Indonesia:New state-owned life insurer seeks more funds

Asuransi Jiwa IFG (or IFG Life) is seeking additional funds following the commencement last month of operations that include taking over the restructured portfolio of the financially stricken state-owned life insurer, Jiwasraya. The move is to ensure that IFG Life will be financially healthy.

IFG Life will obtain the additional funds through fundraising or fresh capital injections through additional state capital participation (PMN) in 2022.

IFG Life president commissioner Pantro Pander Silitonga said the company's main target this year is to complete the migration of Jiwasraya's business portfolio to IFG Life. This task itself requires significant funding, reported Katadata.co.id. He explained that with IDR30tn ($2.1bn) to IDR35tn required for the portfolio transfer and PMN of IDR22tn, there is still a shortfall of IDR13tn.

IFG Life is looking at various sources of funding that include the sale of assets of Jiwasraya that would raise around IDR12tn. The company also plans to conduct additional fundraising of around IDR4-5tn. "We also expect additional PMN in 2022 to be around IDR2tn. We have to make sure, when the migration is complete, IFG Life can stay healthy,” he said.

Jiwasraya

Jiwasraya, which defaulted on payouts to customers, had suffered three fundamental problems, said Mr Kartika Wirjoatmodjo, deputy minister of the Ministry of State Owned Enterprises.

First, solvency and liquidity problems had been present for a long time but were not resolved. Instead, there was window dressing of financial statements. Liquidity issues arose because the company had sold savings-type insurance products that carried guaranteed high interest rates.

Second, Jiwasraya had weak corporate governance and engaged in risky investment activities. There were no guidelines on curbing investments in high-risk assets.

Third, customer confidence declined accompanied by increased withdrawals or payouts and lower sales. There were not enough assets to meet liabilities.

Source: Asia insurance review