Came into force last month, the new law calls for Indonesia’s conventional firms to spin off their sharia-compliant units, reported Reuters.
Indonesia is currently practicing ‘windows’ approach that allows insurance companies to provide sharia-compliant products alongside conventional ones.
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The move is expected to spur the entry of additional foreign players into the market, which is centered on takaful products.
However, the law comes with a cap on the ownership to a maximum of 80 percent, thereby restricting foreign firms from having complete control of their operations in the country.
Allianz Indonesia chief of sharia and corporate communication Kiswati Soeryoko was cited by Reuters as saying, "We are confident that with the existing operational infrastructure, we will be ready when it is time to spin off."
Based on the mutuality, Takaful is a concept that companies follow to oversee a pool of funds contributed by all policy holders, without necessarily bearing the risk themselves.
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By GlobalDataEurope’s Allianz, UK’s Prudential, Canada’s Manulife Financial and France-based AXA are among the major firms offering takaful products in the southeast Asian country.
