TEMPO.CO, Jakarta - FINANCIAL Services Authority (OJK) came under tight scrutiny in the midst of default and graft scandals that hit Asuransi Jiwasraya. Many, including the House of Representatives (DPR), put partial blame on the financial regulatory agency for failing to closely supervise the state insurer. The mismanagement is estimated to have caused the state losses of up to Rp17 trillion.

Chairman of OJK’s Board of Commissioners, Wimboh Santoso, 62, said the agency had already foreseen the problems in 2004, and Capital Market and Financial Institution Supervisory Board (Bapepam-LK) – which would later become OJK – had warned the state-owned enterprises (SOEs) ministry which hold the majority shares in Jiwasraya. “The bottom line was they needed a capital injection. But there were never follow-ups,” Wimboh said in the special interview with Tempo at the new OJK office in Solo, Central Java, on February 16.

Before seeking bailout, Jiwasraya made futile efforts to improve its capital adequacy ratio through reinsurance and asset revaluation for several years. “These measures failed to bring in additional cash flow, therefore, in December 2012 they came up with the saving plan,” explained the financier who was involved in the post-monetary crisis (1997-1998) banking reform project. It was the same saving plan, he said, that created whole new problems for Jiwasraya.

Wimboh, who succeeded Muliaman Hadad in July 2017, dismissed the allegation that the OJK was negligent in its oversight over Jiwasraya. He said the OJK even terminated Jiwasraya’s reinsurance policy in early 2013. He added that the absence of an ecosystem in the money market for insurance products also played a role in the escalation of the scandal. The insurance industry lacks short-term lending facility such as the interbank call money market of the banking sector which helps banks facing liquidity difficulties.

Wimboh sat down with Tempo reporters Mahardika Satria Hadi and Ahmad Rafiq, following a program to promote micro wakaf (charity) financing in Ibnu Maktum Islamic Boarding School, Karanganyar, Central Java. In the interview that lasted nearly two hours, he talked about various issues: from the problems Jiwasraya and other insurance companies are facing, the widespread emergence of dubious investment companies to mushrooming online lenders.

When did the OJK first notice the looming troubles in Jiwasraya?

In 2004 when the OJK was still Bapepam-LK. We had warned the management (of Jiwasraya) and informed its owner, that is, the SOEs ministry. The bottom line was they needed capital injection but there wasn’t any follow-up. Perhaps they were still confident that they could still manage through other measures.

What other measures did they take?

Improving the capital adequacy ratio through reinsurance in 2008. That was for the balance sheet. It offered a temporary solution and they also had other businesses to cover the shortfall although, in reality, these businesses never performed. In 2012, the authority – still Bapepam-LK – said they really had to find other ways. They opted to revaluate assets. Actually, they were already facing liquidity problems that same year. More aggressive sales of general insurance did not generate results either. They then came up with the savings plan in December 2012.

Is the product offered by only Jiwasraya?

Not, Jiwasraya is not the only insurer that offers the plan. The plan is for a combination of saving and protection and promises a certain amount of income in a certain time frame. It is similar to deposits and is sold via banks under different names but in essence, they are all the same. This is what bancassurance is about. When I was with Bank Indonesia, we had a lengthy debate on whether this practice should be allowed or not. In the end, banks were granted permission on certain conditions. For example, they must manage them well and clients must be made aware that they are not banks’ products. Banking products are guaranteed by the Deposit Insurance Corporation (LPS) whereas these products are not. The saving plan is not a pure insurance product.

Has Jiwasraya been reminded of this effect?

Bapepam-LK has reminded it to regularly review the product.

What is OJK’s role in this case after the agency was established?

Well, reminding Jiwasraya. The OJK terminated reinsurance since January 2013. We always maintain communication.

When the scandal broke out, all eyes fell on the OJK because its oversight function was deemed ineffective since the alleged violation had been going on for long.

Now, everything is open and that is the agreement among all the components: Jiwasraya, the SOEs ministry, and the OJK. Why must we cover it up? This is precisely the time. If you ask why it was not monitored in the past, then please ask the previous OJK board.

Doesn’t the OJK have the authority to intervene in troubled insurance companies?

Our authority is clear including to regulate. Right now, even the exit policy is not clear.

Read the full interview in Tempo English Magazine