Indonesia’s LPS Revokes Licenses of 25 Insurance Companies Amidst Global Failures

Jakarta – The Lembaga Penjamin Simpanan (LPS), Indonesia’s deposit insurance agency, has revoked the licenses of 25 insurance companies between 2011 and 2025 due to financial failures. This action underscores the challenges facing the Indonesian insurance sector, which, while relatively stable compared to global trends, is not immune to industry-wide vulnerabilities.

License Revocations and Failure Rates

According to Ferdinan D. Purba, a Member of the Board of Commissioners at LPS, the revocations stem from the inability of these companies to maintain financial solvency. Of the 25 revoked licenses, approximately 17 are categorized as outright failures, while the remaining eight were closed due to restructuring or other non-failure related reasons detikFinance.

The failures break down into nine life insurance companies and eight general insurance companies.

Global Context of Insurance Failures

While Indonesia’s failure rate is comparatively lower than the global average, the industry faces consistent pressures. Globally, 428 insurance companies failed between 2011 and 2024 detikFinance. Asia ranks as the third-highest region for insurance company failures, following North America and Europe.

Failures are more prevalent in the general insurance segment globally, a pattern reflected in international policy guarantee schemes. Of the 27 members of the International Forum of Insurance Guarantee Scheme, three focus solely on general insurance, while the rest cover both general and life insurance detikFinance.

LPS Policy Guarantee Program (PPP)

In response to these challenges, LPS is developing a Policy Guarantee Program (PPP) to safeguard policyholders and maintain financial stability. Ferdinan D. Purba stated that the LPS has prepared three types of guarantees within the PPP VOI:

• Guarantee of Policy Claims: LPS will guarantee claim payments, either in full or partially, if an insurance company faces difficulties.
• Portfolio Transfer: Transferring policy portfolios to healthy companies, maintaining existing policy benefits for customers.
• Policy Returns: If a transfer is not feasible, LPS will reimburse policyholders up to a specified guarantee limit.

The program aims to cover approximately 90% of average policy values in Indonesia, with a coverage limit estimated at IDR 500 million VOI. The PPP will be automatically implemented by LPS without requiring policyholder opt-ins.

Implementation and Future Outlook

The PPP is slated to be formalized through Government Regulations (PP), with details on guarantee limits and covered products to be determined. Originally scheduled to launch in 2028 under the P2SK Law, LPS is prepared for a potential acceleration to 2027 VOI.

LPS believes the PPP will bolster public trust in the insurance industry, leading to increased premium revenue and a more stable financial sector. The program is modeled after similar successful initiatives in countries like Taiwan, France, and Denmark.

About Ferdinan D. Purba

Ferdinan D. Purba currently serves as a Member of the Board of Commissioners for the Insurance Policy Guarantee Program, elected in 2025 for a 2025-2030 term LPS. He has held various positions at LPS since 2005, including Director of the Liquidation Group and Executive Director of Finance. He is a professional accountant with over 30 years of experience in auditing, public finance, and bank resolution, and holds degrees from the State College of Accountancy (STAN) and IPMI Business School, with executive programs at Harvard Kennedy School, Wharton Business School, and MIT LPS.