“We clear our insurance premiums for reinsurance coverage to Europeans in euro and will receive our potential damages when they occur in euro as well,” Abdolnasser Hemmati, the head of the Central Insurance of Iran, the industry’s sole regulator, told IBENA.
“Most of the foreign exchange reserves of CII and insurance companies are held in euro,” he added.
Hemmati conceded that “we need the USD and other foreign currencies for the coverage of some existing risks” and said this has imposed additional costs on Iran because it means costlier insurance premiums, Financial Tribune reported.
Because decades-long sanctions have cut Iran’s access to dollar transactions and political ties with the US seem to be worsening, Iran has been pursuing the replacement of greenback through several measures, namely currency swap deals and forbidding registration of import orders in USD.
The most recent embodiment of the measures came in mid-April when President Hassan Rouhani’s administration officially discarded the USD as Iran’s currency of choice for financial reporting and opted for the euro.
The Central Bank of Iran was tasked with regularly announcing and managing the exchange rate of rial against the euro as well, but all ministries and state-owned companies and organizations were given a maximum of two years to fully comply with the Cabinet decree and do away with the USD.
“The change in the system of [financial] reporting from the USD to euro will not have much of an impact on the insurance industry,” Hemmati said. The CII chief also said Iran has had “wide-ranging” and “high-level” negotiations with foreign reinsurers based on which some results were achieved as well, “but when Donald Trump came to office in the US, unfortunately these negotiations went haywire “ and prompted Europeans to tread much more carefully.
“In spite of all this, European reinsurers have covered 30% of all the risks concerning potential hazardous events in the country, which amountsto about €1.2 billion,” he said.
He pointed out that Iranian ships have also been covered by foreign insurers and are now able to commute within Europe with Iranian insurance policies. Hemmati noted that several Iranian companies have gained permits to offer reinsurance coverage for life insurance portfolios.
“We have received good coverage from a European company and we allowed that so that Iranian companies can become more acquainted with the new products of European insurers and receive the necessary training in this regard,” he said.
The company he was referring to was Munich Re, the biggest reinsurance company in the world, whichrecently signed an agreement with Mellat Insurance Company to offer reinsurance coverage for the entire life insurance portfolio of the company.
Mellat had in October 2017 reached a contract with French reinsurer SCOR to receive excess of loss reinsurance protection up to a maximum of €200 million.