Banking and Insurance in Iran - Insurance Industry

Insurance Industry

See also: Privatization in Iran, Iranian Economic Reform Plan, Takaful, and Insurance

The Central Insurance (Bimeh Markazi Iran) company is in charge of regulating this sector in Iran. Five state-owned insurance firms dominate the sector, four of which are active in commercial insurance. The leading player is the Iran Insurance Company, followed by the Asia Insurance Company, the Alborz Insurance Company and the Dana Insurance Company. Export and Investment Insurance deals with foreign trade. Insurance companies Asia, Dana and Alborz will be listed on the stock exchange in 2009 after review and improvement in their financial accounts, internal regulations and organizational structure nationwide. At the end of 2008, there were 20 insurance firms active in the market, only 4 of which were state-owned (with a 75% market share). Alternate 2006-statistics give the market share for private insurance companies at 54% and 46% for governmental insurance companies.

Parsian Insurance became the largest privately owned company to be listed on the Tehran Stock Exchange in 2010. Parisan is the third largest insurance provider in Iran.

In 2008, the total insurance premiums generated in Iran were $4.3 billion. This is less than 0.1% of the world’s total, while Iran has approximately 1% of the world’s population. The insurance penetration rate is approximately 1.4%, significantly below the global average of 7.5%. This underdevelopment is also evident in product diversity.

Approximately 60% of all insurance premiums are generated from car insurance. There are about 14 million vehicles in Iran and 90 percent of them are insured (2012). Of the 10 million motorcycles that operate on Iran's roads only 2 million are insured. Also, 95% of all premiums come from general insurance contracts and only 5% relate to life products (against world average of 58% for life insurance in 2011). One of the defining characteristics of the economy is entrenched high inflation (and expectations) thanks to persistent monetisation of fiscal deficits. This produces an environment in which no prudent person would enter into a long-term savings contract. According to Business Monitor International, unless and until economic policies in Iran change radically, the reality of the insurance sector will fall a long way short of its potential.

Blood money was $67,500 in 2011, down from $90,000 a year before. Starting in 2012, Iran is also insuring its own fleet of oil tankers.

Payout ratios have shown consistent growth over the years. Last year, the industry average payout ratio was 86%. Iran has 2 re-insurers. Insurance premiums come to just below 1% of GDP. This is partly attributable to low average income per head. In 2001/02 third-party liability insurance accounted for 46% of premiums, followed by health insurance (13%), fire insurance (around 10%) and life insurance (9.9%).

The Central Insurance of Iran is currently in the process of implementing some deregulation within the industry and migrating from a tariff-based regulation regime to a prudential based one, which is in line with the internationally accepted standards such as the Solvency regime.