The Central Insurance company of Iran, the industry’s regulator, has required insurers to get approval before selling insurance policies worth higher than the set caps in several categories.
As per a report on the Risknews website, insurance companies must have CII's approval for selling policies worth more than 15 trillion rials in fire, engineering, oil, gas and petrochemical categories.
It has also set a cap for marine insurance, which calls for approval for policies worth 5 trillion rials and above for each vessel. The new rule also covers the aviation sector, with a cap of 1 trillion rials for each aircraft body and liability coverage collectively.
Cargo insurance is also subject to the new regulation if it covers more than 5 trillion rials for each trip.
The new measure is in line with Section 76 of insurance law, which requires insurers to inform the top body if they are selling insurance over and above the set caps. The compulsory reinsurance share of policies and reinsurance recoverables are set based on these caps, therefore insurance companies need to pay higher percentages for policies valued higher than the announced caps.
Insurers are obliged to transfer a portion of all their non-life and life insurance premium to the CII for reinsurance needs. The CII reinsurance business was created to handle risks that could not be covered by insurers.
The CII can reject the settlement of payouts higher than the set recoverable amounts, if the policy is sold without its approval.
CII’s reinsurance arm is set to support the sector against potential losses due to the US sanctions and the absence of foreign peers.
Recently the CII was told by the government to stop its reinsurance business to support private reinsurance companies.
As per a recent announcement, insurance companies are required to pay 17% of their premium income from life insurance and 9% from non-life insurance to the CII.
This share was 20% for life insurance and 10% for non-life insurance in the last fiscal year that ended in March.
Elaborating on the new policy, the CII head Majid Behzadpour, said that the Sixth Five-Year Economic Development Plan (March 2016-2021) required the CII to lower its participation in the reinsurance sector in order to expand the role and presence of non-government companies in the market.
A review of the share of mandatory reinsurance in the past ten years shows that the CII has steadily reduced this share from 25% and 45% for life and non-life categories in 2011.
The CII's plan is to increase the number of reinsurance firms while strengthening existing companies.
Amin Re and Iranian Re were the two main reinsurance companies in Iran for several years. Recently, the CII issued operating license for Saman Reinsurance Company. The regulator also gave permit to Iran Moein Insurance Company to move from general insurance to reinsurance.
Pars Reinsurance Company, affiliated to Parsian Bank, has also got a permit. In January, TehranRuck Reinsurance Company issued a subscription notice to go public. Raya Reinsurance Company also obtained approval from the CII.
