The Attractive $8 Billion Insurance Market in Iran and the Uncertainty for Foreigners

Reuters reports that Western and Middle Eastern insurance companies find Iran's $8 billion insurance market 'attractive' following the comprehensive nuclear agreement, but uncertainty regarding the lifting of sanctions against Iran has led them to adopt a cautious approach. Eight out of eleven experts who responded to Reuters' questions rated Iran's insurance market, particularly its marine and energy sectors, as 'attractive' or 'very attractive.' Some of these experts believe that a return to the Iranian insurance market could be expected by the end of 2016, while others stated that predicting a return to Iran is difficult due to concerns over how and when sanctions will be lifted. The report adds that lifting sanctions could open an $8 billion opportunity for entering the Iranian insurance market, but the nuclear agreement still faces challenges from Republicans for approval in Congress, as well as opposition from influential Iranian hardliners. Nevertheless, Reuters notes that Iran is the second-largest economy among Middle Eastern and North African countries, with vast oil and gas resources and a young, educated population that has already attracted attention. Ludovic Surban, a senior economist at the French insurance company Euler Hermes, told the agency that 'a fundamental economic leap for Iran will occur next year, although gaining the confidence of domestic consumers and foreign investors may take a short time.' The process of lifting Iran's sanctions is likely to begin at the end of this year. According to the report, since the collapse of the Soviet Union in 1991, the Islamic Republic is the largest regional economy rejoining global trade and the financial system. Reuters adds that Iran's marine and energy insurance has topped the list of insurance types. Ben Abraham, head of the marine division at Willis Insurance Brokerage, told the agency that his company has worked with Iran for years and it will be interesting to see what happens in Iran; however, the company will remain loyal to the sanctions regime against Iran, although it will stay alert for any opportunities. The report adds that insurance for large-scale businesses like oil and shipping is usually handled by local companies whose reinsurance is conducted in Europe or the Lloyd's of London insurance market. Mahesh Mistry, head of analysis at the AM Best insurance rating agency, states that after the Western sanctions, both insurance and reinsurance were widely covered by domestic Iranian companies, a market valued at $8 billion. He noted that Lloyd's insurance previously covered Iranian business and may return to Iran in some areas. However, some Lloyd's market members, such as Beazley, have stated that they have not yet begun assessments to start cooperation with Iran. Andrei Horton, the CEO of this company, told Reuters that transactions with Iran are still not possible due to sanctions and that more transparency is needed. An expert also mentioned to Reuters that Western companies will face competition from Indian and Russian companies that have already entered the Iranian insurance market; however, marine and energy insurers can return to Iranian markets better than insurers in sectors like automotive, as they do not require a domestic presence in Iran. However, health insurance, aviation insurance, and infrastructure insurance could also present opportunities for foreign insurance companies in Iran. The Reuters report also points to potential hindrances from Israel and Saudi Arabia or Iran's failure to meet its commitments under the comprehensive nuclear agreement, as well as regional conflicts and instability in the Middle East as other challenges and uncertainties for insurance companies considering entering the Iranian market.