SYDNEY Dec 11 Insurers in Indonesia, Southeast
Asia's largest economy, will have to wait until at least next
year for a new law that will require the spin-off of their
sharia-compliant units, an official at the country's financial
regulator told Reuters.
The move could reshape Indonesia's Islamic insurance, or
takaful, market by spurring mergers as firms try to meet capital
requirements for their full-fledged Islamic units.
A draft law is now with parliament but other legislative
priorities means it won't be enacted this year as previously
anticipated, said Alis Subiyantoro, head of the sharia insurance
subdivision at the country's financial services authority.
"The draft is still in discussion. The government asked to
look at other legislation so it was postponed until next year."
"It covers all areas - licensing, market conduct, corporate
governance, consumer protection - for both takaful and
non-takaful firms," he said.
Assets in Indonesian takaful firms grew 42.8 percent to 13.1
trillion rupiah ($1.1 billion) as of December 2012 from 9.15
trillion rupiah a year earlier, data from the regulator showed,
representing 2.3 percent of total industry assets.
The law would give three years for insurers to comply with
requirements to spin-off their Islamic units, although that
timeframe is also under discussion, Subiyantoro added.
Minimum capital requirements for full-fledged takaful firms
would be set at 50 billion rupiah, compared with 100 billion
rupiah for conventional insurers, which could prompt smaller
operations to either merge or close.
Indonesia's takaful market is dominated by windows: there
were five full-fledged takaful firms versus 37 sharia units of
conventional insurers, as of December 2012.
Takaful windows enable firms to offer sharia-compliant and
conventional products side by side, provided client money is
segregated, but the practice is not widespread as in commercial
banking where Islamic windows are commonplace.
Takaful is based on the concept of mutuality; the takaful
company oversees a pool of funds contributed by all policy
holders, but does not necessarily bear risk itself.
Indonesia's takaful sector has attracted global firms keen
to capitalize on rapid economic growth in the world's most
populous Muslim country, a market of 240 million consumers.
Firms offering takaful products include Europe's top insurer
Allianz, Britain's biggest insurer Prudential,
Toronto-based Manulife Financial Corporation, and
French insurer AXA.
Passing Indonesia's insurance law would close the last
market that allows takaful windows to operate, helping develop
the country's nascent Islamic finance market which still lags
behind neighbor Malaysia.
The only other regulator that has allowed takaful windows is
Pakistan, which passed a law in July of last year to that effect
but which has been challenged in court by local takaful firms.
The law has been in legal limbo ever since.