OJK Reveals Progress on Sharia Business Unit Spin-offs in Insurance and Multifinance Sectors

Regulatory Update on Insurance Sector Spin-offs

The Financial Services Authority (OJK) has disclosed that six Sharia Business Units (UUS) in the insurance and reinsurance industry are currently in the process of spin-offs ¹

. Ogi Prastomiyono, OJK's Executive Head of Insurance, Reinsurance, and Pension Fund Supervision, revealed that by the end of 2025, two UUS have established new full-fledged Sharia insurance companies. Additionally, two other UUS have completed portfolio transfers to existing Sharia insurance companies.

Multifinance Sector Developments

In a related development, OJK has been monitoring UUS in the multifinance sector that have met the criteria for spin-offs as per OJK Regulation No. 46/2024 ²

. Agusman, OJK's Executive Head of Supervision for Financing Companies, stated that these UUS are being monitored based on their 2025 audited financial reports. The regulation mandates multifinance companies with Sharia business units to spin off if they meet certain criteria, such as core capital and total assets thresholds.

Regulatory Framework and Implementation Timeline

The spin-off requirement is mandated by Law No. 40/2014 on Insurance, which requires Sharia business units with certain assets to operate as independent Sharia insurance companies. OJK Regulation No. 11/2023 further details the spin-off process, allowing two methods: establishing a new Sharia insurance company or transferring the portfolio to an existing one. The deadline for compliance is set at the end of 2026.

Current Status and Future Plans

As of end-2023, 41 UUS had submitted their Sharia business unit separation plans. By end-2025, this number evolved with 28 UUS planning to establish full-fledged Sharia insurance companies and 13 UUS opting for portfolio transfers. Ogi noted that the developments are influenced by domestic and global economic dynamics, risk appetite, and strategic considerations of shareholders. OJK will continue to analyze and assess the business plans of these companies.

Implications and Next Steps

The spin-off process reflects OJK's efforts to strengthen the Sharia financial services sector. Companies deciding not to continue Sharia operations and returning their licenses to OJK will be based on strategic considerations and business scale. The regulatory push is expected to enhance the overall structure and compliance of Sharia insurance and multifinance operations in Indonesia.