New Risk Retention Capacity for Iranian Insurers

EghtesadOnline: In its new appraisal of risk retention capacity of domestic insurers, the Central Insurance company of Iran (CII) has changed the rank of two insurance firms.

News ID: ۷۴۸۳۱۳

31 August 2019

According to a report published on the CII website, the main state-owned Iran Insurance Company is first on the list in terms of risk retention capacity and can accept risks worth at 18.61 trillion rials ($167 million).

Asia Insurance Company is next with risk retention capacity of 4.56 trillion rials ($40.5 million) followed by Dana Insurance Company with 3.27 trillion rials ($28.8 million) capacity.

Alborz Insurance Company came fourth, according to Financial Tribune.

Risk retention capacities announced by the CII are based on the balance sheets of the insurance companies released on August 14.

Comparing new data with the figures in the previous report covering risk retention capacity of insurers to July 17, a change in position is seen for Alborz and Dana.

With a risk retention capacity of 3.5 trillion rials, the former lost its third place to the latter in the new appraisal.

This is despite the fact that Alborz increased its risk retention capacity from the previous report (3.14 trillion rials).

However, it failed to compete with Dana as it managed to make a bigger leap extending its risk retention capacity by rising from  2.3 trillion rials to 3.27 trillion rials.

Parsian and Kosar insurance companies are among the top six with capacities of more than 2.65 trillion rials and 1.69 trillion rials, respectively.

Risk retention in the insurance industry refers to the amount of risk that an insurance company is willing to pay for a policy, risk or group of risks.

The more risk a company assumes by underwriting new insurance policies, the more premium it collects and invests. When an insurer accepts additional hazards by selling policies it actually increases the possibility of insolvency.

A company's risk retention capacity, or the maximum amount of acceptable risk, is a crucial component in its operations.

Reinsurance Sector

Out of a total 30 insurance companies only six are allowed by the regulator to accept reinsurance risk.

Apart from the two specialized firms in reinsurance business, namely Amin Re and Iranian Re, four other companies, namely, Iranian Insurance Company, Pasargad, Mellat and Iran Moein are allowed to accept reinsurance risks.

As the regulator of the domestic insurance industry, the CII finds insurers eligible to take reinsurance risks based on their solvency.

The state-run IIC is once again at the top with a capacity of 9.3 trillion rials ($79.48 million) in reinsurance cover.

It is followed by Pasargad Insurance Company with a reinsurance cap set at 777.72 billion rials and Mellat is third with 723.57 billion rials.

As the last company allowed in the reinsurance matrix, Iran Moein is permitted by the CII to accept up to 440.42 billion rials in reinsurance cover.

Amin Reinsurance Company and the Iranian Reinsurance Company can provide reinsurance up to 914.89 billion rials and 680.62 billion rials respectively.

Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties in some form of agreement to reduce the likelihood of paying large amounts emanating from an insurance claim.

It allows insurers to remain solvent by recovering some or all the amounts paid to claimants.

CII allows government supervision over the insurance sector and is responsible for regulating, assisting and expanding the insurance industry.