France and Germany threatened fresh sanctions against Iran on Friday and Germany's leading insurance companies announced they would quit doing business in the country, following a report that Iran may be working on a nuclear warhead.

France and Germany said they were considering expanding sanctions against Iran through the United Nations Security Council if the country continues to ignore UN resolutions and the International Atomic Energy Agency.

"Of course Iran has the right to use nuclear energy for civil purposes, but it has no right to create nuclear weapons," German Foreign Minister Guido Westerwelle told reporters in Berlin.

The comments come in response to report by the International Atomic Energy Agency on Thursday that suggested Tehran had either resumed working on a nuclear weapon or had never stopped in 2007, as was concluded by a U.S. intelligence assessment. Iran denies any interest in developing nuclear arms.

"This report confirms with precision the international community's very serious concerns," French Foreign Ministry spokesman Bernard Valero said. "It shows how urgent it is to act with determination to respond to the absence of cooperation by Iran."

German reinsurer Munich Re AG said Friday it will not renew existing business contracts or draw up any new ones with insurance companies in Iran, while Allianz SE said it wouldn't renew its reinsurance business there.

"We've been looking at the situation for a long time; the political situation is worse now and we decided to stop business," Munich Re spokesman Klaus Schmidtke told the AP. He said most of the company's business there is property reinsurance.

Reinsurers sell backup coverage to insurance companies to spread risk in the event of large losses.

Allianz, also based in Munich, said it "has decided not to renew its reinsurance treaty business in Iran because of the political developments in the region. This business amounts to negligible premiums."

Joerg von Fuerstenwerth, director of the German Insurance Association said his organization is following the international discussion on Iran and urged the European Union to work to develop uniform measures to limit the effects on businesses.

"Increasing the economic sanctions against Iran is justified and will be supported by the German insurance industry," he said in a statement.

German Chancellor Angela Merkel has recently said she would support further sanctions against Iran if it refuses to return to negotiations.

Many German companies continue to do business in Iran despite the sanctions, exporting goods and services valued at nearly euro4 billion to the country in 2008, the latest data available from the Federal Statistical Office show.

Last month German industrial conglomerate Siemens AG said it would stop doing business in Iran by mid-2010.