Introduction

On November 24, 2025, the Financial Services Authority (OJK) issued OJK Regulation Number 26 of 2025 on the Management of Assets and Liabilities of Insurance Companies and Reinsurance Companies (“Regulation 26/2025”) which took effect on that date. Regulation 26/2025 replaces the previous regulatory framework, which the OJK considers no longer aligned with industry developments, and strengthens the application of prudential principles in investment risk management and financial soundness.

Regulation 26/2025 clarifies the rules on investment diversification, particularly those governing placements in Related Parties and non-Related Parties. OJK emphasizes the need to enhance the previous regulatory framework to enable insurance and reinsurance companies to better manage solvency risks. Regulation 26/2025 repeals OJK Regulation Number 71/Regulation.05/2016 on the Financial Health of Insurance Companies and Reinsurance Companies (“Regulation 71/2016”), as last amended by OJK Regulation Number 5 of 2023 on the Second Amendment to OJK Regulation Number 71/Regulation.05/2016 on the Financial Health of Insurance Companies and Reinsurance Companies (“Regulation 5/2023”), and serves as the new legal basis for asset and liability management in the insurance sector.

Comparison

The following is a comparison between Regulation 26/2025 and Regulation 71/2016 as last amended by Regulation 5/2023:

Key Provisions

Solvency Level Obligations and MMBR

In Article 3, the Company is required to maintain a Solvency Level at all times of at least 100% of the Risk-Based Minimum Capital (MMBR). Furthermore, Article 3 paragraph (1) letter b requires the Company to set a higher internal solvency target, namely at least 120% of the MMBR, taking into account the risk profile and stress test results. The MMBR calculation must take into account credit, liquidity, market, insurance, and operational risks. For companies marketing Investment-Linked Insurance Products (PAYDI), the MMBR calculation must be increased by a certain percentage of investment funds sourced from Sub-funds.

Investment Limits on Related Parties and Business Groups

Article 16 regulates the maximum investment limits for assets other than Sub-funds (company assets) to prevent risk concentration. Investment in Related Parties is limited to a maximum of 10% of Company Equity. Meanwhile, investment in a single Party that is not a Related Party or a single Group of Investment Recipients that is not a Related Party is limited to a maximum of 25% of total investment. If the limit is exceeded due to market movements (such as exchange rate fluctuations or fair value changes), Article 20 categorizes this as an ‘excess’ (rather than a violation), but the Company remains required to formulate an action plan for its resolution.

Strict Restrictions on Direct Participation

The OJK tightens the rules on direct equity participation in non-public companies. In accordance with Article 9, the Company is prohibited from engaging in direct participation other than in three types of entities: financial services institutions, technology-based companies for financial products, or companies supporting the insurance business. The aggregate value of such direct participation is capped at a maximum of 50% of Company Equity. Every direct participation plan must be included in the Business Plan and must obtain OJK approval before execution.

PAYDI (Unit Link) Asset Management

Article 39 requires a full segregation between the accounting records of Sub-fund (PAYDI) assets and company assets. The Company is prohibited from transferring assets between Sub-funds or to company assets, except for portfolio adjustments that are not detrimental to policyholders. Regarding investment, Article 44 establishes separate limits for each Sub-fund: investment in Related Parties is a maximum of 10% of the investment value per Sub-fund, and in a single non-related party is a maximum of 25% of the investment value per Sub-fund. In addition, Sub-fund investments may be placed overseas only for foreign-currency PAYDI policies. All Sub-fund assets must be administered at a Custodian Bank.

Admitted Investment Instruments and Rating Requirements

Articles 5 and 6 detail the types of permissible investment assets (Admitted Assets), such as Time Deposits, Government Securities (SBN), Corporate Bonds, Shares, Mutual Funds, and Pure Gold. Corporate Bonds must carry an investment grade rating from a securities rating agency recognized by the OJK. Specifically for Debt Securities and/or Sukuk (EBUS) Without Public Offering (formerly MTN), Article 6 paragraph (4) requires an AAA rating (highest), collateral worth 100% of the nominal value, and issuance by State-Owned Enterprises (SOEs) or institutions granted special authority by laws and regulations for central government investment management.

Management of Non-Investment Assets

Article 25 sets out the limits on recognized non-investment assets. Cash and Banks overseas are limited to a maximum of 1% of Equity. Direct closing premium receivables (including coinsurance) are only recognized if their age is a maximum of 2 months from the date of coverage or due date. Similarly, coinsurance and reinsurance claim receivables are limited to a maximum age of 2 months. Assets in the form of self-owned buildings (offices) are limited in value to a maximum of 25% of Equity.

Prohibition on Affiliate Transactions and Dividends

Article 22 prohibits the company from transferring assets to shareholders or Related Parties other than through arm’s length transactions. The Company is also prohibited from providing loans to shareholders or Related Parties. Furthermore, Article 52 prohibits the payment of dividends if it causes the company's equity to fall below the minimum limit or causes the internal solvency target to be unachieved.

Guarantee Fund Obligations

Article 55 requires the establishment of a Guarantee Fund as a final protection for policyholders if the company is liquidated. The amount of the Guarantee Fund is set at a minimum of 20% of minimum Equity. This amount is dynamic following business volume: for Life Insurance, it is increased by 2% of reserves for PAYDI and 5% of reserves for premiums of products other than PAYDI and unearned premium reserves; whereas for General Insurance, it is increased by 1% of Net Premiums, 0.25% of reinsurance premiums, and 2% of reserves for PAYDI. This fund must be placed in liquid instruments (Time Deposits/SBN) and administered at a Custodian Bank.

Reporting and Publication

Articles 68 to 73 require the company to prepare annual financial statements (audited), quarterly, monthly, and actuarial reports. The Company must publish a summary of its annual financial statements on its website and in national newspapers, as well as announce the summary of monthly reports on the company website no later than 10 working days after the month ends.

Transitional Provisions

Regulation 26/2025 provides a transitional period to allow the industry to adjust to the applicable provisions. Article 80 stipulates that companies currently holding direct participation investments outside the permitted sectors (Article 9 paragraph 1) or exceeding the 50% equity limit (Article 9 paragraph 2) must adjust them no later than two years from the date this Regulation comes into force (i.e., no later than November 24, 2027). During this period, existing investments remain recognized as Admitted Assets. If adjustments have not been made after this deadline, the investments will no longer be accounted for in the solvency level calculation.

Article 84 also clarifies the status of Medium Term Notes (MTN) instruments held before this Regulation came into effect. Such instruments are treated as EBUS Without Public Offering and remain recognized as long as they do not conflict with the provisions in this Regulation. Additionally, Article 83 states that the arrangements regarding minimum equity in Regulation 71/2016 remain valid until December 31, 2026, ensuring companies retain certainty regarding capital requirements during the transition period.

Closing

Regulation 26/2025 significantly revises the asset management framework for insurance companies, particularly through strengthened segregation between PAYDI assets and company assets, and recalibrated investment limits on related parties which are now calculated based on equity. For companies, the regulation prompts a restructuring of investment portfolios, including reassessing non-strategic direct participations and reducing exposure to affiliated business groups. Management also needs to review all PAYDI investment agreements, ensure compliance with new reporting obligations, and prepare adjustment plans for assets exceeding limits during the two-year transition period to avoid impacting financial health levels.