Indonesia’s insurance market is being restructured as dozens of insurers separate their syariah business units – divisions within conventional insurers that offer products compliant with Islamic finance principles – into standalone companies before a regulatory deadline on December 31, 2026.
The mandate, issued by the Financial Services Authority (OJK) under Regulation No. 11 of 2023, requires all insurance and reinsurance companies with syariah windows to complete spin-offs or face licence revocation, according to law firm Assegaf Hamzah & Partners.
The latest company to complete the process is Sompo Indonesia, which commenced operations for PT Sompo Insurance Sharia (“Sompo Syariah”) after receiving its business licence from the OJK on August 7, 2026, according to OJK announcement PENG-145/PD.02/2026.
As of August 2024, 41 insurers with syariah windows had submitted spin-off work plans to the OJK, according to data cited by the Pacific Insurance Research Association (PIRA). Of those, 29 planned to continue as standalone syariah companies, while 12 indicated they would exit the syariah market and transfer their portfolios to other operators.
By February 2025, the OJK said 17 syariah business units were set for spin-off that year, with five planning to transfer their portfolios to existing syariah insurers, IDN Financials reported.
The regulation sets minimum equity at 100 billion Indonesian rupiah (IDR) for newly spun-off syariah insurance companies and IDR 200 billion for reinsurance companies, according to Assegaf Hamzah & Partners.
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For intermediaries placing business in Indonesia, the spin-off wave is creating a different market. Each new standalone syariah entity is a separate counterparty with its own licence, capital base, and governance structure. Brokers will need to reassess capacity, conduct fresh due diligence on newly formed entities, and in some cases renegotiate distribution agreements.
The 12 insurers that indicated they would exit the syariah market raise a practical question about where that capacity lands. Portfolio transfers to remaining syariah operators could concentrate risk in fewer hands.
Takaful (Islamic insurance) accounted for approximately 9% of gross written premium in Indonesia as of 2022, according to the World Bank’s Financial Sector Assessment Program technical note published in April 2024. Total insurance penetration in Indonesia sat below 1.5% in 2022, compared with nearly 4% in Malaysia and above 10% in Singapore, the same World Bank assessment found. The OJK’s Insurance Industry Development and Strengthening Roadmap 2023-2027 targets 3.2% penetration by 2027.
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General syariah insurance assets grew by 13.77% in the first quarter of 2026, reaching IDR 10.8 trillion, according to data from the Indonesian Sharia Insurance Association (AASI). AASI has set a target for syariah insurance assets to reach 20% to 25% of total insurance industry assets by 2030, according to a report published by Islamic Markets.
Eric Nemitz, president director and CEO of Sompo Indonesia in Jakarta, said the new entity is intended to sharpen the company’s syariah focus. “The establishment of Sompo Syariah allows us to serve the community with greater clarity and focus. By creating a dedicated syariah entity, we strengthen our ability to deliver protection that is compliant, responsive, and aligned with the needs of our customers,” Nemitz said.
Ratna Indrayani, CEO of Sompo Syariah in Jakarta, said: “Sompo Syariah reflects our commitment to offering protection that is fair, transparent, and grounded in syariah principles. Our focus is on serving the community with solutions that reflect modern needs while staying true to values that provide stability and confidence for our customers.”
Sompo Indonesia, part of Sompo International Holdings Ltd., has offered syariah-based insurance services since 2017. Its parent company, Sompo Holdings, Inc., holds ratings of A+ (Superior) from A.M. Best and A+ (Strong) from Standard & Poor’s.
The wider regulatory pressure on Indonesia’s insurance sector extends beyond syariah spin-offs. The OJK has also proposed new capital rules that would restrict smaller insurers’ credit and specialty lines, adding further impetus for consolidation.
