Indonesia's financial regulator will encourage local insurance companies to pursue initial public offerings to have more access to capital, an official said on Monday.

"In the past, domestic owners of capital were not strong enough, but now there are many that are strong enough," Firdaus Djaelani, a commission board member of the Indonesian financial services authority, told reporters.

"The commitment has to be long term because a new life insurance business will only bring in profits after five to six years."

The Indonesian government plans to issue a regulation to cut the size of the stake that foreigners can own in a local insurer to less than 80 percent, Djaelani said. The regulation will only apply to new investors, he added.

The Jakarta stock exchange has risen around 20 percent so far this year, outperforming the 12 percent gain for the MSCI South East Asia stock index.

Insurance companies operating in Indonesia include PT Prudential Life Assurance (Prudential Indonesia), PT BNI Life Insurance, PT Asuransi Allianz Life Indonesia and AXA Mandiri.

Indonesia's insurance sector has seen a spate of acquisitions in the past few years as foreign companies seek to capitalise on the low coverage and attractive growth rates in Southeast Asia's largest economy.

Japan's Sumitomo Life Insurance Co bought a 40 percent stake in PT BNI Life Insurance, the life insurance arm of PT Bank Negara Indonesia Tbk, while Dai-ichi Life Insurance Co Ltd acquired 40 percent of PT Panin Life.