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Exclusive: Iran Gov’t Divesting Reinsurance Stake

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Exclusive: Iran Gov't Divesting Reinsurance Stake
  • 5 months ago

There are just a few insurance companies that reinsurance in Iran, and as the sector is not well-served, it creates a market for foreign and domestic investors. This is a significant step toward expanding the insurance sector in Iran and developing its privatization program. The government will give up its remaining part to Amin Reinsurance, a large firm based within Kish Island’s Free Trade Zone.

It is anticipated to accelerate the development process for the Iranian insurance sector, which is still far from achieving global standing, remarkably when a foreign bidder succeeds in making the profitable investment.

“There are just one or two reinsurance firms in the country. Since the sector is not well-served and has a gap, it is a good investment for both foreign and domestic buyers,” said Farid Dehdilani as the advisor for international investors to the Iranian Privatization Organization, the principal organization responsible for selling off state assets of the Economy Ministry.

Exclusive: Iran Gov't Divesting Reinsurance Stake

According to Dehdilani, the remaining government shareholding within Amin Re is about 11 percent. These shares will be sold through an offer to buy shares on Iran Fara Bourse, the country’s over-the-counter market. The date of the divestiture was set for the closing of October.

“We have seen a lot of excitement so far regarding the sale because first and foremost, you don’t require many funds to purchase the company, and secondly, the firm that is being sold is already a publicly traded company, and therefore, there is the possibility of transparency,” He said.

The IPO official also stated that the third reason for being excited about the offering is the distinctiveness of the insurance market in Iran and reinsurance specifically, which makes it an attractive investment opportunity because of its vast potential.

Despite the low penetration rate, the Iranian insurance sector has enormous growth potential. The value of the Iranian insurance market was $8.298 billion in the YearYear 2016. The market is now 0.18 percent of the world insurance market, which puts Iran 42nd regarding insurance per Sigma, a research company.

Dehdilani said that the purchaser of the stake would effectively take over the government’s stake in the business and secure an appointment to the board, as well as voting rights.

“As to the flotation, there will be no limitations on acquirers, and the top bidder will be able to get an offer most openly,” he said, noting that while several suitors, both domestic and foreign, have reached out to the IPO regarding the proposed deal The bidding process will be conducted in open bidding.

Positively about the foreign interest in the deal Sara Haqiqivand, a senior insurance expert and part of the Committee of the High Council of Insurance Foreign companies, are typically more accepting of the proposed agreement.

“This is since Amin Re is a privately-run entity that requires less due-diligence work from the buyer,” she explained to Financial Tribune.

“The transaction is a positive occasion to the Iranian insurance sector, as it encourages competition and openness within the insurance industry.”

Bigger Divestitures on the Way

Reinsurance divestiture is the significant first step toward privatization following the election of President Hassan Rouhani in May. Because it falls within the financial sector-a segment that is the most targeted by sanctions, it could be a signpost to future deals.

Dehdilani said that there were many more and larger divestitures on the horizon, including one for the sugarcane industry, which will be the most extensive privatization of the coming years since it provides 55 percent of Iranian sugar production and has a vast potential to export.

“In recent times, the new approach of the government was making privatization a major priority because we’ve seen that privatization in the previous times hasn’t been capable of achieving its planned targets,” Dehdilani said, speaking of several failed divestitures under the previous administration, where huge state-owned companies ended being owned by quasi-state players instead of the actual companies in the private sector.

He said that flexibility in contract terms and pricing, as well as a more robust mandate granted to IPO to ward off the opposition of hostile entities to its policies, are among the latest reforms.

Dehdilani expressed a positive outlook for the nuclear agreement’s future, following an agreement to join forces agreement with French oil giant Total and Korea’s $8 billion financing deal in the case of Iranian projects.

In the past YearYear in the last YearYear, the IPO has worked internationally to encourage divestiture opportunities in Iran and has sent three groups to Asian and European countries with this goal.

“The curiosity that foreigners show is far beyond our expectations; however, things aren’t going to change overnight since reforms in the domestic system are also required,” he said.

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