The Central Insurance company of Iran, the regulator of the sector, is planning to put an end to its supremacy over the reinsurance market by increasing the number of players, head of the company said.
"The CII accounts for about 90% of reinsurance operations in Iran…Before the imposition of [US] sanctions the risk was transferred to foreign reinsurers…We are planning to end CII’s role in the reinsurance sector as soon as possible," Majid Behzadpour told IRNA.
Iran’s insurance companies cover an estimated $500 billion worth of risks largely through local firms, including reinsurance companies, insurance firms and the CII.
As per regulations, insurers are obliged to cede 15% and 25% of all their non-life and life insurance premium income to the CII for reinsurance needs.
CII reinsurance arm is also set to support the sector against potential losses due to the US sanctions and in the absence of foreign peers.
Economy Minister Ehsan Khandouzi recently asked the CII to end its reinsurance operations. "CII's involvement in the reinsurance sector may be understandable in the current economic conditions and international sanctions. However, the CII must consider stopping reinsurance work to help support growth of the sector," Khandouzi said in a meeting with CEOs of insurance companies in March.
Behzadpour noted that the regulator's reinsurance operations are in accord with law that considers compulsory reinsurance a supervisory compulsion to support the rights of policyholders.
Despite efforts to boost insurance companies' capital, the sector is still unable to cover all the risks, Behzadpour said, "The CII's reinsurance business was devised to cover risks that could not be covered by insurers."
New Players
The CII's new plan seeks increase the number of reinsurance firms while strengthening the existing companies.
Amin Re and Iranian Re were the two main reinsurance companies in Iran for several years. Recently, the CII issued operation license for Saman Reinsurance Company, allowing the private firm to enter the market.
The regulator also issued a license for Iran Moein Insurance Company to move from general insurance to reinsurance. As per a CII announcement, this company was to discontinue insurance business as of the beginning of the fiscal year on March 21.
Pars Reinsurance Company, affiliated to Parsian Bank, has also acquired a permit. Earlier in January, TehranRuck Reinsurance Company issued a subscription notice to go public. Raya Reinsurance Company has also obtained approval from the CII.
Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties in some form of agreement to reduce the likelihood of paying large amounts emanating from claims. It allows insurers to function by recovering some or all the monies paid to claimants.
