Insurance Sector Starts Adopting IFRS

EghtesadOnline: After the banking system, insurance companies are next in line to conform their financial statements to International Financial Reporting Standards, with Iran Insurance Company leading the way.

News ID: ۷۳۹۷۷۶

12 February 2017

"The company has established the preliminary requirements for adopting IFRS," IIC's CEO Mohsen Pourkiani told ILNA.

"IIC is also moving toward publishing its new financial reports in accordance with IFRS and has made early preparations."

Pourkiani said the effects of the implementation of new standards on the company's financial statements will soon become known, Financial Tribune reported.

All banks, credit institutions and insurance companies registered with the Stocks and Exchange Organization, whose financial period starts from the beginning of the current fiscal year(March 20) or later, have been obligated to draft their annual financial statements in accordance with IFRS.

IFRS are a single set of accounting standards, developed and maintained by the International Accounting Standards Board for application on a globally consistent basis—by developed, emerging and developing economies.

These standards help provide investors and other users of financial statements with the ability to compare the financial performance of publicly listed companies on a like-for-like basis with their international peers.

Separation of Life Insurance

Seyyed Rasoul Tajdar, the chief executive of Alborz Insurance Company, believes that the category of life insurance must be separated from other categories for the sector to flourish.

"The model of oversight on the reserves of life insurances is of paramount importance and therefore separating the category of life insurance from other categories is a good move," Tajdar said in a talk with IBENA.

The official said the insurance companies of only a few countries engage in general insurance activities.

Middle East Life Insurance Company, affiliated with the privately-owned Middle East Bank, was the first specialized Iranian insurance firm launched this week.

Middle East became operational with an initial capital of 1.2 trillion rials ($37.9 million), aiming to “promote life insurance by offering innovative and attractive insurance products”.

Last month, the Central Insurance of Iran announced that a number of insurance firms have proposed spinning off their life insurance operations into separate entities. It was also announced earlier that the regulator will issue no new license for general firms.

Abdolnasser Hemmati, the head of CII, had also recently emphasized the importance of the separation of life insurance from other categories, saying that should any insurance companies wish to expand their activities in life insurance, they are welcome to establish a specialized company as a subset.

The chairman of Parsian Insurance Company has also commented on Hemmati's remarks, stressing the importance of the issue.

"Following the measures approved in the parliament in line with increasing the share of life insurance in the sixth five-year development plan, this category is very important and has the potential to be developed extensively," Kourosh Parvizian said.

"Life insurance is a category that is currently ripe for a wide entry of insurance companies and they can increase their profitability very much," he added.

The official, who is also the CEO of Bank Parsian, also drew attention to another comment made by Hemmati who had said the mathematical reserves of the life insurance sector must not be spent to make up for losses in other categories.

Mathematical reserves are assets that a life insurance company must set aside and capitalize to meet its commitments to the insured.

Noting that the behavior of insurance companies in tapping into their mathematical reserves to make up for losses suffered by other insurance categories is consequential, Parvizian said insurance companies must "focus on ways to make the insurance sector profitable across varying categories".