Gholamreza Soleimani Amiri, speaking during his first press conference this week, said that “in line with expanding the private sector, we intend to float some shares of Iran Insurance Company, which will take place if the legal barriers are removed”, Risknews.ir quoted Soleimani as saying.
He said the company’s divestiture hinges on the reform of Article 44 of the Iranian Constitution, which recognizes the private sector as a major segment of the country’s economy, Financial Tribune reported.
According to Capital Intelligence, the international credit ratings agency, the Iranian insurance sector remains highly fragmented, characterized by the dominant market position of Iran Insurance Company, the state-owned insurance company with a market share of 38% in FYE 2017, and the existence of numerous small insurers.
The latter are struggling to achieve critical mass to cover their costs, resulting in a highly competitive environment. Most Iranian insurers rely on a motor-dominated business mix.
The mandatory motor third-party liability rates are politically driven rather than risk-based, often leading to technical underwriting losses, which are only partially offset by investment income.
As CI put it, Iran’s insurance regulation and supervision remain rather prescriptive and currently seems to be more focused on form than substance. For example, tariffs are set by the regulator for about 70% of the sector’s premium volume, mainly for basic insurance products such as motor third-party liability.
Solvency requirements for insurers in CI’s view also do not adequately reflect the inherent risks in insurers’ business and risk profile, or sufficiently address the quality of capital in an insurer’s capital base.