Banking & Finance

Saudi Central Bank grants first licence to a foreign insurer

February 7, 2023, 3:21 PM

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Sama licence is part of Vision 2030 drive to increase foreign investment

US healthcare giant Cigna is to become the first international insurer operating in Saudi Arabia as the kingdom seeks to increase foreign direct investment.

Cigna has been granted a health insurer licence by the Saudi Central Bank (Sama), it revealed on Monday.

Jason Sadler, president of international markets at Cigna, described the branch licence as a “significant milestone” for the Connecticut-based group.

Medical policies are growing in popularity for Saudi consumers. They accounted for 66 percent of the insurance premiums paid in the kingdom in 2022, out of a total of $14.2 billion, according to Oxford Economic Group.

Healthcare premiums are forecast to reach $9.4 billion by 2027.

Sadler said Cigna, which has more than 180 million customers in some 30 countries, was committed to the growth of the health insurance sector in Saudi Arabia.

He added: “This marks a significant milestone for Cigna in the kingdom and across the Middle East and Africa region. The licence enables us to deliver a stronger value proposition, access and service to our clients through a host of proprietary health and well-being products and services.”

A KPMG report issued in December said the kingdom’s overall insurance market grew by 26.8 percent in 2022.

The total assets and total equity of the insurance industry were $21 billion and $5 billion, an increase of 20 percent and 4.8 percent respectively on the previous year, the study added.

Insurance penetration in the kingdom is still below the global average, however. Sama’s latest Saudi Insurance Market Report attributes this to low levels of demand and awareness among consumers.

In its statement on the Cigna licence, the central bank said the move was part of its initiative to encourage foreign direct investment and increase competition in the sector, in line with Vision 2030.

“Additionally, enabling new international entrants will enhance the quality of provided services, increase the diversification of investors and introduce unique business models to the market,” Sama said.

In 2022 the kingdom had 29 insurers, takaful (Islamic insurance) providers and reinsurers, as well as 179 brokers and other service providers.

Details of Cigna’s Saudi operation will be announced soon, said Jerome Droesch, CEO of domestic health and health services at Cigna International Health.

Last August, Saudi Arabia set up a dedicated agency to attract more international investors. The Saudi Investment Promotion Authority aims to deliver an integrated approach between government agencies to encourage investment and support partnerships with local businesses.

Vision 2030 also calls for a smaller roster of sizeable insurers with the capital required to withstand challenges and cover large projects. In 2021 Sama signalled an increase in paid-up capital requirements, to be implemented over three years, from a minimum of $26.7 million to $133.3 million.

In October, the merger of Walaa Cooperative Insurance Co and SABB Takaful Co was completed, with all assets and liabilities of SABB transferred to Walaa.

More consolidation is expected. In December Saudi-listed Arabian Shield Cooperative Insurance said it was exploring a merger with Alinma Tokio Marine Insurance Company.