Sanctions removal to attract major reinsurers to Iran
LONDON, August 12, 2015
The lifting of trade restrictions placed on Iran may present a significant opportunity for the Middle East and North African (Mena) re-insurance market, with European participants also expected to re-engage and seek a foothold in the country.
Following the planned suspension of a number of sanctions imposed on Iran by the US and the EU, international trade with the country is expected to increase notably over the next few years.
AM Best anticipates the re-insurance community will be excited by the prospects in Iran as it is the one of the biggest insurance markets in the region, and offers potential given its low insurance penetration, said a statement.
The Joint Comprehensive Plan of Action (JCPOA) between the US, the United Kingdom, Germany, France, China and Russia resulted in Iran reaffirming that under no circumstances would it ever seek, develop or acquire any nuclear weapons, it said.
The JCPOA agreement will result in the lifting of all UN Security Council sanctions, as well as multilateral and national sanctions related to Iran’s nuclear programme.
The EU will terminate all provisions of its regulations which cover sanctions and restrictive measures in areas including the provision of insurance and reinsurance and financial support for trade with Iran (export credit, guarantees and insurance).
Despite the sanctions, the Iranian insurance market has been growing and is one of the largest in the region, with gross premiums written (GPW) of $7.5 billion last year, although insurance penetration is low; with only one-fifth of homes being insured and the regulator stating that 31 per cent of vehicles are uninsured.
Motor and medical are the main lines of business, which is typical of the region, with compulsory motor third-party liability driving growth in premium volumes.
At present, other lines of business have low premium revenue, with very little use of property insurance in the private sector.
The commercial risks such as petrochemicals also tend to be underinsured, largely as a result of many being state property and the Iranian government being able to retain or subsidise the risks itself.
The lifting of sanctions to lead to opportunities for primary insurers given the significant levels of underinsurance in Iran, the country’s population of 78 million and its large youth representation, said AM Best.
To date, the Iranian insurance sector has operated largely as a closed market, with reinsurance business captured predominantly by the country’s domestic reinsurers, including Bimeh Markazi, Amin Reinsurance and the Iranian Reinsurance Co, and a small number of reinsurers from countries that are willing to trade with Iran.
Bimeh Markazi, which is also the regulator and supervisor of insurance activities in Iran, receives a compulsory 25 per cent quota share cession of all non-life business written by the primary market, in addition to the right of first refusal on a share of all business ceded outside Iran’s borders.
To date, the primary insurance market has used co-insurance as an additional measure, particularly for spreading large commercial risks between several market participants. - TradeArabia News Service
