Bambang Pamungkas
Jakarta, Indonesia – The Indonesian Financial Services Authority (OJK) has announced significant headway in the mandated spin-off of Sharia Business Units (UUS) from conventional insurance companies, a pivotal regulatory initiative designed to strengthen the nation’s Islamic finance sector. As of April 6, 2026, a total of 13 insurance companies are actively engaged in the process of spinning off their UUS, with five entities having already completed the transition. This update underscores OJK’s commitment to fostering a robust and independent Sharia insurance landscape in Indonesia.
Hernawan Bekti Sasongko, Deputy Chairman of the OJK Board of Commissioners, detailed the progress during a press conference following the OJK’s Board of Commissioners Meeting (RDK) on Monday, April 6, 2026. He elaborated that among the five companies that have successfully completed their spin-off, three have opted to establish entirely new, independent Sharia insurance entities. The remaining two have chosen an alternative route, transferring their Sharia portfolios to existing full-fledged Sharia insurance companies. This dual approach provides flexibility while ensuring the continued provision of Sharia-compliant insurance services. "Regarding the follow-up on the spin-off of insurance UUS, there are three companies that have spun off by establishing new businesses and two others have transferred their portfolios, and 13 are in the process of spin-off," Hernawan stated.
The Regulatory Impetus: Strengthening Islamic Finance
The mandate for the spin-off stems primarily from OJK Regulation No. 11/2023 on the Spin-Off of Sharia Business Units of Conventional Insurance Companies, Conventional Reinsurance Companies, Sharia Insurance Companies, and Sharia Reinsurance Companies (POJK 11/2023). This landmark regulation, which came into effect on July 21, 2023, sets out a clear framework and timeline for UUS to separate from their conventional parent companies and become independent Sharia insurance entities. The regulation specifies that UUS that have operated for more than 10 years or have total assets exceeding 50% of the parent company’s total assets must spin off by December 31, 2026. For UUS that do not meet these criteria, the spin-off deadline is extended to December 31, 2030. This staggered approach aims to provide sufficient time for companies to prepare for the significant capital, operational, and structural adjustments required.
The overarching objective of this policy is multifaceted. Firstly, it seeks to enhance the competitiveness and resilience of the Sharia insurance sector by allowing dedicated Sharia entities to operate with greater autonomy and focus. Secondly, it aims to promote capital strengthening, as new independent entities are required to meet specific minimum capital requirements, thereby bolstering their financial stability. Thirdly, the move is expected to improve corporate governance and risk management within the Sharia segment, ensuring that Sharia principles are embedded at the core of the business model without being diluted by conventional operations. Ultimately, this strategic separation is envisioned to foster a more vibrant, innovative, and trusted Sharia insurance ecosystem in Indonesia, aligning with the nation’s broader ambition to become a global hub for Islamic finance.
Progress and Ambitious Targets
The recent announcement by Hernawan Bekti Sasongko highlights the ongoing momentum towards achieving these regulatory goals. The 13 companies currently undergoing the spin-off process are in various stages, from initial regulatory filings and capital raising to operational restructuring and market preparation. This robust activity indicates a strong commitment from the industry to comply with OJK’s directive and capitalize on the growing potential of the Sharia market.
Looking ahead, OJK had previously indicated ambitious targets for the sector. As of December 15, 2025, Ogi Prastomiyono, Chief Executive of Supervision of Insurance, Guarantees, and Pension Funds OJK, stated that at least 29 Sharia Business Units were projected to complete their spin-off and transition into full-fledged Sharia companies by the end of 2026. This would significantly expand the number of dedicated Sharia insurance players in the market. Prastomiyono further projected that, with these actions, the total number of Sharia insurance companies in Indonesia would reach 45 by 2026. This represents a substantial increase from the 17 companies that had successfully completed their spin-off by the end of 2025, suggesting a rapid acceleration in compliance and market expansion throughout 2026. The latest figures from Hernawan in April 2026 confirm that the industry is actively working towards these targets, with the 5 completed spin-offs contributing to the growing count and the 13 in-process companies poised to further swell the ranks of independent Sharia insurers.
Strategic Choices: Spin-Off vs. Portfolio Transfer
While the regulatory push for spin-offs is clear, OJK acknowledges that not all UUS are positioned or willing to form new standalone entities. Ogi Prastomiyono previously revealed that some insurance companies have opted to return their UUS operating licenses to the OJK. This strategic decision signifies that these companies do not intend to continue their Sharia business independently. Instead, they choose to transfer their existing Sharia customer portfolios to other established Sharia insurance companies.
Prastomiyono emphasized that the paramount concern in such scenarios is consumer protection. "There are several [companies that are not spinning off UUS]. The key is that they must not harm consumers. So, it is only a portfolio transfer to another Sharia insurance company," he explained in Jakarta on December 15, 2025. This ensures that policyholders’ interests are safeguarded, and their Sharia-compliant coverage remains uninterrupted.
The primary reasons cited for companies choosing not to spin off their UUS often revolve around internal capabilities and strategic alignment. Prastomiyono noted that some companies assess their internal resources, including capital, human resources, and technological infrastructure, as insufficient to establish and sustain a new independent Sharia entity. In such cases, transferring the portfolio to a larger, more established Sharia insurer allows these companies to exit the Sharia segment gracefully while ensuring their customers continue to receive Sharia-compliant services within a potentially stronger ecosystem. This approach can also be seen as a form of market consolidation, allowing for greater efficiency and specialization within the Sharia insurance landscape.
The Broader Landscape of Indonesian Islamic Finance
The ongoing spin-off process is a critical component of Indonesia’s broader strategy to solidify its position as a global leader in Islamic finance. As the world’s most populous Muslim-majority nation, Indonesia possesses immense potential for the growth of its Sharia financial services sector. The country’s Islamic finance industry has demonstrated robust growth over the past decade, with assets under management (AUM) in the banking, capital market, and non-bank financial institutions (IKNB) sectors consistently expanding.
The Sharia insurance segment, in particular, has been a focus area for development. While still holding a relatively smaller market share compared to its conventional counterpart—estimated to be around 5-7% of the total insurance market—its growth trajectory has been steeper. Data from the OJK indicates a steady increase in Sharia insurance premiums and assets, driven by rising public awareness, increasing demand for ethical and Sharia-compliant products, and supportive government policies. The spin-off mandate is expected to significantly accelerate this growth by creating more dedicated and focused Sharia entities, thereby enhancing product innovation, distribution channels, and overall market penetration. The OJK’s vision of reaching 45 Sharia insurance companies by 2026 signifies a deliberate effort to scale up the sector and unlock its full potential.
Implications for the Industry and Consumers
The transformation brought about by the spin-off policy carries profound implications for both the insurance industry and Indonesian consumers.
For the Industry:
- Increased Competition and Specialization: A larger number of independent Sharia insurance companies will intensify competition, encouraging greater innovation in product development, service quality, and pricing. It will also foster greater specialization, as these entities focus solely on the unique demands of the Sharia market.
- Capital Strengthening: New entities will need to meet stringent capital requirements, leading to stronger balance sheets across the Sharia insurance sector. This could attract further investment, both domestic and foreign, into the Islamic finance ecosystem.
- Talent Development: The expansion of dedicated Sharia entities will necessitate a greater demand for skilled professionals with expertise in both insurance and Sharia principles, driving talent development and specialized education in Islamic finance.
- Operational Autonomy and Efficiency: Separating from conventional parents allows Sharia entities to streamline their operations, invest in Sharia-compliant technology, and tailor their business strategies without the constraints or complexities of a dual operating model.
- Potential for Mergers and Acquisitions: While new entities are forming, the competitive landscape might also lead to consolidation among smaller players in the long run, as companies seek economies of scale and market dominance.
For Consumers:
- Wider Product Choice: Consumers seeking Sharia-compliant insurance will benefit from a broader array of innovative products and services tailored to their specific needs and values, covering everything from family takaful (life insurance) to general takaful (property, health, travel).
- Enhanced Trust and Transparency: Dedicated Sharia entities, with independent governance structures and Sharia Supervisory Boards, are expected to foster greater trust and transparency among policyholders, assuring them that their policies are truly compliant with Islamic principles.
- Improved Service Quality: As companies focus exclusively on the Sharia segment, there is a potential for improved customer service, deeper understanding of Sharia customer needs, and more personalized offerings.
- Greater Financial Inclusion: The growth of the Sharia insurance sector contributes to broader financial inclusion, providing ethical and faith-based financial solutions to a larger segment of the Indonesian population.
Economic Impact and Future Outlook
The successful implementation of the UUS spin-off policy is expected to have a tangible positive impact on Indonesia’s economy. A robust and growing Sharia insurance sector can contribute to national economic growth by mobilizing long-term funds for investment in Sharia-compliant sectors, fostering job creation, and enhancing financial stability. It also strengthens Indonesia’s appeal as an investment destination for global Islamic finance players.
The OJK’s proactive regulatory stance underscores its commitment to nurturing a healthy and dynamic financial sector that caters to the diverse needs of its population. The journey to a fully independent and thriving Sharia insurance landscape is complex, requiring continuous collaboration between regulators, industry players, and other stakeholders. Challenges such as capital adequacy, human capital development, technological infrastructure, and public education remain. However, the current progress, with 13 companies actively engaged in spin-off and 5 already completed, demonstrates a strong collective will to overcome these hurdles.
As Indonesia moves closer to its 2026 deadline for mandatory spin-offs, the transformation of its Sharia insurance sector is poised to create a more competitive, resilient, and innovative market. This strategic shift not only promises to elevate the quality and accessibility of Sharia-compliant insurance for Indonesian consumers but also solidifies the nation’s aspirations to become a leading force in the global Islamic economy. The regulatory framework, coupled with industry commitment, sets a promising trajectory for the future growth and development of Sharia finance in the archipelago.
