The Central Insurance company of Iran is set to rank insurance companies based on new criteria to help promote competition in the gradually growing market.
Gholamreza Soleimani, the CII head, made the statement in a talk with Bimeh-Dari Novin magazine that specializes in news, views and analysis of the insurance sector.
"So far, solvency ratio was the only criterion for ranking insurance companies. Not anymore.
We have been urging insurance companies to improve their adequacy. However, this criterion is not enough for assessing their performance in its entirety for ranking them."
Thus “we have developed 20 new indexes for measuring their performance," he said, and added that the basis for the new ranking will be released in the near future. He did not provide details nor reflect on the aspects of the new criteria.
However, he did say that a main goal of the rewriting the ranking system is to improve supervision of insurance companies, though it will also help policyholders compare insurance companies and make informed choices about which company to work with.
The CII has compartmentalized insurance firms into different levels. Rankings (levels) are set subject to the key metric, the Solvency Margin Ratio (SMR). The metric is the capability to cover exposed risks.
Most insurance companies have reportedly improved to Level 1 in fiscal 2020-2021, which makes the metric irrelevant for customers wanting to decide the most suitable insurance company.
Except for Asmari Insurance Company, with Level 2, all others were elevated to Level 1, which means the companies are capable of meeting their financial commitments to policyholders.
The need for ranking insurance companies has gained importance due to the entry of new players.
So far 33 insurance companies operate in Iran including offshore firms and reinsurance companies. The number, including reinsurance, life insurance and general insurance companies, is expected to reach 46 with the regulator saying that 13 new firms are in the pipeline.
However, market observers say the industry does not have the capacity for more players, at least not in the present difficult economic conditions.
Responding to the reservations, the CII head has said, "Licenses were issued for applications compatible with our policies. We have approved some reinsurance companies, specialized life insurance companies and general insurance firms with verifiable innovative plans to empower the industry."
The regulator of the insurance sector seems determined to raise competition among players. By restricting new operational licenses to firms that offer innovative services, the CII wants to persuade insurers to come out of their comfort zone and compete with new players in offering more personalized, data-driven, innovative and quality service.
