Indonesia's Sharia Insurance Industry Navigates Regulatory Changes

Challenges Ahead for Sharia Insurance

The Indonesian Sharia Insurance Association (AASI) has identified substantial challenges facing the sharia insurance industry as it approaches the 2028 deadline for implementing the Group Insurance Company Classification by Equity (KPPE) regulation ¹

. The new capital requirements and classification system pose significant compliance challenges for industry players.

Positive Impact of New Regulations

Despite these challenges, recent regulatory changes are driving growth in the sharia insurance sector. The Financial Services Authority (OJK) has mandated that insurance/reinsurance companies spin off their sharia units by the end of 2026, as stated in POJK 11/2023 ²

. This regulation is expected to lead to an increase in the number of sharia insurance companies, potentially creating a more competitive market.

Industry Response to Regulatory Changes

Major industry players are already adapting to the new regulatory landscape. PT Prudential Life Assurance (Prudential Indonesia) views the spin-off regulation as a positive development that will foster healthy competition and drive innovation in the industry ²

. Similarly, PT AXA Financial Indonesia has announced the spin-off of its sharia unit and establishment of a new sharia insurance company, following OJK's approval ³

Source 3

https://keuangan.kontan.co.id/news/axa-financial-indonesia-umumkan-spin-off-uus-dan-mendirikan-perusahaan-baru

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Implications for the Industry

The combination of challenges and opportunities is reshaping Indonesia's sharia insurance landscape. While the KPPE regulation presents compliance hurdles, the spin-off requirement is expected to expand the market and potentially lead to better services through increased competition. As the industry navigates these changes, innovation and strategic adaptation will be crucial for companies to thrive.