Indonesia’s new regulation seen to boost takaful sector – Fitch Ratings

This is expected to strengthen the business profiles of takaful businesses and the sector.

Recent changes in rules regarding the spin-off requirements for conventional insurers' takaful windows in Indonesia will have a positive impact on the development of the country's takaful sector in the long term, predicted Fitch Ratings.

The new regulations, issued by Indonesia's Financial Services Authority (OJK) in July, extend the deadline for the spin-off of sharia business units (SBUs) and outline requirements for the process. 

These rules provide an extension until December 2026 for insurers to spin off takaful windows, allowing them to focus on their competitive positioning and growth in the sector. 

Conventional insurers that haven't spun off their takaful windows will need to decide whether to separate their SBUs or transfer portfolios to full-fledged takaful companies. 

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The new regulations also encourage business synergies between spun-off takaful companies and conventional insurers under common ownership. 

This is expected to strengthen the business profiles of spun-off takaful companies and contribute to the growth of the takaful sector in the long term, considering Indonesia's large Muslim population and low insurance penetration rate. 

As of August, there were 40 takaful and three retakaful windows, along with 14 full-fledged takaful companies and one retakaful company in Indonesia.