Iranian Insurance increased from 28 to 31 companies in the year ended March 2017 and also three foreign insurance companies, London Lloyd Insurance Broker (Kay International Plc), Swiss Evasan Insurance Company and Lebanese Nasco Karaoglan Brokers Insurance Company entered Iran.
In the year ended March 2017, insurance sales and service networks expanded and general agents were more than 33,400, with life insurance agent 10,600, insurance brokers 650 and loss accountants reached 214 (total more than 44,000 active agents). The insurance companies also increased from 1,043 to 1,079 branches in the year ended March 2017, as Iran was is among the first three countries in the region in premium services.
The increase in penetration rate of insurance from 2.08 to 2.18 in the year ended March 2017. Increasing branches of insurance companies to 1,079 in the year ended March 2017. Insurance companies increased to 31 in the year ended March 2017. Foreign insurance broker companies entering Iran in the year ended March 2017. Increasing private sector share in insurance industry.
In the year ended March 2017, volume of earned premium in the insurance market reached to more than 8.94 bn USD with 22.5% increase over the same period in the last year. Insurance premium per capita has been growing in recent years and increased by 111.83 USD in the year ended March 2017.
In the year ended March 2017, Iran insurance penetration rate was 2.18%, which is 6.1% higher than in the year ended March 2016. According to 2016 statistics, Iran insurance industry stands at the 62th place according insurance penetration index.
In the year ended March 2017, premiums were 111.83 per capita, which has grown by 16% compared to the previous year. According to per capita premium index, Iran has the world’s 68th place.
There are 31 licensed insurance companies in Iran, including one state-owned and 30 private companies. The amount of corporate monopoly in insurance market in the year ended March 2017 based on Herfindahl-Heirshnman index (total squares of each insurance company share) is 1,733 units, which was reduced and improved by 181 units (9.5%) compared to the year ended March 2016. However, only five insurance companies: Iran, Asia, Dana, Alborz and Parsian (each share over 6%) accounted for a total of 68.6% premiums generated by the market.
Non-government insurance companies share from premiums and loss was 53% and 48% in the year ended March 2012 to 63% and 57% in the year ended March 2017, respectively
Insurance fields performance
Insurance industry is generally divided into life and non-life insurance. In the year ended March 2017, Iran non-life insurance premiums share was about 87% and life insurance was about 13%, while the total world life insurance share (in 2016) was about 55%. Also, in terms of number, 95% belonged to non-life insurance.
In the year ended March 2017, earned premium were 8,830 mn USD and 59 mn insurance were issued. Motor (TPL) and surplus accounted for the largest share of premiums (39.5%) and the number of insurance policies issued (34.6%). This kind of insurance, together with driver insurance is compulsory and accounts for a share about 43.2% of premium production and 67% of total issued insurances.
43.4% of paid loss was allocated to T.P.L insurance. Approximately 30.7% of the loss was paid to health insurance. The share of life accounted for 6.6% of insurance market losses.
Insurance companies’ performance
Total premium production reached about 8,925 mn USD in the year ended March 2017. Nine insurance companies: Iran, Asia, Dana, Alborz and Parsian, Pasargad, Kowsar, Moalem and Karafarin (each share over 3%) accounted for 82.7% of market premium and 17.3% are distributed among 20 companies.
Nearly 6,000 mn USD loss was paid in the year ended March 2017. Iran Insurance Company paid the most loss by more than 42% of total paid loss during the mentioned year.
In the year ended March 2017, insurance industry loss ratio was 65% which comparing the same period of the previous year had an increase of 1.2 units.
At present, of active insurance companies, 8 companies are authorized to do reinsurance. Central Insurance of I.R. Iran with 2nd ranking in reinsurance capacity is the 9th member of insurance family. In the year ended March 2017, amount of reinsurance of each unit risk among public and private insurance companies totaled 564.63 mn USD.
Studying financial solvency of insurance companies for five consecutive years may indicate their growing or declining trend. This survey shows the companies succeeded with financial recovery program in improving their solvency and companies gone down deviating from the path. Amin Reinsurance had the highest and Novin had lowest solvency in the year ended March 2017.
Sanctions & post-sanctions
During sanctions period, insurance industry was one of the sectors suffering many losses, so that activities in this area were limited. Insurance companies were indirectly affected by sanctions which led in worsened economic situation and businesses, thus affecting insurance companies’ performance. Reinsurance was one of main sanctions subsets, which prevented insurance companies to rely on foreign companies’ reinsurance and as a result, the risk of insurance was increased. After lifting sanctions, Iranian insurance industry is expected to remove obstacles; Activists in this industry should consider increasing the capacity of the insurance industry so as to be
prosperous in the post – JCPOA period.
Internationalizing of insurance industry has begun and import of knowledge and technology are being prepared. Certainly, Iran’s insurance industry can trade off with the world.In terms of reinsurance, after the JCPOA period,
internal insurance companies can choose better partners to collaborate. Thus, conditions for foreign investors entry will be provided. In addition to all the conditions, with the lifting of sanctions, Iran’s insurance will also be able to enter the new insurance markets which were not possible before during the sanctions.
Foreign insurance companies joint venture with various financial and insurance partnerships can be expected in Post-JCPOA period.
Insurance industry can benefit from post sanction period. Compared to Turkey, Iranian insurance market is a small amount with a 6 bn USD premium. After JCPOA, international investors have paid more attention to participating in various industries. Insurance companies have always been attractive for investment; as foreign
competitors have shown more tendency.
- High scalability
- Extensive agent network
- Low managerial and expertise capacity
- IT Inefficiency in insurance industry
- High share of T.P.L insurance and health
- Lack of dynamic money and capital market
- Lack of rating for insurance companies
- Insurance cultural poverty in Iran
- Low Insurance penetration rate relative to global average
- Tax payments and multiple tolls
- Due to low level insurance coverage in Iran, promoting insurance culture and potential for attracting insurance contracts are possible.
- Iranian 80 mn population and high young population (low claims ratio for life insurance)
- Increased volumes of oil and gas projects: Due to huge volume and lack of progress of Iranian oil and gas
reserves in recent years (sanctions), lifting sanctions will result in projects increase, which in turn will create
a potential market for domestic and foreign insurance companies Increasing International trade volume.
- Considering possible increase in trade volume with other countries, the transportation and related sector experiences significant growth which will also affect the volume of insurance contracts
- Reducing market monopoly over the last few years
- Promoting people’s view on saving for retirement
- Increasing education level in society
- Development of Life insurance growth
- Favorable demand growth in insurance market
- Industry’s strong dependency on political conditions
- Market resistance against changing rates
- Ascending inflation rate
– Lack of actuarial and risk modeling knowledge.
– Operational risks (dealers and insurers fraud).
– Low efficiency and high cost of reinsurance cover and lack of risk sufficient diversification, monopoly in reinsurance (loss of relevant income opportunities for insurance companies).
– Government pricing on T.P.L insurance and loss of this insurance field (premium and loss are rated outside insurance industry) as the main insurance product in the portfolio of insurance companies (about 50%) and insurance companies’ efforts to offset this gap through payment management.
– The effect of hyperinflation and its impact on low interest in life insurance as one of remarkable fields of the insurance industry. (According to Central Insurance and experts, one of the factors behind the lack of development of the insurance industry in Iran is life insurance and its role in long-term financing).
– The problem of health insurance’ complimentary contracts and lack of transparency in government spending and interventions in health service tariffs.
– Numerous taxes and some excluding as tax deductive expenses.
Investment advantages & incentives
– Low insurance coverage in Iran and the possibility of promoting insurance culture and potential for attracting insurance contracts.
– Lower loss ratio for life insurance.
– Concerning the high volume of oil and gas reserves in Iran and the lack of progress in the projects in recent years, lifting sanctions will increase the volume of projects, which in turn will lead to a broad potential for the insurance companies.
– With lifting the sanctions and possible increase in international trade volume the scope of transportation and related areas will grow significantly and insurance contracts will be affected .
– Development of the tourism industry and the improvement and renovation the transportation fleet in tourism and considering the high capacity of tourism attraction in Iran and travelling barriers reduction to Iran, it is expected that the volume of travel to Iran will increase, which can boost the volume of travel insurance policies and travel insurance.
– With sanctions lifting, followed by renovation of aviation fleet and joint venture partnerships with global automakers, the loss coefficient for these fields will decrease, which can be a good revenue source for insurance companies.
– The insurance market in Iran is still untouched and has a very high access potential.
Laws & Regulations on foreign investment
– According to the documents of Islamic Republic of Iran’s Central Insurance strategic goals, “attracting foreigners in Iran’s insurance market” and “enhancing cooperation with foreign insurance companies” considered as the strategic goals.
– According to Article 113 of the 5 th Development Plan approved in 2011, foreign investors can enter Iran’s insurance sector if they comply the general policies of Article 44 in Islamic Republic of Iran’s Constitution and Rules as mentioned in the following:
– Partnership between foreign and domestic commercial insurance companies, (by giving priority to the private sector) in order to create trade insurance company in Iran.
– Attracting foreign investment by domestic insurance companies (includes granting shares to foreign entities).
– Establishing branches and agencies for foreign trade insurance companies.
– According to the law approval by Iran Central Insurance agreement in June, 1971 transmitting share of Non- governmental insurance institutions to the foreign individuals or legal entities is allowed up to 20% and more than 49% will be due to the suggestion of Central Insurance and approval of Insurance Supreme Council
and the Cabinet. Iran insurance institution’s share transfer to foreign governments, (or more than 49% of their shares transfer) individuals or legal entities are strictly prohibited.
– According to the Islamic Republic of Iran’s insurance Laws and Regulations, such as permissive forms for establishing and operating insurance companies, combined insurance companies, (life and other insurances), there is no prohibition for establishing such businesses currently.
– According to regulations of Iran Central Insurance and Insurer Establishment, there is the possibility of owning stock for foreign individuals or legal entities. Accordingly, these individuals allowed possessing the stock up to 20% of public organizations with Iran’s Central Insurance agreement.
– More than 20% to 49% possession is by recommendations of Iran Central Insurance high council’s confirmation and the Cabinet’s approval. Iran’s insurance institutions shares transfer to foreign governments or more than 49% of their shares transfer to individuals or legal entities of foreign nationals are strictly prohibited.
– According to the related insurance Laws and Regulations, insurance firms owning stock in Iran is investigated, whether directly or indirectly to any individual (individual or legal entities), so that any individual cannot own directly or indirectly more than 20% of the insurance agency’s shares.
– Due to Iran’s Central Insurance and Insurer Establishment Regulations and “foreign insurance institutions trust” regulation, they must be held an amount of the two strands of life insurance for each and other types by the Central Insurance of Islamic Republic of Iran. The deposition amount in each of the two
mentioned cases, is at least 500,000 USD or as its equivalent in foreign currencies accepted by Islamic Republic of Iran’s Central Bank. In addition, each of the foreign insurance institutions must add the deposition of their earnings year by year so that it reaches to at least double amount of which approved by the Insurance
Council. Increase in depositions over and above this amount is optional. It should be noted that at least the anticipated deposition is the same amount as high council of insurance adopted in law (of 500,000 USD).
– Reinsurance contracts with reinsurers/brokers operate abroad to transfer some of risks and reinsurance contracts or direct insurance firms in Iran subject to the provisions of Article 73 of the Iran’s Central Insurance and Insurer Establishment Regulations and High Council of Insurance Approval Regulations.
– Due to Iran’s Central Insurance and Insurer Establishment and the latest approved regulations, all active insurance companies in Iran should make reinsurance, 25% of life insurance and 15% of other fields of their direct insurance transactions by Islamic Republic of Iran’s Central Insurance. Currently, the only insurance field, which its purchase is mandatory by individuals and also supply them by insurance company’s regulations, is the field of civil liability insurance of vehicle owners against Motor (TPL).
– The insurance coverage purchase is mandatory actions under the Laws and Regulations as well as foreign national’s treatment and accidents.
Insurance industry in Capital Market
The insurance is almost a young industry in Tehran Stock Exchange and approximately accounts for market value of 661 mn USD with share of 0.6% in stock market value. The P / E ratio of this is 6.34.