LPS Prepares Insurance Policy Guarantee Rules, Awaiting Green Light from Government

 

 

JAKARTA, Investortrust.id — Indonesia’s Deposit Insurance Corporation, or LPS, is prepared to issue a regulation that would establish the Insurance Policy Guarantee Program, or PPP, set to be launched in 2028. However, finalization awaits a government regulation currently under review by the Ministry of Finance and the Financial Services Authority (OJK).

 

“Once the government regulation is issued, we will ratify the LPS Regulation (PLPS) within one to two weeks,” said Chairman of the LPS Board of Commissioners Purbaya Yudhi Sadewa during the LPS Putih Abu-Abu Financial Festival 2025 on Saturday, May 31. “We’ve nearly finalized the technical rules, including PLPS, PDK, and others—it’s just a matter of waiting.”

 

One of the main provisions under discussion is the Risk-Based Capital (RBC) requirement for insurance companies. Indonesia currently applies a 200% RBC threshold, while other countries range from 120% to 150%.

 

“We’ll align this with global practices—it will be part of a single entry requirement into the program,” Purbaya added.

 

The PPP is a mandate under Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector (UU P2SK). It requires LPS to begin policyholder protection within five years of the law’s enactment, or by 2028.

 

LPS expects insurance firms to improve their financial health by the deadline. “If they fail to meet the criteria by then, they may not qualify for the program—and their future viability will be at risk,” said Purbaya.

 

No Repeat of 1998 Crisis, LPS Chief Assures

 

Separately, Purbaya said a financial crisis like that of 1997–1998 is unlikely to recur, citing early warning systems developed by the Financial System Stability Committee (KSSK), which includes LPS.

 

“LPS has built a real-time early warning system that monitors the economy and banking sector in detail,” he said. “I believe there’s little chance we’ll be caught off guard.”

 

The KSSK—comprising the Ministry of Finance, Bank Indonesia, OJK, and LPS—was formed under Law No. 9 of 2016 to coordinate the prevention and management of systemic financial crises. The committee meets regularly to evaluate risks and prepare strategic responses.

 

Rp 255 Trillion in Reserves Secures Banking Deposits

 

LPS currently holds Rp255 trillion (approximately $15.9 billion) in reserves to guarantee bank deposits, a figure expected to grow to Rp270 trillion ($16.8 billion) by year-end.

 

“These reserves are placed in cash, government bonds—both in rupiah and US dollars—and include conventional and sharia instruments,” said Purbaya.

 

Over the last five years, LPS has nearly doubled its asset base, from Rp130 trillion to over Rp200 trillion, a reflection of stronger deposit growth and improving financial sector health. Third-party funds (DPK) grew 4.75% year-on-year as of March 2025, and LPS projects 6% growth by year-end.

 

“The economy and banking sector are still expanding, and so is deposit growth. Our reserves are more than adequate,” Purbaya said.