Background and Objectives: The insurance industry, as one of the fundamental pillars of every country’s financial and economic system, plays an indispensable role in transferring and distributing risk among economic actors. The essence of insurance is grounded in the principles of assurance and trust; therefore, any deficiency in legal, supervisory, or compliance mechanisms may lead to diminished confidence in the financial market. In today’s world, insurance companies face rapid regulatory changes, financial technologies, and international supervisory requirements, which compel them—beyond managing financial and operational risks—to pay close attention to legal and compliance risks as well. Nevertheless, alongside financial and operational risks, legal and regulatory compliance risks have increasingly influenced the performance of insurance companies. Frequent legislative changes, divergent interpretations of regulations, and the absence of a transparent compliance framework have created challenges that may result in legal disputes and a decline in policyholder trust. Existing literature has predominantly focused on the economic and accounting aspects of insurance, while legal dimensions have received comparatively less attention. Accordingly, the primary objective of this study is to develop a comprehensive model for managing legal risks in the Iranian insurance industry and to identify and prioritize the key components of these risks, thereby providing a basis for designing preventive policies within insurance institutions.

Methodology: This study is applied–developmental in nature and was conducted using a mixed-methods (qualitative–quantitative) approach. In the qualitative phase, data were collected through semi-structured interviews with ten insurance experts, including legal managers, compliance officers, and academic specialists. The extracted themes were categorized across three levels of open, axial, and selective coding using grounded theory techniques. In the quantitative phase, the weight of each identified risk was determined through fuzzy averaging of expert judgments. Final evaluation was carried out using a risk matrix (probability of occurrence × severity of impact) to determine the criticality level of each risk.

Findings: Based on the analytical results, seventeen core components of legal risk in the insurance industry were identified. The highest risk scores were associated with divergent interpretations of insurance laws and frequent regulatory changes, each receiving a score of 25 and classified as critical risk areas. Contractual ambiguities, insufficient employee familiarity with insurance regulations, weak internal documentation, and lack of coordination between technical and legal units were also identified as major contributors to high-risk exposure. Fuzzy analysis revealed that institutional and human factors play a more significant role in intensifying these risks compared to technological variables.

Conclusion: This research presents, for the first time, a comprehensive and indigenous framework for managing legal risks in the Iranian insurance industry. The added value of the proposed model lies in its integration of qualitative and quantitative analyses and its transformation of conceptual data into a decision-support tool for insurance managers. The findings indicate that effective management of legal risks in the insurance sector requires a holistic and multidimensional approach that simultaneously addresses legal, human, and structural factors. According to the final model, reducing legal disputes in the insurance industry necessitates enhanced regulatory training, legal review of contracts prior to execution, development of intelligent compliance systems, and the establishment of specialized legal risk management units within insurance companies. This approach, while strengthening legal compliance, contributes to enhanced public trust, institutional sustainability, and improved effectiveness of supervision by the Central Insurance Authority.