CII Rates Iranian Insurers’ Risk Retention, Reinsurance Cap

EghtesadOnline: The latest appraisal of risk retention capacity of domestic insurance companies has placed state-owned Iran Insurance Company on the top.

News ID: ۷۴۹۲۸۸

25 December 2019

The rating is a based on financial statements of insurance firms up until Dec. 15, the Central Insurance company of Iran, the body in charge of regulating the domestic insurance industry, reported.

IIC is capable of handling risks worth at 23.2 trillion rials ($177 million), rising above its previous 18.61 trillion rials, calculated based on insurers’ financial statements until end of Sept.

Asia Insurance Company came second with risk retention capacity of 4.56 trillion rials ($35 million) followed by Alborz Insurance Company, which was capable of accepting risks to the tune of 3.74 trillion rials ($30 million), according to Financial Tribune.

Dana Insurance Company was in fourth position reporting 3.27 trillion rials in risk retention capacity.

It was followed by Parsian Insurance Company and Pasargad Insurance Company, respectively, capable of accepting 2.65 trillion rials and 2.27 trillion rials in risks up until Dec 15.

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, 126.8 billion rials and 136 billion rials, respectively.

Risk retention in the insurance sector 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 accepts by underwriting new insurance policies, the more premium it collects and invests. However, when an insurer accepts additional hazards by selling more policies it also 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 Cover

A look into the list of insurance companies authorized to accept reinsurance cover shows that CII has allowed Parsian Insurance Company to cover reinsurance contracts in the new rating.

As per the CII report, only seven of the 30 firms are allowed by the regulator to accept reinsurance risk.

Apart from Parsian Insurance company and two specialized firms in reinsurance business, i.e. Amin Reinsurance Company and Iranian Reinsurance Company, four others, namely, IIC , Pasargad, Mellat and Iran Moein can also accept reinsurance risks.

The state-run IIC was again on the top with 11.6 trillion in reinsurance cover, rising above 9.3 trillion rials reported in the previous rating.

It was followed by Parsian Insurance with a reinsurance cap of 1.3 trillion rials, taking the position of Pasargad Insurance Company in the previous rating.

Pasargad’s reinsurance cap was 1.13 trillion rials. Mellat Insurance Company was third with 723.5 billion rials.

As the last company allowed in the reinsurance matrix, Iran Moein was permitted by the CII to accept up to 478.5 billion rials in reinsurance cover.

Amin Re and Iranian Re have boosted their reinsurance capacities compared with the previous rating with the former capable of handle reinsurance coverage up to 1.1 trillion rials and the latter at 728.3 billion rials.

Amin Re and Iranian Re had previously reported 961.2 billion rials and 680.62 billion rials in reinsurance cap, respectively.

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.