Insurance companies that fail to meet the minimum capital requirement will be merged by the end of the next Iranian fiscal year (March 2018), said the president of the Central Insurance company of Iran, Abdolnasser Hemmati on Tuesday.
“Insurers had five years to raise their capital level. This timeline will not be extended for companies that fail to meet the requirements [before the deadline],” razepool.ir quoted him as saying during a press briefing.
“However, we have developed a new plan to relax capital requirement levels for insurance firms, which has been proposed to the Ministry of Economic Affairs and Finance.”
The plan proposes a minimum capital of 1.5 trillion rials ($48.6 million) for general insurance firms; 1.2 trillion rials ($38.7 million) for those specialized in life insurance and 2.5 trillion rials ($80.7 million) for reinsurance companies.
Hemmati said no new general insurance firms will be established under his watch.
Pointing to the insurers’ complaints about interference of CII in pricing insurance policies, he said: “We are not against competition in the market as competition helps the industry grow.”
“But the fact is that what is happening in the market is unhealthy competition and fraud,” he said, “Insurers’ focus is on boosting their portfolio without any specific plan for the future, especially in the health, transport and fire categories.”
Insurers complain that policy premiums set by the regulator is not in line with their loss commitments. For instance, claims for injuries leading to death in the PAP category has increased tenfold over the past seven years, whereas the premiums have increased by three times.
Insurance industry’s premiums grew by 30% during the first quarter of the Iranian fiscal year, according to Hemmati. “I hope the penetration rate of insurance exceeds 2% by the end of this year.”
“Life insurance accounts for 12% of the industry’s portfolio,” he said. “Increasing the share of life insurance category would be a suitable measure to promote the insurance industry.”
The CII is firm on its decision to separate reserves of life and non-life policies, mainly to enhance transparency in the industry, he added.
Hemmati noted that Iran Insurance Company–the only state-owned firm in the market– has a market share of 32%, “The remaining 68% belongs to the non-governmental companies, including [three] companies that were formerly owned by the government.”
Dana Insurance Company, Alborz Insurance and Asia Insurance were three firms privatized under Hemmati’s previous management of CII (1994-2006).
“However, I personally believe that these companies are not [fully] private. I call them ‘quasi-government’ because their board members are still appointed by the government.”