurer’s short-term cash needs to pay interest, maturing policies and other liabilities until the end of 2020 amounted to 16.13 trillion rupiah, while it had only 530 billion rupiah in current assets as of September, according to the documents.
“As of now, the state-owned enterprises (SOE) ministry is leading the effort to resolve the problems of Jiwasraya. We at the finance ministry fully support this if changes in capital structure and or in ownership are needed,” the finance ministry’s spokesman Nufransa Wira Sakti said.
“So far, the SOE ministry is determined to resolve the problems without requiring additional capital injection using the state budget,” he said.
The government is struggling to meet its revenue target this year, with its budget deficit seen widening to 2.2% of GDP from 1.84%, limiting room for spending.
The attorney general’s office had received a request from the SOE ministry to look into possible fraud by the management of Jiwasraya, according to media reports citing its spokesman.
Jiwasraya’s President Director Hexana Tri Sasongko pledged in a statement to respect the legal process, while urging policyholders to be patient as it seeks to overcome its problems.
Five potential fixes were being looked at to ensure the firm met its obligations, including inviting investment in its unit Jiwasraya Putra and releasing new insurance products, he said.
Jiwasraya is the second major Indonesian life insurer to run into financial trouble after Bumiputera. The two are among the country’s oldest insurers, formed over a century ago under Dutch colonial rule, and together have millions of policyholders.
Management appointed by the OJK tried to save Bumiputera, which faced a 17 trillion asset-liability mismatch at the end of 2017, though were unable to complete a deal and the extent of its financial woes are now unclear.
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