As most sanctions targeting Iran have been lifted following the nuclear deal implemented since January 2016, many foreign insurance companies from Germany, the UK, France and Japan, to name a few, have been visiting the Islamic Republic which welcomed them with open arms. MARC ROUSSOT however writes that two years later, not much has happened and most players seem to remain fearful that moving into the Iranian market would expose them to fines and sanctions.
Despite the lifting of sanctions, Iran’s economy has yet to boom. Expectations were high following the Iran nuclear deal. Many international insurance companies sent representatives to the Islamic Republic or received Iranian officials to evaluate potential opportunities in the country’s insurance market worth IRR280.18 trillion (US$7.70 billion) in direct premiums in 2016, according to the Central Insurance of Iran (CII)’s latest data. The marine, aviation, and energy sectors were then considered as the most promising ones.
However, these discussions only led to one reinsurance agreement signed in July last year between Saman Insurance Company and Munich Re, the world’s largest reinsurance firm, that also agreed to work together to develop a new model for auto insurance policies, whereby drivers’ behavior would be used as the criteria for calculating the premium.
Nevertheless, CII, which highlights the lack of international interactions as a challenge in the development of the sector, has repeatedly shown its willingness in welcoming foreign players. Developing international interactions, absorbing foreign investors, and benefitting from training services of international insurers, are amid CII’s top priorities, the regulator told IFN.
The shadow of US sanctions
Among the many insurers which considered tapping the Iranian market is Lloyd’s of London. Back in November 2016, following a meeting with Abdolnasser Hemmati, the president of the CII, the British insurance firm shared its intention to send international insurance marketing experts to Iran, to study the potential of its free trade zones. But as of today, it has not led to any concrete development.
“Due to the continuing presence of sanctions — particularly US sanctions — Lloyd’s is currently not pursuing direct business opportunities in Iran, but instead, has focused its strategy on seeking to build relationships within the government and the industry for future development,” explains Cameron Murray, the head of Middle East and Africa at Lloyd’s of London. “Lloyd’s continues to monitor the developments in the US of the sanctions regime and we will keep our market informed,” he added.
Rejuvenation of regulations
While foreign insurers are still waiting for the situation to stabilize — which may take some time given Donald Trump’s antipathy and hostility towards Iran — the CII is not standing idly by and has been working hard on partially revamping its regulatory framework and developing its industry.
In February last year, a proposal setting the minimum capital required for establishing insurance firms was approved by the government and a few months later, the bylaw on insurance corporate governance was approved by the High Council of Insurance.
Also, the High Council of Insurance in November issued the license to establish Iran’s second specialized life insurance company as CII wants to increase the share of life insurance from 14% presently to 21% in 2021. The reinforcement of insurance in managing national catastrophe risks has also been a hot topic on the back of an earthquake that shook several regions bordering Iraq causing the death of at least 530 people.