EghtesadOnline: New US sanctions and major reinsurance companies' aversion to play their proper role has deprived the country of the ability to transfer major risks outside its borders and to the top international players in the key sector.
Risks are not negligible, experts say, calling for the regulator’s new measures before it is too late.
Currently, two reinsurance companies operate in the local market. A limited number of insurance firms have also received permission from the regulator to offer reinsurance coverage. Some experts believe that deficiencies in regulations is depriving the reinsurance industry to play its crucial role.
These issues were discussed in a meeting with the representatives from Central Insurance of Iran, Iran Insurance Company, Alborz and Razi insurance companies, hosted by Risknews.ir, a local news website covering the insurance industry, according to Financial Tribune.
Gholamali Jahangiri, CII's deputy for reinsurance, says the regulator is aware of the importance of transferring risks out of the country. "We have no option but to come up with alternative solutions."
In CII's point of view, efforts should focus at insurance firms. "Firms with restricted capital and limited capacity need to be cautious when selling insurance policies. Moreover, smaller firms could link with each other and form consortiums to share the risks," he added.
Shole Nouri, IIC's deputy for reinsurance, says the regulator needs to allow all the players to accept reinsurance risks. "The CII is right about some insurers…they have a bad history in their operations… but under the current conditions [sanctions], insurers should be allowed to cover their own risks to some extent."
Balancing the Market
Jahangiri, however, believes that the unruly operations of some firms, like accepting risks beyond their potential or lowering rates, cannot and should not be ignored. "We need to make sure that there is a balance in the market."
Recently, fourteen new companies were added to the existing eight in the reinsurance business to help widen risk in insurance coverage. Issuing insurance-linked securities in the capital market has also been on the CII agenda to further bolster reinsurance coverage.
Limitations in reinsurance services have gradually resulted in lower demand for insurance coverage in some categories like transport, engineering and energy insurance categories, says Mohsen Gharekhani, Razi Insurance company's representative.
"Insurers are not capable of covering major losses…they simply do not have the resources because the premiums are pretty low," he said.
He said the regulator should develop a mechanism for managing insurers' interaction, like the interbank market.
Alireza Pourhassan, Alborz Insurance's deputy for reinsurance, believes that the CII should push the two operating reinsurance firms so that they play a more significant role in the market.
"At the same time, the regulator can attract more investments towards the reinsurance sector to empower current players and establish new firms."
Amin Reinsurance Company and Iranian Reinsurance Company can provide reinsurance up to 914.89 billion rials and 620.62 billion rials respectively.