Due to numerous individual requests, we are republishing Misbah G A Kamal’s commentary on the development of the Iraqi insurance market, from its heydays as a pioneer in the Arab world to the present day.

Although the origins of insurance are traced to Iraq’s ancient codes, the Hammurabi Code being the most famous (circa 1760BC), the insurance sector of Iraq today has nothing to boast about except its survival under the most difficult conditions of wars, sanctions, invasion and occupation and lack of security.

The first privately owned Iraqi insurance company was established in 1946 followed in 1950 by the formation of the state-owned National Insurance Company. Prior to these dates, the market was made up of Arab and foreign insurance companies and agencies. In 1958, the second privately owned insurance company was established. By 1964, all insurance companies were nationalised and reconstituted into three specialist companies: life, general and reinsurance.

In its heydays, Iraq’s insurance market was a pioneering market in the Arab world. Though state-owned, it had first-class insurance and reinsurance professionals at management level with a growing number of mid-tier staff developed through regular training programmes that also benefited other Arab insurance markets.

Those were the days when research for post-graduate diplomas was undertaken at Iraqi universities. Many of the practitioners in the market ended up managing Arab insurance companies or assuming important leading positions – a move that began in the 1970s.

But the years of wars (1980 to 1988), the invasion of Kuwait (1990) and the harsh UN sanctions (1990 to 2003) have devastated the insurance sector in terms of manpower loss, isolation from international developments, loss of treaty protection and falling effective demand for insurance protection.

The sector has a lot of catching up to do, but that is not easy under conditions marked by legal discrimination against Iraqi insurers, the slow improvement in the security conditions and the relegation of insurance to the bottom of the insured’s quest for financial security against risk.

Nationalisation to privatisation
The Iraqi insurance market, until 1997, comprised three state-owned companies:
National Insurance Co (NIC), Iraq Life Insurance Co (ILIC) and Iraq Reinsurance Co (Iraq Re). The restriction of the activities of NIC to non-life business and ILIC to life business was ended in 1988 (ILIC’s name was changed to Iraq Insurance Co). Both companies were permitted to transact all classes of insurance, thereby a measure of competition was introduced to the market. 1988 also witnessed the compulsory cession to Iraq Re.

A year earlier, the State Insurance Organisation, the supervisory body, was abolished. Between 1988 and 1997 the companies were attached to the Ministry of Finance and the office of Insurance Supervisor was set up at the ministry.

The nationalisation era ended in 1997 when a law was passed to “commercialise” the state-owned companies and simultaneously permit the formation of private insurance companies. The first private insurance company was formed in 2000. Thereafter many others were formed. Today, the market is made of the three public companies (including a specialist reinsurance company) and 14 private companies (all very small at this stage). Three of these companies operate in Iraqi Kurdistan. More companies are planned.

In 1990, following Iraq’s invasion of Kuwait and the comprehensive UN economic sanctions, the three state-owned companies lost their treaty protections. The long sanctions regime (1990 to 2003) undermined the insurance sector and to date the sector is still weak.

During the sanction’s regime, the market utilised its own local resources to provide limited treaty protection. In effect, business was retained by the insurers and Iraq Re.

Almost immediately after the US invasion of Iraq (March 2003), a crash privatisation scheme of the state-owned insurance companies was hastily put together (Summer of 2003) by the US occupation administration (illegal under international law). This was part of the project for the total restructuring of the Iraqi economy. The scheme entailed the splitting of the companies to four specialist risk carriers: motor, marine and aviation, non-marine and life & pensions. (For a critique, see my article in MEES (Middle East Economic Survey) Vol 47, No 19 (May 10, 2004) pp D1-D5). The scheme was not implemented and its documents were shelved at the Ministry of Finance.