EghtesadOnline; The government has approved a proposal for setting the minimum capital required for establishing insurance firms during a Cabinet meeting on Sunday.
The measure also lowers the minimum capital requirement for firms already operating in the insurance market.
Based on the measure, at least 1 trillion rials ($26 million) are needed for obtaining the operation license for insurance firms in Iran’s mainland, Risknews.ir reported.
New insurance firms will need to have additional capital for getting the operation license in each insurance category, in addition to the initial capital, according to Financial Tribune.
The amount is set at 300 billion rials ($7.8 million) for non-life categories and 200 billion rials ($5.25 million) for life insurance category.
The license of general firms, therefore, will be granted with an initial capital asset of 1.5 trillion rials ($39.11 million). The Cabinet also agreed on 2.5 trillion rials ($65.18 million) as the initial capital requirement for starting reinsurance firms in Iran.
However, the Central Insurance of Iran has announced that it will not issue any new licenses for general insurance firms. It aims to enhance the quality of insurance services in Iran by increasing the number of specialized insurance companies.
Tejarat Nou Insurance, affiliated with Tejarat Bank, was the latest general firm to receive a license, with an initial capital of 2.5 trillion rials.
Middle East Life Insurance was the first specialized firm, which started operations with an initial capital of 1.2 trillion rials ($31.29 million).
Hekmat Saba Insurance and Shahr Insurance are new applicants seeking the CII license.
The Central Insurance of Iran requires established general insurance firms to raise their capital to at least 2.5 trillion rials by the end of the current fiscal year (March 20). Following the recent approval, insurers are required to meet similar standards for their capital.
CII announced that it would consider merging firms with low capital. At present, 27 insurance and reinsurance firms are licensed by CII.
However, only seven insurers managed to meet the capital requirement, which made the regulator revise the standards.
Parsian Insurance, Asia Insurance, Razi Insurance, Karafarin Insurance and Pasargad Insurance met the capital requirements after the ceiling was lowered.
The cap for reinsurance firms was 4 trillion rials ($104.3 million), which has now been lowered to 2.5 trillion rials.
Iranian Re, affiliated with Bank Pasargad Iran, and Amin Re, licensed for operating in free trade zones, are the only reinsurance firms in Iran. Both firms have increased their capital recently and face no problems, following the recent measure.
Iran Insurance Company, the only state-owned firm, has the highest capital compared with other insurers–34 trillion rials ($886.5 million). The insurer is planning to raise its capital to 100 trillion rials ($2.6 billion) by March 20.
With 4 trillion rials ($104.3 million), Alborz Insurance, one of the big four private insurers, is the top private firm in terms of capital.