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Iran Insurance Report Q1 2009
Business Monitor International, March 2009, Pages: 69
Iran Insurance Report provides independent forecasts and competitive intelligence on Iran's insurance industry.
The coming year will be a tough one for Iran. Economic growth will slow, mirroring the slowdown in all the major economies of the world, and we now see real GDP growth in 2009-2010 (note: Iranian years begin in March) falling to just 2.4%, down from 4.7% in 2008/09. While we are not expecting Iran to fall into recession, our projected growth rate would be the most lacklustre in a decade. Thereafter, growth will begin to pick up again, in line with a slow recovery in the global economy, and over the course of the forecast period (2009/10 to 2013/14) we expect growth to average 3.6%. This is substantially below an estimated 5.6% average growth rate over the previous five years, when economic expansion was driven in
large part by the oil boom.
Although Iran may be relatively isolated in diplomatic terms, the theory of a decoupled, developed and developing world is increasingly being shown to be wishful thinking and we do not believe that the Islamic Republic will be able to hide from the gathering global headwinds. Indeed, as the world's fourth largest oil producer, with crude sales making up over 80% of total export revenues, Iran's economic health is intrinsically tied to the state of the global economy.
We also see gross fixed capital formation growth slowing to 2.5% in 2009/10, down from over 6% the previous two years. As regards the crucial hydrocarbon sector, we expect that much-needed investment will remain subdued until the oil market recovers. In addition, foreign investment into the hydrocarbon sector is likely to remain muted as long as Iran faces international sanctions. On a more positive note, it appears that inflationary pressures are finally easing.
The global financial crisis is likely to affect the various segments of the global insurance industry in different ways. In many countries, especially in Europe, the coming recession points to softness in the non-life segment. In many cases, numbers of policies may fall and there should be downwards pressure on premiums. By contrast, the main problem for the life segment in almost every country is the extreme volatility of financial markets. Over the longer term however, the fortunes of life insurance will likely recover thanks to the secular growth of organised savings in most countries. China - where the larger insurance companies continue to achieve double digit growth in premium income - is a good example of this. Some particular niches should also do well in the current environment, such as legal liability
insurance.
In the Middle East and North Africa, we profile 17 companies. These are AGF, AIG, Allianz, Aviva, AXA, Cardif, ERGO, Eureko, Fortis, Generali, Groupama, HSBC Insurance, Liberty Mutual, MAPFRE, RSA, UNIQA and Zurich Financial Services. We also look at a number of the smaller local firms that are active in the region, particularly in Kuwait, Oman, Saudi Arabia and the UAE. We also discuss the regional presence of Belgium’s KBC and Austria’s Erste Bank through a number of insurance subsidiaries and explain the importance, for each of the various countries, of purely domestic firms.
Our Insurance Business Environment Rating for Iran is 34.6
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