Iran: Iran's Capital, Insurance Markets

Last Updated: 18 December 2017
Article by Shanda Consult Ltd

Following Iran's nuclear deal, many foreign insurance companies specially from Italy, Germany and from the UK announced their willingness to invest in Iran's insurance industry. For instance, Munich Reinsurance Company officials, one of the world's leading reinsurers, signed a contract with Saman Insurance Company in July 2017 to provide reinsurance coverage in life and capital formation categories, investing in the insurance industry and providing training to managers and experts in insurance sector.

Another insurance company which expressed readiness to invest in Iran's insurance sector, is London's Lloyd which plans to establish offices in Iran.

Abdolnasser Hemmati, President of Central Insurance of Iran (Bimeh Markazi Iran) said during the opening ceremony of Kish Invex 2017, "Iran's insurance industry has a great potential for attracting foreign investment". He noted that some of international insurance companies are ready to invest in Iran's insurance sector.

Kish Invex was established with the aim of introducing investment opportunities in Iran and to provide networking opportunities for foreign companies and Iranian business people. In Kish Invex foreign businesses and investors will have the opportunity to gain better understanding of Iran's business environment and to meet Iranian officials who are in decision taking positions and also market leaders from private and public sectors. Participants in exhibition are mostly operating in the following fields:

  • Capital Market, Finance, Banking and Insurance,
  • Logistics and Transportation,
  • Construction and Infrastructure,
  • Hospitality and Tourism,
  • Energy (Oil, Gas & Petrochemicals), and
  • Trade-Industrial Free Zones;

According to statistical information, in 2016 Iran's insurance market worth around $8 billion in premiums which is 0.18% of the international insurance market and Iran ranked 42nd in the world in terms of insurance. This indicates the huge potential for development in insurance sector. In terms of geographical distribution of premium, Iran stands at fourth place, from among 14 countries in the MENA region, after Turkey (20%), the UAE (19%) and Saudi Arabia (18%), by representing 14% of the insurance premium in the region.

The Central Insurance of Iran (CII) reported in 2016 total of 58.6 million insurance policies were issued in Iran and 32.5 million claims were compensated. The share of the private sector from the premium made and the claims paid were 62.6% and 57.3%, respectively.

The Iranian insurance industry needs to re-establish ties with insurance and reinsurance providers in the international market in order to improve the internal insurance sector as well as external business relations.

For the Iranian insurance industry rebuilding international ties and to attract foreign investment is a desire, however, the international sanctions against Iran were not the only obstacle in doing business internationally, so we can't expect that the nuclear deal and partial removal of sanctions can make a huge improvement in global positioning of Iran.

There are a few main weaknesses that should be considered and fixed in order to attract foreign companies and to expand efficient international relations with insurance companies.

Masoud Karbasian, Iran's Economy Minister, pointed out some of these issues during the 23rd Conference on Insurance and Development. Some of these issues are as follows:

Alignment with International Regulations

Iran's insurance industry needs to align with global regulations in order to establish ties with International companies and to build trust for an efficient cooperation.

Credit Rating

Credit rating is an essential part of evaluating an insurance company, so either Iranian insurance companies seek to cooperate with reinsurance companies or foreign investment, credit rating is one of main factors for assessment of the creditworthiness of an insurance company.

Updating Know-How

Due to the international sanctions against Iran, local businesses had limited access to the world's latest know-how and technologies. So, it is a mandate for Iranian firms and specifically insurance companies to train themselves and to improve their skills and knowledge in order to fill the gap between local and international standards.

Iran's Capital Market

Since Iran's capital market is a low risk market with high profitability, is attracting many countries for foreign investments, Shapour Mohammadi, head of Iran's Securities and Exchange Organization, said in the opening ceremony of Kish Invex 2017. He added that Iran's SEO (Securities and Exchange Organization) trying to boost transparency of Iran's capital market by cooperation with the Central Bank of Iran (CBI) and Central Insurance of Iran (CII) in order to improve international standards in financial reporting systems.

According to Mohammadi, the volume of foreign investments in Iran's capital market has shown a significant growth over the past year. As of October 2017, the number of individuals and legal entities who invested in Iran reached 944 from 813 about a year ago.

Natural Disasters Insurance

After the recent 7.3 magnitude earthquake that shook western province of Kermanshah and the regions bordering Iraq which caused damages to 30,000 houses and destroyed 2 villages completely, the importance of natural disasters insurance coverage was again raised by the Central Insurance of Iran.

Hemmati, president of the Central Insurance of Iran, said "More than 85% of residential units are not currently covered by fire insurance, as the type of insurance that also contains earthquake insurance," He pointed that if fire and earthquake insurance become as mandatory for people, this will be beneficial for the country in other areas of insurance as well, such as personal auto policies, government workers' life insurance and students' accident insurance. 

Shanda Consult offers various services mainly to German and Chinese investors in Iran to facilitate Foreign Direct Investment into Iran, coaching intercultural communication for Joint Venture partners and market surveys and project implementation in Iran.

For a personalized consultation regarding your investment and project related needs in Iran, please contact us.

Source: Financial Tribune

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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