Capital Intelligence, the international credit rating agency, has released its key report on the Iranian insurance market, reviewing the latest development during last month.
Although CI considers it the latest blow to the Joint Comprehensive Plan of Action as an underlying negative point, it does not see wider fallout for the insurance sector.
Explaining the key points of the report, Wolfgang Rief, the senior credit analyst who co-authored the report, said in an exclusive interview with Financial Tribune that the upcoming US sanctions for Iran"s insurance industry will have little impact both because of the limited exposure of insurers to foreign business and the experience of previous sanctions that have made the firms more adept at managing them.
“You know one of the largest risks for banks is the contagion risk, meaning that when one bank is ill, the others will become ill, too–but in the insurance sector there is no contagion and the business model of insurers is more stable than that of the banks,”Financial Tribune quoted Rief as saying. According to the analyst, the inflow of business for insurers in Iran which is 50% mandatory–the motor vehicle business for example–indicates that the business model is more stable and safer “therefore we think that the ratings of the insurance sector can be above the sovereign”.
Rief noted that CI has downgraded Iran’s sovereign rating until the end of April from BB- with a stable outlook to BB- with a negative outlook, but for the insurance sector no lowering of rating has been considered.
As for the international ties of domestic insurance firms, Rief said the international business of Iranian primary insurers is very small. “I would say that 90% of the business are national business. Iran’s insurance sector acted with remarkable resilience during the previous sanctions,” he added.
Asked about the Iranian insurers’ strategy in the new era, Rief said these firms already have the experience from the previous sanctions. “Business model will continue with private clients as it is,” he said.
In its key report completed in May and is considered the most up-to-date review of Iran’s insurance sector, Capital Intelligence Ratings sees addressing the structural problems of Iran’s insurance market as vital for further buttressing the resilience of domestic insurers. In fact, CI Ratings highlights the need to consolidate Iran’s insurance market and move toward a more risk-based system.
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