State-owned insurance company Asuransi Sosial Angkatan Bersenjata Republik Indonesia (Asabri) claims that the losses of Rp 10 trillion (US$ 728.9 million) it suffered from plunging stock investments are only temporary and will not affect its ability to pay customers’ claims.

The insurer, which manages the social insurance and pension funds of personnel of the National Police, the Indonesian Military (TNI) and employees of the Defense Ministry, said the losses were caused by the declining value of Asabri’s investment portfolio as a result of unfavorable capital market conditions.

The Jakarta Composite Index (JCI), the Indonesia Stock Exchange (IDX) main gauge, recorded modest growth of 1.7 percent last year, not enough to make up for the 2.54 percent contraction recorded in 2018.

“Our management already has a mitigation plan to recover the decline in investment,” the insurer said in a statement obtained by The Jakarta Post on Monday.

Asabri also claimed that the losses did not affect its operations as it was still able to pay its policyholders’ claims on time and that it will work to provide the best service for all policyholders and stakeholders.

The insurer has been implicated in the recently revealed alleged corruption at state-owned insurer PT Asuransi Jiwasraya after its stock portfolio plunged by more than 95 percent. Most of the stocks held are similar to those of Jiwasraya, which were deemed as “low quality stocks” by the Supreme Audit Agency (BPK). 

Jiwasraya is facing a corruption investigation by the Attorney General’s Office (AGO) and the BPK. Jiwasraya failed to meet Rp 12.4 trillion in payments for matured policies due in December 2019, leading to allegations of investment mismanagement.

State-Owned Enterprises (SOEs) Deputy Minister Kartika “Tiko” Wirjoatmodjo told the press on Monday that his ministry would overhaul Asabri’s board of directors following the losses.

He said the ministry would also prepare a different strategy for handling Asabri’s problems compared with measures it took to rescue the ailing Jiwasraya.

“[Asabri] is a social insurer, so its business-to-business aspects are different from Jiwasraya, which is a commercial insurer,” he said in Jakarta, adding that his ministry was waiting on the BPK audit result on Asabri before taking any further measures.

Meanwhile, Financial Services Authority (OJK) chairman Wimboh Santoso said Asabri was not under his institution’s supervision, despite its status as an insurer, but fell under the authority of the Defense Ministry, the Finance Ministry and the BPK.

However, he said the OJK would create a new investment guide applicable for all non-bank financial institutions, including insurance companies, to prevent similar investment mistakes faced by Asabri and Jiwasraya from happening again.

“We will soon issue a new risk-management guideline specifically aimed at nonbank financial institutions,” he said, adding that it would base its supervision on risk, which include a company’s investment instruments, and not just its balance sheet.