09 Apr 2025
A Comparative Review of Insurance Company Liquidation Procedures applicable under 2015 regulations as against the latest regulatory updates that were introduced in 2024

As Indonesia’s financial regulatory landscape evolves, the Financial Services Authority (Otoritas Jasa Keuangan / “OJK”) continues to refine its policies to address the sector’s changing needs. 

In 2024, the OJK released OJK Regulation No. 38 of 2024 (“POJK 38/2024”), which governs the dissolution and liquidation of insurance companies. This regulation amends and supplements OJK Regulation No. 28 of 2015 (“POJK 28/2015”), introducing several new provisions on the same subject. 

Following these amendments, POJK 38/2014 introduces several key changes that affect the processes for liquidation and dissolution of Indonesian insurance companies. 

The regulatory processes under both POJK 28/2015 and POJK 38/2024 generally follow the Indonesian Company Law. However, these regulations were introduced to address the unique obligations of insurance companies towards their customers, which require tailored procedures. 

Further details regarding the specifications of these amendments are set out below, highlighting the key differences and relevant changes as between POJK 28/2015 and POJK 38/2024. 

1. Duties and Authority of the Liquidation Team

Liquidation processes applied by Indonesian insurance companies, much like general corporate liquidation processes, begin with approval of the proposed liquidation plan by company shareholders in a General Meeting of Shareholders ("GMS"). (We note that this approval must also provide for appointment of a liquidation team responsible for carrying out the comprehensive liquidation process).

The original POJK 28/2015 sets out several duties for the liquidation team, including requirement for handling of matters related to the dissolution of the company, management of employee affairs, settlement of the company’s assets and liabilities, and completion of reporting requirements to the OJK. Notably, POJK 38/2024 adds new duty for the liquidation team: if the company being liquidated is a registered debtor, the team to submit a written request to OJK to update its debtor status in the financial services information system. 

This aims to improve the accuracy of debtor information during liquidation, enhancing transparency for stakeholders.

2. Timeframe for Completion of Liquidation

The original POJK 28/2015 set a deadline of two years from the establishment of the liquidation team to complete the liquidation process, with the possibility of extending this period up to two additional one-year extensions, subject to approval from either the GMS or OJK, as regulated under Article 28 of that regulation. 

While POJK 38/2024 keeps the two-year rule, it now allows OJK to apply alternative resolution measures (Article 28, paragraph 6) if liquidation cannot be completed within the permitted timeframe. This provision offers greater flexibility to OJK with respect to the resolution of extended liquidation cases.

3. Payment of Liabilities to Policyholders, Insured Parties, or Participants (with respect to Sharia Based Insurance financing)

POJK 38/2024 preserves the provisions of POJK 28/2015 concerning the priority of liability payments to policyholders, stipulating that premium returns or payment obligations to policyholders, insured parties, or participants (in Sharia-based insurance) must take precedence over payments to other creditors of the liquidating insurance company.

Previously, POJK 28/2015 focused on the liquidation team’s duty to transfer active insurance policies to another insurer or return premiums to policyholders in event the transfer was ultimately not feasible (Article 25) and set conditions for the transfer of insurance portfolios. In contrast, POJK 38/2024 introduces two key clauses (Article 25, paragraphs 5 and 6). First, POJK 38/2024 specifies that premium returns or transfers must be aligned with the remaining coverage value. Second, when the company's assets are lower than its liabilities, the premium refunds ought to be made proportionally. These updates offer clearer guidance for managing policyholder entitlements when company assets fall short of liabilities.

4. Unclaimed Funds After Liquidation

Regarding unclaimed funds remaining after liquidation processes were completed, POJK 28/2015 established that in the event creditors do not claim their rights within the liquidation time frame, the remaining funds must be deposited with the court (Article 38, paragraph 4). By contrast, POJK 38/2024 expands this by allowing unclaimed funds to be deposited with a Probate Office (Balai Harta Peninggalan), in line with applicable laws. 

5. Status of the Legal Entity Post-Liquidation

In alignment with the provisions of the Indonesian Company Law, POJK 28/2015 states that a company undergoing liquidation’s status as a legal entity will cease following the publication of the liquidation conclusion in the State Gazette (Article 41). While POJK 38/2024 maintains this provision, the 2024 regulation implements a new provision (Article 42, paragraph 2), which states that from the date the company’s business license is revoked, the shareholders or those equivalent (e.g. members of a cooperative engaging in insurance business) must assume responsibility for the liquidation process. 

The business license is revoked after OJK approves the Director’s report confirming all obligations of the liquidated company have been settled. This is final step in completing the liquidation process of an insurance company prior to announcing the company’s dissolution in the State Gazette. Once the announcement is made in the State Gazette, the liquidation process will be considered complete, and the company will cease to exist, releasing the shareholders from all obligations. 

However, Article 42, paragraph 2, could hold shareholders responsible for liquidation activities, even after the company has lost its legal status.
 

ABNR Commentary: 

POJK 38/2024 upholds the priority rights of policyholders, insured parties, and participants to receive payments from a liquidated insurance company before other creditors. 

However, such claims continue to be limited by the relevant firm's available assets and liquidity. Certain breakthroughs, such as a cut-through arrangement that enables policyholders, insured parties, and participants to directly seek recovery from the reinsurance company of the liquidated insurance company, may offer greater assurance to the interested parties during the liquidation process. This arrangement may potentially help restore public trust, particularly given current scepticism that exists toward insurance companies in Indonesia as a result of several cases involving both state-owned and private insurers failing to meet their obligations to policyholders, for instance the Asuransi Jiwasraya case.

We also observe that the provisions of Article 42, paragraph 2 —which states that shareholders or equivalent parties must assume responsibility for the liquidation process—raise several uncertainties that would benefit from further regulatory clarification. While POJK 38/2024 introduces this requirement, it does not clearly define the scope or extent of such shareholder responsibilities. 

Key areas of concerns include:

• Potential conflict with Indonesian Company Law

Under prevailing Company law, shareholders' liability is strictly limited to the value of their shareholding. Any extension of post-liquidation obligations may conflict with this principle. 

• Timing of responsibility

The provision appears to imply shareholder responsibility after the company’s legal entity status ceases, which contradicts the conventional understanding that obligations end upon dissolution.

• Ambiguity in liability scope

It is unclear whether the responsibility extends beyond administrative tasks (e.g., appointing or overseeing the liquidation team) or includes financial obligations tied to unresolved liabilities. POJK 38/2024 does not provide clear limitation on the scope of applicability of the above task. 

Given these uncertainties, it is important for insurance company investors and shareholders to seek clarification on the regulatory intent and practical implications of this provision. Clearer guidance from OJK would help mitigate legal risk and ensure consistency with existing corporate governance frameworks under Indonesian law. 

By partner Ayik C. Gunadi (agunadi@abnrlaw.com), senior associates Muhammad Muslim (mmuslim@abnrlaw.com), and Rosevelt Riedel Lontoh (rlontoh@abnrlaw.com)

This ABNR News and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.