The Central Insurance company of Iran (CII) has announced data on risk retention and reinsurance capacity for insurance companies based on their last financial report.
According to CII website, the main state-owned Iran Insurance Company is ranked first in the list in terms of risk retention capacity and can accept risks worth at 18.6 trillion rials ($155 million).
It is followed by Asia and Alborz insurance companies with respective risk retention capacities of 3.5 trillion rials ($29.1 million) and 3.14 trillion rials ($25.8 million).
Parsian and Dana insurance companies are among the top five with capacities of more than 2.49 trillion rials and 2.35 trillion rials respectively.
The report indicates that retention capacities of the four top firms have not changed compared to previous figures. However, Dana insurance has managed to improve its capacity by 95.9 billion rials from the previous 2.26 trillion rials.
Risk retention in insurance industry refers to the amount of risk that an insurance company is willing to pay for a policy, risk, or group of risks.
The more risk a company assumes by underwriting new insurance policies, the more premium it collects and invests. When an insurer accepts additional hazards by selling policies it actually increases the possibility of insolvency.
A company's risk retention capacity, or the maximum amount of acceptable risk, is a crucial component in its operations.
The capacities announced by the CII are based on the balance sheets of insurance companies to July 17.
Reinsurance Capacity
Out of a total 30 insurance companies in Iran, there are only six that are allowed by the regulator to accept reinsurance risks.
Apart from the two specialized firms in reinsurance business, namely Amin Re and Iranian Re, the CII has also let Iran Insurance Company, Pasargad, Mellat and Iran Moein accept reinsurance risk.
The state-run IIC is once again at the top with a capacity of 9.30 trillion rials ($70.78 million) in reinsurance cover.
It is followed by Pasargad Insurance Company with a reinsurance cap set at 777.72 billion rials and Mellat is third with 698.37 billion rials.
As the last company allowed in the reinsurance matrix, Iran Moein is permitted by the CII to accept up to 440.4 billion rials in reinsurance cover.
Amin Reinsurance Company and the Iranian Reinsurance Company can provide reinsurance up to 914.89 billion rials and 620.62 billion rials respectively.
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 a large obligation resulting from an insurance claim.
It allows insurers to remain solvent by recovering some or all amounts paid to claimants.
The insurance industry regulator has advised insurers to consider the level of financial strength of peers as announced by CII when determining risk retention caps.
Except for Tose Insurance company, which is banned from offering insurance policies by the CII since 2014, there are no restrictions regarding the operations of 29 companies.
The CII report says that the High Insurance Council has annulled the operation license of the failed insurer for selling auto and life insurance policies.
CII allows government supervision power over the insurance sector and is responsible for regulating, assisting and expanding the insurance industry in Iran.
