Magazine

Read the latest edition of AIR and MEIR as an Interactive e-book

Mar 2024

Potential balanced by challenges over Iran's opening - A.M. Best

Source: Middle East Insurance Review | Sep 2015

The lifting of trade restrictions on Iran may present a significant opportunity for the MENA (re)insurance market, with European participants also expected to re-engage and seek a foothold in the country, said a report by A.M. Best.
   In a briefing note titled “Sanctions Removal to Attract Insurers and Reinsurers to Iranian Market”, A.M. Best anticipated that the (re)insurance community will be excited by the prospects in Iran as it is one of the biggest insurance markets in the region, with gross premiums written of US$7.5 billion in 2014, and offers potential given its low insurance penetration.
   The research followed the Joint Comprehensive Plan of Action (JCPOA) between the US, the UK, Germany, France, China and Russia on 14 July, which resulted in Iran reaffirming that it would not seek, develop or acquire any nuclear weapons. The JCPOA agreement will result in the lifting of all UN Security Council sanctions, as well as multilateral and national sanctions related to Iran’s nuclear programme. The EU will also terminate all provisions of its regulations, which cover sanctions and restrictive measures in areas including insurance and reinsurance.
   The rating agency expects the lifting of sanctions to lead to opportunities for primary insurers, given the significant levels of underinsurance, the population of 78 million and its large youth representation.
   Mr Mahesh Mistry, Director, Analytics, at A.M. Best, said: “With the removal of restrictions, major reinsurers are anticipated to re-engage with the Iranian market. The country has significant oil reserves, and increased international trade is likely to stimulate an expansion of infrastructure and business development. The largest European reinsurers will be examining prospects in the Iranian market and are expected to have a first-mover advantage over their American counterparts, as US sanctions are likely to remain in place for longer than European restrictions.”
   While the rating agency expects the lifting of the sanctions to present opportunities for reinsurers, it could also expose them to additional risks. Mr Michael Dunckley, A.M. Best Financial Analyst, said: “Given the elevated level of catastrophe exposure associated with the country, particularly from earthquakes, risks must be underwritten prudently in order to ensure accumulated exposures are effectively managed. In Iran, earthquake exposure is higher compared with countries in the Gulf Cooperation Council. In addition, the country is exposed to flood risk.”
   In addition to CAT risk, reinsurance underwriters will need to consider the state of insured property. Ageing infrastructure in Iran and the potential of differing standards in risk management may influence their pricing decisions. However, new entrants to the market may be able to gain some comfort from standardised market wordings and primary insurers’ premium calculations monitored by Bimeh Markazi, the Iranian insurance industry regulator.
 
| Print
CAPTCHA image
Enter the code shown above in the box below.

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.

 

Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.