Boston, MA -- (SBWIRE) -- 02/13/2014 -- 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
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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.
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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.
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