Insurance in Iraq
As conditions gradually improve in Iraq, queries are being received concerning opportunities in the insurance sector. This article provides a regulatory overview of the Iraqi market.
The operation of insurance in Iraq is governed by the Insurance Business Regulation Act 2005 (IBR). This act applies to all industry participants who wish to practice insurance business in Iraq.
Insurance business is widely defined in the IBR to include any activities of reinsurance, works of insurance professionals, acts of agents, intermediaries, the promoters of insurance contracts, claims evaluation, assessment, settlement, any transfer operations and any other activities related to an insurance contract. It is therefore likely that any insurance activities conducted in Iraq will fall within the terms of the IBR and be subject to regulatory supervision.
The IBR establishes the Iraqi insurance regulator, which is called the Iraqi Insurance Diwan ("Diwan"). The Diwan was established as an independent body that sets policies and procedures for the regulation of the insurance industry.
The objectives of the Diwan are to regulate and oversee the insurance sector, to assure industry development, provide industry transparency, protection of individuals and property and the accumulation and growth of national savings in order to support economic development.
To this end, the Diwan is given wide ranging powers with regard to insurance and is empowered to issue regulations concerning all aspects of the industry including insolvency, margins, minimum guarantees, technical reserves, reinsurance criteria, investments of funds, assets to be held and qualifications of industry participants.
Obtaining an Insurer's License
An insurer must be one of the following:
- Iraqi public company
- Iraqi private or mixed holding companies
- Branches of foreign insurance companies registered in Iraq
- Takaful and Retakaful insurance entities
The Diwan has power to authorise and grant licenses and the terms upon which licenses can be granted. Licenses are issued yearly and must be renewed. It also has the power to suspend and cancel licenses in the event of any breach of the IBR or regulations. No insurance business can be conducted without a license however the Diwan may grant permission for a new business to commence provided licensing requirements are completed within 90 days.
For foreign entrants a branch is the most likely option to set up. The other alternative is to acquire a shareholding in an existing Iraqi company or joint venture.
Any new applicants may only be granted a life or general insurance license. Existing Iraqi companies with dual licenses are exempt from this requirement. The grant of a life insurance license also authorizes the practice of health and personal accident insurance.
Any insurance contract that is concluded by an unlicensed insurer is considered invalid. However, such invalidity cannot be used as a defense by the insurer if an insured or beneficiary entered into a contract in good faith.
Practice of Insurance
The Key points arising are as follows:
- Insurers are entitled to reinsure both inside and outside Iraq.
- Insurers practicing in Iraq must meet a minimum capital
Type of Insurers
IRD = Iraqi Dinar
Insurer authorised to practice general insurance business.
IRD 500 Million / £290,000
Insurer authorised to practice life insurance business.
IRD 750 Million / £435,000
Insurer authorised to practice exclusively the business of reinsurance.
IRD 1 Billion / £580,000
Insurer authorised to practice general insurance businesses and life insurance.
IRD 750 Million / £435,000
- In addition to the minimum capital, each insurer is required to deposit a guarantee with an approved Iraq bank of 30% of the minimum capital detailed above.
- The Diwan has issued principles for the calculation of technical reserves and provisions that must be set aside to meet claims. It has also specified the accounting policies that must applied. (See Regulations 2 of 2005 and 1 of 2006.)
- IBR contains provisions to prevent money laundering and the Diwan has supervisory powers in respect of both money laundering and an insurer's accounts.
- All insurance policies or endorsements to be issued in Iraq must be approved by the Diwan.
- Foreign insurers are subject to additional requirements, which require a foreign insurer to appoint a managing director who will be responsible for the branch. Notification of the manager's qualifications must be provided. The foreign insurer is required to authorize the manager to carry out all activities for the purposes of managing the branch.
- Foreign insurers must provide separate accounts of the branch that relate to the conduct of business in Iraq.
- Insurance contracts can be made in any currency.
- Insurance of public property of Iraq ministries or state offices must only be insured by licensed Iraqi insurers following the issue of a public tender.
- Policies may be written in Arabic or another language.
Agents, Intermediaries and Insurance Expert.
Agents, intermediaries and experts are required to be licensed by the Diwan. No agent can practice as an agent without a license and evidence of an agreement with an insurer. An insurer must also specify its agent and provide proof of appointment. No person can conduct business as an insurance intermediary or reinsurance intermediary without obtaining an appropriate license and meeting the conditions imposed by the Diwan.
Surveyors, loss assessors and actuaries must also be registered with the Diwan. Insurers are permitted to obtain specialist technical expertise from offshore unregistered experts, however written approval from the Diwan must be obtained. This can be important with regard to major claims or specialist functions.
The IBR contains provisions dealing with qualifications of employees, rules with regard the takeover or transfer of Insurance licenses and procedures and protections with regard to the liquidation of an insurance company.
The Diwan is required to and has established alternative dispute resolution mechanisms for insurance disputes involving policy holders including mediation and arbitration. The Diwan also keeps a register of insurance mediators and arbitrators to be used when resolving disputes.
The IBR establishes an Iraqi insurance and reinsurance association that all licensed insurers and reinsurers are to be a member of. The Association is set up to represent the collective interests of insurers and reinsurers.
The framework established by the IBR is workable, friendly to business and transparent. The Diwan is appropriately established to guide the industry moving forward and compares favourably to other regulatory regimes in the region. Hopefully as the political situation improves we will see further growth in the industry.
This article is designed to provide a regulatory overview and independent legal advice should be obtained.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.