Indonesia plans to close down embattled state life insurer Asuransi Jiwasraya and create a new company to settle outstanding claims, a move requiring state investment, the firm's chief executive yesterday.
The concept is to save policyholders. Policies are restructured then transferred to the new company that will be formed under the state insurance holding company using a capital injection.
Such a plan could further strain the state budget, with spending to help the economy rebound from the impact of the coronavirus pandemic seen keeping the fiscal deficit wide in the next few years. The state investment would likely happen in 2021.
The central bank is expected to finance some of the deficit by taking up bonds without receiving interest and helping the government pay some interest expenses, under a $40bn bond scheme.
The plan to close down Jiwasraya was introduced for parliamentary debate on 7 July by deputy minister of state-owned enterprises (SOEs) Kartika Wirjoatmodjo. Wirjoatmodjo said that Jiwasraya had IDR35.9tn ($2.5bn) in negative equity. Jiwasraya’s unpaid claims at the end of May amounted to IDR18tn.
Jiwasraya is the oldest life insurance company in Indonesia which is the forerunner of the Dutch life insurance company NILLMIJ van 1859, which was eventually nationalized and became state property in 1960.
Jiwasraya suffered from investment mismanagement and corruption and has been unable to pay benefits on matured insurance policies.
No comments:
Post a Comment