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Iran Insurance Report Q1 2012
Market |
Finance and Banking |
Report Type |
Market Research |
Country |
Iran |
Published |
31 January 2012 |
Number of Pages |
73 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
File Format |
- |
Ira?ns insurance sector has a number of strengths, including scale in terms of gross written premiums per annum. Bimeh Iran, the largest company that is a state-owned enterprise, is one of the largest underwriters in the Middle East and would rate as a reasonably large insurer in most countries. Non-life penetration has consistently remained slightly above 1% of GDP. Among other things, this suggests the regulatory regime is reasonably sound. Ira?ns insurers have managed to survive in the face of various challenges - not least of which is the almost complete lack of access to the global reinsurance markets. Unlike in other Middle Eastern countries, Ira?ns insurance sector does not consist of a surprisingly large number of sub-scale non-life companies that are offshoots of local business interests that do not have a clear edge in the industry.
The sector is undergoing privatisation, via listings of companies on the Tehran Stock Exchange, and liberalisation, in that the decisions over products and pricing are moving from Bimeh Markazi Iran (the regulator and, to a certain extent, provider of reinsurance service) to the insurers themselves. However, in contrast to privatisation in other countries, the deals in Iran are not necessarily reducing government control and are certainly not increasing formerly state-owned companies access to capital. The limited data that is available suggests the main impact of liberalisation is to transfer resources from shareholders of private sector companies (including the recently privatised Bimeh Alborz, Bimeh Asia and Bimeh Dana) to the still state-controlled Bimeh Iran, employees and, to a certain extent, insurance customers.
As of December 2011, the data published by Bimeh Markazi indicates that total premiums rose by 27% in Iranian year 1389, which we have shown as 2010. This is a lot more than the 15% or so increase which had been indicated by other sources through Q311. The implication is that non-life penetration has risen decisively above the level at which had stagnated in 2005-10, specifically 1.1-1.2% of GDP. In the coming months, we will be looking for further details as to what are the key drivers of this growth. We would be amazed, though, if it is significantly because of developments in Irans miniscule life insurance sector. One of the defining characteristics of the economy is entrenched high inflation (and expectations) thanks to persistent monetisation of fiscal deficits. This produces an environment in which no prudent person would enter into a long-term savings contract. Unless and until economic policies in Iran change radically, the reality of the insurance sector will fall a long way short of its potential.
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