BMI Industry View
BMI View: As of late 2013, we remain of the view that the key factors driving
growth in Iran's insurance sector have been higher (real) prices in just two
lines - Compulsory Motorists Third Party Liability, and especially) health
insurance. We are not convinced, though, that this is evidence of a definitive
change for the better in the non-life segment or in the insurance sector as a
whole.
Key Insights And Key Risks
The latest data published by Bimeh Markazi Iran, the insurance regulator,
suggest that total premiums continued to develop strongly in Iranian year 1390,
which ended in March 2012 (please note this year is shown as 2011 in the tables
in this report). We think that the key factors have been higher (real) prices i
just two lines - Compulsory Motorists Third Party Liability, and health
insurance. We are not convinced, though, that this is evidence of a definitive
change for the better in the non-life segment or in the insurance sector as a
whole.The latest data published by Bimeh Markazi Iran, the insurance regulator,
suggest that total premiums continued to develop strongly in Iranian year 1390,
which ended in March 2012 (please note this year is shown as 2011 in the tables
in this report). We think that the key factors have been higher (real) prices
in just two lines - Compulsory Motorists Third Party Liability, and health
insurance. We are not convinced, though, that this is evidence of a definitive
change for the better in the non-life segment or in the insurance sector as a
whole.
In spite of the strong growth in life premiums in the year to March 2012, we
remain of the view that the segment is expanding from a very low base and is
still in an embryonic stage of development. 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. Unless
economic policies in Iran change radically, the reality of the insurance sector
will fall a long way short of its potential.
Iran's insurance sector has a number of strengths, including scale in terms of
gross written premiums per annum. Bimeh Iran, the largest state-owned enterprise,
is one of the largest underwriters in the Middle East and would rate as a
reasonably large insurer in most countries. Non-life penetration has, as noted
above, consistently remained slightly above 1% of GDP. Among other things, this
suggests the regulatory regime is reasonably sound. Iran's insurers have
managed to survive in the face of various challenges - not least of which is
the almost complete lack of access to the global reinsurance markets. Unlike in
other Middle Eastern countries, Iran's insurance sector is dominated by a
surprisingly large number of sub-scale non-life companies that are offshoots of
local business interests that do not have a clear edge in the industry.
The sector is undergoing 'privatisation', via listings of companies on the Tehran Stock Exchange, and 'liberalisation', in that the decisions over products and pricing are moving from Bimeh Markazi Iran (the regulator and, to a certain extent, provider of reinsurance service) to the insurers themselves. However, in contrast to privatisation in other countries, the deals in Iran are not necessarily reducing government control and are certainly not increasing formerly state-owned companies' access to capital. The limited data available suggest the main impact of 'liberalisation' is to transfer resources from shareholders of private sector companies (including the recently 'privatised' Bimeh Alborz, Bimeh Asia and Bimeh Dana) to the still state-controlled Bimeh Iran, including employees and, to a certain extent, insurance customers. A new private sector insurer - Arman - opened its doors in March 2012.