EghtesadOnline: Fitch, the global ratings agency has predicted that Iran's insurance sector will record an average of 15% growth a year in the next five years, as the partial easing of sanctions against the market in early 2016 helped it grow.
According to a Fitch report on the fourth quarter of 2018, high inflation and low household incomes have constrained the development of the life insurance segment, while the lack of access of insurers to foreign capital and expertise were an impediment to substantial growth of the non-life segment.
Nonetheless, the sector is expected to grow rapidly in the coming years. The agency, however, has not discussed the possible ramifications of the US pullout from the nuclear deal in May on the insurance sector of Iran.
As reported by Fitch, Iran's life and non-life insurance sectors are dominated by domestic players and the market size as a whole is small, with sanctions leading to an absence of international companies and their subsidiaries needed to grow the industry, Financial Tribune reported.
"We do not expect to see a major shift in the competitive landscape over the coming years," the report said.
"Overall, we expect motor vehicle insurance to remain the largest sub-sector, and that it will be boosted by higher volumes owing to an expansion in the national car fleet."
The scale of the sub-sector is also increased by its largely compulsory nature. Demographic trends will boost morbidity and healthcare spending, which will in turn boost health insurance. The other sub-sectors have been - and will remain - hampered by low income levels of many households; high inflation eroding the value of savings; and a lack of understanding of the benefits of life insurance.
The largest player by far in Iran's insurance sector is Bimeh Iran (Iran Insurance company), a fully state-owned composite insurer established in 1935 and holding over half of total insurance industry share.
It offers a wide range of personal and corporate non-life lines, including insurance for: cars, fire, contractors, property, marine, aviation, personal accident, shipping, liability and engineering risks. It also offers long-term savings for personal customers as well as travel insurance, and it provides reinsurance to other insurers.
Outside of Iran, Bimeh Iran has 12 branches in the Persian Gulf Cooperation Council, including in Saudi Arabia, the UAE, Bahrain and Oman.
It holds around 45% of the domestic market share and 50% of the market share in several subsectors. It is one of the few domestic firms with a large overseas presence, and will likely work to grow this strategy as competition intensifies in the domestic market.
Bimeh Iran benefits from significant support both in terms of capital and access to public contracts, which means the company is well placed to take advantage of growth potential in the Iranian market moving forward.
There are three partially privatized firms in Iran: Bimeh Alborz, Bimeh Asia and Bimeh Dana. Bimeh Alborz, established in 1959, offers a range of personal and corporate non-life lines, including insurance for cars, fire, personal accidents, shipping, liability and engineering risks. It also offers long-term savings products for personal customers, as well as travel insurance and group health products
Like the banking sector, Iran's insurance industry is regulated by the state. Bimeh Markazi (also referred to as the Central Insurance of Iran).
Central Insurance of Iran was established in 1971 by the government, through the Act on Establishment of Bimeh Markazi Iran & Insurance Operation. It governs all operations in the local insurance sector, including those located in Free Trade - Industrial Zones. Foreign companies are allowed to buy up to 49% of the total shares of an Iranian insurance company, though concerns remain over the quality of the market's financial reporting, the high risk to participation and the heavy involvement of the state in the sector.
Bimeh Markazi grants the government oversight of the Iranian insurance industry and is responsible for regulating, guiding and expanding insurance operations in Iran; giving guidance to insurance companies; and protecting the insured and their beneficiaries.