(BUSINESS WIRE)-- The lifting of trade restrictions placed on Iran may present a significant opportunity for the Middle East and North African (MENA) (re)insurance market, with European participants also expected to re-engage and seek a foothold in the country.
Following the planned suspension of a number of sanctions imposed on Iran by the United States and the European Union, international trade with the country is expected to increase notably over the next few years. In a new briefing titled “Sanctions Removal to Attract Insurers and Reinsurers to Iranian Market,” A.M. Best anticipates the (re)insurance community will be excited by the prospects in Iran as it is one of the biggest insurance markets in the region, with gross premiums written (GPW) of USD 7.5 billion in 2014, and offers potential given its low insurance penetration.
The research follows the Joint Comprehensive Plan of Action (JCPOA) between the United States, the United Kingdom, Germany, France, China and Russia on July 14, 2015, which resulted in Iran reaffirming that under no circumstances would it ever seek, develop or acquire any nuclear weapons. The JCPOA agreement will result in the lifting of all U.N. Security Council sanctions, as well as multilateral and national sanctions related to Iran’s nuclear programme and the European Union (EU) will terminate all provisions of its regulations, which cover sanctions and restrictive measures in areas including insurance and reinsurance.
A.M. Best expects the lifting of sanctions to lead to opportunities for primary insurers given the significant levels of underinsurance in Iran, the country’s population of 78 million and its large youth representation. Mahesh Mistry, director, analytics, said: “With the removal of restrictions, major reinsurers are anticipated to re-engage with the Iranian market. The country has significant oil reserves, and increased international trade is likely to stimulate an expansion of infrastructure and business development. The largest European reinsurers will be examining prospects in the Iranian market and are expected to have a first-mover advantage over their American counterparts, as U.S. sanctions are likely to remain in place for longer than European restrictions.”
While A.M. Best expects the lifting of the sanctions to present an opportunity for reinsurers, the report cautions it could also expose them to additional risks. Michael Dunckley, financial analyst, added: “Given the elevated level of catastrophe exposure associated with the country, particularly from earthquakes, risks must be underwritten prudently in order to ensure accumulated exposures are effectively managed. In Iran, earthquake exposure is higher compared with countries in the Gulf Cooperation Council (GCC). In addition, the country is exposed to flood risk.”
The report adds in addition to catastrophe risk, reinsurance underwriters will need to consider the state of insured property. Ageing infrastructure in Iran and the potential of differing standards in risk management may influence their pricing decisions. However, new entrants to the market may be able to gain some comfort from standardised market wordings and primary insurers’ premium calculations monitored by Bimeh Markazi.
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=240399.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Contacts
A.M. Best Company
Mahesh Mistry, +(44) 20 7397 0325
Director, Analytics
mahesh.mistry@ambest.com
Yvette Essen, +(44) 20 7397 0322
Director, Research & Communications
EMEA
yvette.essen@ambest.com
Michael Dunckley, +(44) 20 7397 0321
Financial Analyst
michael.dunckley@ambest.com
Edem Kuenyehia, +(44) 20 7397 0280
Associate Director, Market Development & Communications
edem.kuenyehia@ambest.com
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