The Islamic Republic is about to achieve the privatization of its insurance sector initiated back in 2002 in a bid to increase insurance penetration, competition and innovation, as the government sold its stake last week in Alborz Insurance and is in the process of divesting its shares in Asia Insurance and Amin Reinsurance, MARC ROUSSOT reports.
Four weeks after the beginning of the divestiture process, the Iranian Privatization Organization on the 3rd March sold the shares owned by the government in Alborz Insurance to a consortium comprising the Civil Servants Pension Fund; the Agricultural, Rural and Nomadic Pension Fund and the Social Security Investment Company, but has yet to find investors with the required profiles for the stake in Asia Insurance and Amin Reinsurance, the last two insurance companies to be privatized in Iran.
“A few investors had expressed their interest in buying the shares but we were not convinced by their profiles, either because they did not know enough about the companies, or because financially they would not have been able to support the companies in the long run, or because regulations were not allowing them to increase their ownership,” explains Mahdi Hajivand, an economic expert at the Iranian Privatization Organization. “This is not an unusual situation,” he says before adding: “What is important for us is that the investors we are going to sell the shares to really know about the business in general and the company in particular.”
The 17.34% stake owned by the government in Alborz Insurance and the 18.84% stake held in Asia Insurance were first put on sale on the 5th February while the 11.44% stake owned in Amin Reinsurance Company was offered for the first time a week later.
Besides macroeconomic goals like shifting the role of the government from ownership and direct management to policy, guidance and supervision, Iranian authorities also engaged in privatizing the country’s insurance sector since 2002, seeking to increase insurance penetration – which reached 2.2% in 2017 and is expected to attain 7% by the end of 2022 – competition and the variety of products and services.
“Over the past few years, one of the strategic objectives of the Central Insurance of Iran was to increase the private share in the national insurance market. Currently, privately held insurance companies account for more than 60% of the total premium,” Abdolnaser Hemmati, the president of the Central Insurance of Iran, told IFN.
Once the ongoing privatization process is achieved, the government will remain an important player in the insurance sector, which counts 32 insurance companies, as it fully owns the Iran Insurance Company and does not plan to sell it.