Global
insurance firms are circling Iran for business opportunities following the
lifting of sanctions - and the first test of their appetite could come in March
when some Iranian companies seek new cover.
Insurers,
the reinsurers that share their risk and the brokers that forge deals are
exploring ways to tap a market worth $7.4 billion in premiums after a nuclear
accord between world powers and Tehran led to the removal of restrictions on
financial dealings with Iran this month.
Allianz (ALVG.DE),
Zurich Insurance (ZURN.VX),
Hannover Re (HNRGn.DE)
and RSA (RSA.L),
for example, said in recent days that they would evaluate potential
opportunities in the country.
Insurance and
reinsurance specialists regard the marine and energy sectors as among those
offering the best opportunities in oil-producing Iran. Alongside commercial
cover, life insurance is a potential growth area as it represents less than a
tenth of overall Iranian premiums, compared with more than half globally.
At first
international companies are likely to link up with Iranian firms to capitalize
on their local knowledge and to reinsure local insurance in the international
market, according to industry experts, with international brokers helping
foreign firms get that business.
American
insurance industry players are still banned from doing business in Iran,
however, due to separate U.S. sanctions that remain in place.
The insurance
contracts of some Iranian companies expire when the Persian calendar year ends
in late March - similar to the January renewal season in Western countries -
and they will be looking to strike new agreements. This could include insurance
firms themselves seeking new reinsurance cover.
Mohammad
Asoudeh, vice chairman and managing director of Iranian Reinsurance Co, told
Reuters he had already been contacted by foreign insurance players looking to
forge tie-ups with his company and enter the market.
"They
have been waiting for Implementation Day," said the 30-year industry
veteran, referring to the day this month when the U.N. atomic agency confirmed
Tehran had met its commitments under the nuclear deal. "We have had enough
visits (from foreign firms)...
resuming business could be quick but will depend
on the terms and conditions they offer us."
"There
are some market renewal dates in two months' time. This will be a good point to
start."
Sasan Soltani, regional business development
manager at Dubai-based but majority Iranian-owned Iran Insurance Company, said
his firm had also been approached about tie-ups by British and Japanese brokers
and insurers.
HURDLES REMAIN
Foreign players have been awaiting the
lifting of sanctions for months; eight out of 11 established Western and Middle
East insurance and reinsurance firms who responded to Reuters questions last
year said Iran was an attractive market, especially in the marine and energy
sectors.
However despite the lifting of sanctions,
hurdles still remain which are making companies cautious about a speedy entry.
The U.S. curbs still in place exclude
American nationals, banks and insurance industry players from trading with Iran
including dollar business, so concerns remain on whether other foreign insurers
can transact without the risk of penalties.
London-headquartered United Insurance
Brokers (UIB) said it was active in Iranian reinsurance before the imposition
of international sanctions and planned to reopen its Tehran office "as
soon as we can", according to chairman Bassem Kabban.
"Under the sanctions we ceased to
operate, but we have maintained the salaries of our people there for the past
five-and-a-half years," said Kabban, adding that firms could be wary due
to concerns about having U.S. shareholders or subsidiaries.
"People will be very careful what to
do. If they are not sure, they would rather not do it."
He said, though, that French and Japanese
players were likely to be quickest off the blocks in providing reinsurance as
they had large presences in Iran in the past, adding that sectors such as
aviation, power generation and energy would require large amounts of cover.
Reinsurers help insurers shoulder the
burden of large losses in return for a proportion of the premiums.
Another London-based broker said his firm
had decided against opening an office in Tehran for now, preferring not to take
the risk of being a "frontrunner".
While Iran has 27 direct insurance
companies and two reinsurance firms, most established in the last 10 years,
they lack international credit ratings because they have been shut out of
markets.
This could also deter foreign firms and their
penalty-wary compliance departments from doing business with them.
Iranian Reinsurance Co. is now working to
obtain a rating and has held discussions with two rating agencies for this
purpose, said Asoudeh, declining to name them.
"Because of sanctions they couldn't
price it, so this is first in our agenda. Several insurance companies in Iran
are also waiting to be rated."
Currently around 4 percent of total
Iranian insurance premiums are ceded to reinsurers, which would amount to an
estimated $300 million of reinsurance business in the country, said Asoudeh.
Reinsurance volumes are expected to pick up with wider access to foreign
players, he added.
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