Premium earned last year by the insurance industry rose 14%, a trend that persisted through the first five months of the current fiscal that started in March, and climbed further to reach 20%, said the head of the Central Insurance company of Iran.
“Earned premiums were up 14% in the year to March 21 and the rising pattern continued in the first five months of the current year to August 21,” Abdolnasser Hemmati was quoted as saying by banker.ir.
The official, who was speaking at the CII general assembly, announced that the penetration rate of insurance – which is the ratio of premiums over GDP – has reached 2%.
He added that in the category of personal auto policies (PAP), 39 trillion rials ($1.25 billion) was collected as outstanding claims reserves by the end of last year and “this year we will focus on strengthening these reserves.”
The CII head referred to the corporate governance mechanism in insurance companies as one of the most important plans of the CII in the second half of the current fiscal year.
“Robust supervision and control over investments of insurance companies within the framework of the regulations approved by the Supreme Council of Insurance is one of the main plans that will be undertaken by the CII in the second half of the year.”
Cautioning that unwanted and discordant decisions made by officials will lead to turbulence in the money market, Hemmati said there is a dire need for the creation of a council that will coordinate and regulate policymaking in the key banking, insurance and bourse sectors.
“Money markets cannot be separated. True, they do not have an integrated management regime, but they have a link in the sense that when something happens in one market there is the effect on others.”
The head of CII pointed to three issues in the past three years that undermined the gradually emerging insurance sector. “The first was related to PAPs. The judiciary set a new ceiling for blood money which increased the financial commitment of insurers, but the government failed to increase premiums proportionally.”
The second, he says, was the Public Health scheme that increased medical costs and tariffs by about 50%. “As such, insurers were not able to cope with the sudden jump and were forced to make do with what they had.”
The third factor was the deregulation of premium rates which had a negative effect on certain insurance categories, namely fire and cargo insurance.
“High number of insurances, decrease in rates, falling PAP earnings and rising costs of health insurance were among the other reasons that contributed to the crisis that has saddled the insurance sector.”
Reinsurance After Nuclear Agreement
The nuclear accord Iran signed in July of last year with the six world powers has contributed to the insurance sector, the senior insurer said.
“After the nuclear deal many international insurance companies contacted us,” he said. “In addition to expressing readiness in collaborating with Iran, the first and biggest reinsurance company of Germany has invited the ICC to start negotiations.”
Hemmati said “in the next 2-3 months” new openings are expected. He was referring to collaboration with Munich Re, one of the world’s leading reinsurers.
Stressing the importance of Resistance Economy, he said along with attracting foreign investments, Iran wants to maintain and strengthen the capacity of local insurance companies. “So we will move in the direction of maintaining and reinforcing our local insurance industry while keeping contact with foreign peers.”
The Resistance Economy is a set of recommendations made by the Leader Ayatollah Seyed Ali Khamenei to augment the national economy, help domestic manufactures and productivity and promote Iran-made goods.
