Risk Retention Cap for Insurers Announced

EghtesadOnline: A report by the Central Insurance company of Iran (CII), rating domestic insurers based on their risk retention capacity, placed the state-owned Iran Insurance Company at the top of list.

News ID: ۷۴۸۶۳۴

06 October 2019

According to the report published on the CII website, IIC is capable of handling risks worth at 18.61 trillion rials ($162 million).

The report is based on the balance sheets of insurance companies released on September 29.

Asia Insurance Company came in second with a risk retention capacity of 4.56 trillion rials ($39.8 million) followed by Alborz Insurance Company, according to Financial Tribune.

Capable of accepting risks to the tune of 3.74 trillion rials ($32.6 million), Alborz managed to rise from fourth place in the previous report to third.

Dana Insurance Company slipped to fourth position in the new ranking reporting 3.27 trillion rials in risk retention capacity.

It was followed by Parsian Insurance Company and Pasargad Insurance Company, respectively being capable of accepting 2.65 trillion rials and 2.27 trillion rials in risks up until Sept. 29.

The latter was promoted from seventh place in the previous report to sixth by boosting its risk retention capacity by 580 billion rials, surpassing Kosar Insurance Company.  With a risk retention capacity of 1.6 trillion rials, Kosar was placed seventh.

Bottom End

On the bottom of the list were Hafez Insurance Company, Middle East Life Insurance Company and Asmari Insurance Company. Risk retention capacity of these companies stood at 119.9 billion rials, 122.6 billion rials and 136 billion 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. However, when an insurer accepts additional hazards by selling more policies it actually increases the likelihood 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 the total 30 insurance companies only six are allowed by the regulator to accept reinsurance risk.

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

The state-run IIC was again on the top with a capacity of 9.3 trillion rials ($81 million) in reinsurance cover.

It is followed by Pasargad Insurance Company with a reinsurance cap of 1.13 trillion rials. The insurer’s reinsurance capacity rose from 777.7 billion rials in the previous rating. Mellat Insurance Company was third with 723.5 billion rials.

As the last company allowed in the reinsurance matrix, Iran Moein is permitted by the CII to accept up to 478.5 billion rials in reinsurance cover-up by 440.4 billion rials in the previous report.

Amin Re and Iranian Re can handle reinsurance up to 961.2 billion rials and 680.62 billion rials respectively.

Amin Re had previously reported 914.8 billion rials in reinsurance capacity.

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

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