The bankruptcy decision of a contested life insurer
Asuransi Jiwa Kresna (Kresna Life) was declared bankrupt by the Supreme Court which granted the insurer’s bankruptcy application on June 8, 2021.
The petitioners were six clients of Kresna Life. Other clients, however, are seeking judicial review of the bankruptcy decision so that it can be overturned. They want Kresna Life to immediately settle their obligations to customers, CNN Indonesia reported.
According to customer representative Nurlaila, many customers are surprised by the bankruptcy decision because the insurer had made certain payments. Bankruptcy means that all the assets of the insurer will be taken over by the official assignee. As a result, payments to customers will be suspended until all assets have been sold.
In addition, clients also urge the Financial Services Authority (OJK) to protect consumers by intervening in the bankruptcy decision and ensuring that all amounts owed to clients are settled immediately by Kresna Life.
OJK found violations in Kresna Life. Thus, the Authority must ensure that the insurance company is responsible, declared Katadata citing unhappy customers.
“This case is not a default due to financial hardship and bankruptcy, but a violation of regulations. Kresna Life invests its clients’ funds in its affiliates well in excess of the limit allowed by the OJK, ”Nurlaila said.
Kresna Life defaulted on two of its insurance products. This decision was communicated to policyholders by circular letter on May 14, 2020. In the letter, Kresna Life CEO Kurniadi Sastrawinata explained that the COVID-19 pandemic was a case of force majeure beyond the control of the company. This condition made the investment portfolio of two of its products problematic, namely Kresna Link Investa Life Insurance (K-LITA) and Protecto Investa Kresna Life Insurance (PIK).
Kresna Life’s financial ability to meet K-LITA and PIK policy obligations has been hampered by liquidity issues.
Kresna Life then went to trial to postpone the Debt Payment Obligations (PKPU) in the Jakarta Central District Court. The insurer has sought to postpone each policy buyback transaction due from February 11, 2020 to February 10, 2021. The company has also postponed payment of investment benefits on policies maturing from May 14, 2020 to February 10, 2021. PKPU’s request has been approved.
At that time, the judges were reluctant to explain the legal considerations for the approval of the PKPU. The reason is that they didn’t have to.
The lawsuit ended with disappointed customers and creditors. They demanded legal transparency and argued that since the PKPU’s decision was not followed by the OJK, it was considered legally flawed.
Meanwhile, OJK responded by saying that he had never approved Kresna Life’s PKPU application.
The PKPU ruling was finally withdrawn in February 2021. However, clients have yet to receive payments on their policies. Alvin Lim, attorney for Kresna Life clients, said the PKPU status only serves to delay payments which are Kresna Life’s obligations.
Then the group of six Kresna Life clients filed for bankruptcy against the insurer.