Iran looks into ILS as reinsurance replacement

Iran is working on the development of a range of new financial products, including insurance-linked securities (ILS) as reinsurance cover has become scarce in the country due to the reintroduction of sanctions, according to an Oct. 2 Reuters report.

Sanctions against the country have been reintroduced following the US rejection of an agreement on Iran’s nuclear programme.

Officials in Iran now reportedly said that they are working on new products to stimulate capital markets activity. The capital market regulator, the Securities and Exchange Organisation (SEO) is considering whether to introduce ILS so that domestic insurers can offload some portfolio risk in the capital markets, Majid Pireh, senior Islamic finance expert in the SEO’s research, development and Islamic studies department, reportedly said.

ILS are typically tied to natural catastrophes such as earthquakes and offer high yields and investors can lose their principal if a catastrophe loss is triggered. They could serve as an alternative to reinsurance cover, which is scarce as sanctions mean Iran is shut out of global reinsurance markets such as Lloyd’s of London, Reuters noted.

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