Iran Insurance Company, the sole state-owned and largest domestic insurance company has finalized its long-awaited plans for boosting capital, the CEO said.
"IIC's board has approved increasing capital by 154.971 trillion rials (almost $673 million) via revaluation of fixed assets. This will increase our capital from 34.2 trillion rials ($148.6m) to 189 trillion rials ($821.6m)," Majid Bakhtiari was quoted as saying by the company's website. Capital increase was in the making for a long time.
In September 2019 the company announced that it wants to increase capital from 34.241 trillion rials ($160m) to 100 trillion rials ($470m). That did not happen and it is not clear why.
By increasing capital, the major insurer aims to expand its solvency. Solvency of insurance companies -- the capability to cover exposed risks -- is seen in numbers and larger figures indicate weaker solvency.
"This is good for our company as it lets us raise our contribution as the only government player in the market to the national economy," Bakhtiari said.
Private insurers seem not to be likeminded. The monopoly of the state giant is often challenged by other companies. IIC’s largesse in offering discounts on premiums and claims is often seen as unfair and against free competition.
Iran’s insurance companies generated 817.3 trillion rials ($3.7 billion) in premium income last year (March 2020-21) up 37.8% compared to the year before. IIC alone had 31.5% of the total premium income.
Total annual payouts amounted to 436.7 trillion rials ($2b) up 30% compared to the year ago. Third-party vehicle insurance accounted for 40% of the total payout reaching 175.2 trillion rials ($800m) or 27.7% higher. IIC paid 33.2% of the total.
New Rules
In related news, the government approved a proposal by the Central Insurance company of Iran for doubling the minimum capital required for establishing insurance companies.
Henceforth the minimum capital will be two trillion rials ($8.69 m), according to a report seen on the government’s website on Monday.
The move is reportedly to discourage insurance companies from investing in business beyond their purview and pave the way for a robust insurance sector.
Currently 33 insurance companies operate in Iran including offshore firms and reinsurance companies. The CII has supported founding of new firms. "Newcomers will help boost competitiveness in the gradually growing industry."
It approved the establishment of five insurance, life insurance, and reinsurance companies in the last Iranian year that ended in March and more are in the pipeline.
