Establishment of specialized insurance is common practice around the world

The High Council of Insurances recent resolution on providing the possibility of establishing specialized insurance by mixed insurance institutions has led to discussions among experts. In this regard, and in order to elaborate on the different dimensions of this resolution, we arranged an interview with Hassan Reza Abbasianfar, Director General of Planning and Development of Central Insurance.

The plan for specializing the activities of insurance companies has long been considered and there have been some experiences in this regard. Please explain in detail about the recent High Council of Insurance's decision on the possibility of establishing specialized insurance by mixed insurance companies.

- Despite the fact that in accordance with the regulations governing insurance operations in the country and based on international procedures, the separation of life insurance from non-life is mandatory, but since insurance companies are mixed, the plan has faced some obstacles and has not come into action. One of the ways to overcome this problem is to create regulatory frameworks for converting the status of existing institutions to specialized life and non-life insurance institutions. On the other hand, the task set out in Article 11 of the Sixth Development Plan states that in order to increase the share of life insurance from premiums of the country's insurance business at least up to 50% we have to move towards the professionalization of insurance companies.

Are there any obstacles to the implementation of this resolution? If the answer is yes, what measures have you taken to eliminate them?

- One of the ways of professionalizing insurance institutions is to reform regulations in order to facilitate the transformation of mixed insurance companies into specialized life and non-life insurance ones. In this regard, one of the main regulatory barriers is the restrictions on the ownership of shares of insurance companies. It is noteworthy that, following the prior approval of the High Council of Insurance, the ownership of shares of insurance companies was subject to a 20% limit for affiliated legal entities. Due to this limitation, existing mixed insurance companies cannot establish a specialized insurance company with the participation of their affiliated legal entities. Therefore, in the first phase the Central Insurance proposed to remove existing restrictions in line with the legal framework of the High Council of Insurance. In this way, existing mixed insurance companies can, if they wish, establish a specialized life insurance or non-life insurance company to transfer their portfolios of related insurance policies to the new insurance company in accordance with the relevant laws and regulations.

Have previous obstacles been removed?

- According to the proposal, which was approved by the High Council of Insurance, mixed insurance companies are excluded from the scope of the restrictions upon request for the establishment of a specialized insurance institution (whether life or non-life). Thus, any mixed insurance institution applying for the establishment of a specialized insurance institution (whether life or non-life) can establish a specialized insurance institution. At the same time, it is stated in the amendment that, since the issuance of a new agency's activity license, the applicant insurance agency is not authorized to issue a new insurance policy in the relevant field and may retain part of its portfolio related to the new specialized insurance institution to it in compliance with the relevant regulations.

What about the companies that do not want to be active in this field?

- This amendment is in line with the policies of the Islamic Republic of Iran's Central Insurance and merely grants rights to mixed insurance companies. Thus, if any institution is unwilling to change its status, it will be obliged to separate its life insurance operations from non-life according to the previous law. It should be noted that there is a requirement to observe this distinction in the major insurance laws of the world and this is also anticipated in Iran's insurance regulations, which has not been implemented yet due to some obstacles.