In September 2014, the government of Indonesia announced changed rules for foreign investors.



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Inception date: 23 Oct 2014 | Removal date: open ended

FDI: Entry and ownership rule

On 23 September 2014, the Indonesian House of Parliament passed a new insurance law, which revokes Law nr. 2 of 1992 on Insurance Business.
Among other features, the law on the Indonesian insurance industry introduced changes in the ownership of insurance business companies (hereinafter: IBCs). Whereas the IBCs can still be owned up to 80% by foreign shareholders, the remaining 20% have to be held by Indonesian citizens (art. 7(1)a of the insurance law). Prior to this legislation, the minority part of 20% could have been owned by either Indonesian citizens or Indonesian legal entities. This clause was used by foreign IBCs in the past such that local subsidiaries were owning minority shares of the local company. After the enactment, foreign IBCs will have 5 years (art. 88(1)) to comply with the new rules.
Also, according to the new law, all assets or risks located in Indonesia must be insured with a local insurer, as long as there is any local IBC willing to do so. The rules also stipulate that Indonesian insurers and reinsurers have to maximize the reinsurance coverage of the local market.
Similar to the banking sector, the new law requires that each insurance company has a 'single presence' on the Indonesian market, i.e. a person or legal entity can hold only one of the following types of IBCs in Indonesia:

  • Life insurance company
  • General insurance company
  • Re-insurance company
  • Syariah life insurance company
  • Syariah general insurance company
  • Syariah re-insurance company.

As this restriction does not apply to the government and there is only one large Indonesian player on the insurance market, the state-run Asuransi Jiwasraya, this section of the Law will mostly affect foreign companies.
The new rules comes into force 30 days after the enactment, i.e. 23 October 2014, but is yet subject to the President's signature.
The list of affected partner countries was compiled based on the largest foreign insurance companies in Indonesia at the time of implementation. These are: UK's Prudential plc and Aviva, Canada's Manulife Financial, Germany's Allianz, Japan's Sumitomo Life Insurance Co. and Dai-ichi Life, France's joint venture AXA Mandiri, China's AIA Financial andAustralia's Commonwealth Life.


On 20 January 2020, the Indonesian government issued regulation 3/2020 reversing partially the restriction. According to article 6(2a), an insurance company may surpass the 80% cap on foreign investment if it decides to raise more capital and cannot find sufficient funds from an Indonesian entity.

The amendment also scraps the requirement for an Indonesian partner.

Regulation 3/2020 came into force on 20 January 2020. Given that it did not scrap the investment restriction entirely, this intervention continues to be classified as implemented.