Insurers have to obtain their license from the Finance Ministry’s insurance committee and so far only a handful of local companies have succeeded. Photo: Rudaw
ERBIL, Kurdistan Region—Local authorities say that more than 1,115 people were killed in traffic accidents in the Kurdistan Region last year, and over 10,000 injured. Almost none of them were insured.
However, according to Rezan Jawad, head of the Kurdistan Regional Government (KRG) Economic Council, that is about to change.
“Our council has prepared a draft insurance law…. after the formation of the new government, [it] will be submitted to the Council of Ministers first and then to the Kurdistan Parliament.” Jawad told Rudaw.
This law would make auto insurance mandatory for all drivers who would be covered in case of injury and damage claims through insurance companies.
The draft law presents a table of benefits designed to set minimum standards for all insurance plans.
This measure coincides with a gradual push towards privatization. Several months ago the Ministry of Finance froze the activities of the Kurdistan Region Insurance Company (KRIC) —its public insurer—to shift the responsibility to the private sector.
Abu Zaid Mohammad Hassan, Director of the KRIC office in Erbil, welcomes the change, saying, “The Ministry understood there was a lack of expertise.”
Hassan adds that there was a certain degree of pressure from Islamic groups on the government to abolish the state sponsored insurance programs. The parties argue that insurance means trading in human life, which only God can own.
“They have misunderstood it,” Abu Zaid told Rudaw with apparent frustration. “In any case, they are the minority. Most people just don’t know how it works.”
Current insurance laws were established by the Federal government in 2005. Baghdad regulates its own through the Iraqi Insurance Diwan, and Erbil through the Ministry of Finance.
Insurers have to obtain their license from the Finance Ministry’s insurance committee and so far only a handful of local companies have succeeded.
Jamal Ansfour, CEO of Asia Insurance, the region’s leading insurer, believes that bureaucracy and misguided regulations are a major obstacle.
According to Ansfour, insurance companies are required to deposit 25 billion Iraqi Dinars ($25 million) with the Ministry of Finance in order to get a license, which he says is a large sum for new companies who are just starting a business.
“I believe that the government should revisit this issue,” says Ansfour. “You just keep a minimum capital requirement and release the deposit. It’s against basic economic rules. How can you deposit all your capital (with no interest) and start working?”
Ansfour advises policymakers in Erbil to follow the example of their southern neighbor.
“In Baghdad, you have to deposit a small percent of your capital to keep it as a guarantee,” he explains. “But you can put it in any bank and earn interest on it.”
Thanks to this massive deposit requirement, dozens of insurers have simply declined to obtain a license and according to the Finance Ministry, around 50 companies are currently working illegally in Kurdistan.
Hassan states that many of these companies are from Iran, UAE, Jordan, Turkey, and Lebanon, and they simply ignore orders to shut down.
Asfour says that the government’s failure to enforce its own laws has affected his business.
“According to directives from the Ministry of Finance and Baghdad, it’s not allowed for any company operating inside Iraq or Kurdistan to obtain insurance from abroad, but the implementation of this has never been carried out, and inspections were never done,” he complained. “Asia Insurance cannot in any circumstance report someone who is insuring abroad. We are a service company, and these people are potential clients. Enforcing the law is the regulators task, not ours.”
Companies with investment license in Kurdistan, however, are exempt from this law. These companies can seek the service of foreign insurance firms.
Kurdish insurers are currently trying to amend the 2006 investment law, arguing that it encourages capital flight to foreign insurers.
They believe the money should stay in the Kurdistan Region where it could contribute to the local economy.