Tenggara Strategics, Jakarta – The Financial Services Authority (OJK) has suffered another legal setback against Kresna Life Insurance. This defeat took place at the Jakarta State Administrative High Court (PTUN) on June 14, where OJK's appeal to maintain the revocation of Kresna Life's license was overturned. Moving forward, OJK is now contemplating filing a cassation appeal, which could potentially result in the legal enforceability of the overturned license revocation of Kresna Life if they are unsuccessful.
Problems with Kresna Life began to surface when their customers reported them to the OJK for defaulting on payments for policies known as Kresna Link Investa (K-LITA) and Protecto Investa Kresna (PIK) due to liquidity issues stemming from the COVID-19 pandemic. Kresna Life failed to pay claims on 12,000 insurance policies, amounting to Rp 6.4 trillion (US$390 million). Further investigation revealed that Kresna Group founder and CEO Michael Steven, along with two other suspects, had issued investment products through Kresna Sekuritas, PT Pusaka Utama Persada, and PT Makmur Sejahtera Lestari without the necessary investment-management licenses. They are accused of misappropriating investor funds without consent, resulting in losses of up to Rp 337.4 billion.
The money-laundering and payout default cases led the OJK to impose restrictions on Kresna Life's business activities (PKU) on Aug. 3, 2020, with the condition that Kresna Life submit and implement financial restructuring plans (RPK). However, the insurance company failed to execute all the 10 RPKs aimed at improving its capital adequacy, prompting the OJK to revoke Kresna Life's business license on June 23, 2023. Subsequently, Kresna Life filed a lawsuit to overturn the license revocation at the Jakarta State Administrative Court (PTUN), which granted their appeal on Feb. 22, 2024. In response, the OJK filed an appeal to uphold the revocation of Kresna Life's license.
The Jakarta PTTUN ruling No. 238/B/2024/PT.TUN.JKT upheld the Jakarta PTUN ruling No. 475/G/2023/PTUN.JKT, granting the lawsuit filed by PT Duta Makmur Sejahtera, a major shareholder of Kresna Life, and Michael Steven against OJK head of insurance, guarantee, and pension funds Ogi Prastomiyono and OJK's board of commissioners. According to OJK deputy commissioner for insurance, guarantee, and pension funds Iwan Pasila, the OJK will definitely file a cassation appeal against the Jakarta PTTUN's rejection of its appeal. He stated that the revocation of Kresna Life's business permit was enacted in accordance with established procedures and regulatory provisions to protect Kresna Life's policyholders.
However, some Kresna Life policyholders have reservations about OJK's decision to appeal, as Kresna Life's solvency is below 100 percent and its risk-based capital (RBC) is below 120 percent. This means they could potentially receive as little as 20 percent of their money and lose the rest. Nonetheless, Kresna Life Liquidation Team head Huakanala Hubudi said the company is proceeding with the liquidation process by evaluating the assets owned by Kresna Life to make the payments.
What we've heard
The defeat of the OJK's lawsuit to revoke Kresna Life's business license for the second time at the PTUN has triggered speculation in the financial market. According to one analyst, it further demonstrates the OJK's powerlessness in dealing with Kresna's actions.
What has happened at Kresna Life so far cannot be separated from the OJK's poor oversight of Kresna. This means that the OJK also played a role in Kresna's default. The misuse of authority by an insider at the OJK was used by the judge as a consideration in the decision to favor Kresna.
On the other hand, Kresna is also close to several officials and former officials in the financial market. This closeness is said to be a factor that has allowed Michael Steven, the owner of Kresna, to remain at large despite his status as a suspect in an embezzlement case.
One former official who is close to Kresna is Bacelius Ruru, the former head of the Capital Market Supervisory Agency (Bapepam). In the capital market, Ruru is a highly respected figure. He once served as the main commissioner of Asuransi Kresna Mitra (ASMI) – a subsidiary of Kresna Group. Furthermore, the embezzlement of customer funds occurred while Ruru was commissioner.
If insiders are not prosecuted and the LHP is annulled by law, Kresna will remain untouchable. Many have said that regulators do not dare to investigate Ruru. In fact, besides being a commissioner, he also served as chairman of the Audit Committee.
In addition to Ruru, there is Robinson Simbolon, the former head of the Legislation and Legal Assistance Bureau of Bapepam-LK, which has been renamed the OJK. He once served as a commissioner when PT Kresna Graha Investama (KREN) was plagued with defaults on the policies of its subsidiary, Asuransi Jiwa Kresna.
Many Kresna Sekuritas customers were unable to withdraw their investment returns after their funds were placed in KREN and ASMI. Customer funds were placed and rotated in the stocks of Kresna Group.
The IDX never seriously examined the financial reports of Kresna Group's subsidiaries. The speculation at the time was that the IDX was reluctant to deal with Ruru and Robinson despite Kresna Group being suspected of falsifying the financial reports of subsidiaries related to them.
[This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia's political and business landscape.]