Saudi insurance market braces for more mergers

Eric Lafforgue/Hans Lucas/Reuters

Saudi insurance companies expect an increase in mergers and acquisitions once a new independent insurance authority is fully operational by early next year, a spokesman said this week. 

On August 16 the Saudi cabinet gave its authorisation for the body’s creation, which central bank (Sama) governor Ayman Al-Sayari said would help improve efficiency in the sector and increase its contribution to non-oil economic growth. 

Adel Al-Eisa, who acts as spokesman for Saudi insurers, told Asharq TV it would take six or seven months to transfer full powers to the new entity.  

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He said it would focus on facilitating merger activity among the industry’s more than 200 companies, with the aim of increasing their contribution to non-oil GDP to over 4 percent by 2030. 

In an annual sectoral report issued in May Sama said the Saudi insurance penetration ratio – which usually registers the percentage of total premiums collected against GDP – had risen to 2 percent of non-oil GDP in 2022 from 1.9 percent in 2021.  

“What’s new is the authority will be independent and belong to the council of ministers and focus solely on the insurance sector,” Al-Eisa said. “All regulations will be brought under one roof.”

“The sector faces many challenges and one of them is mergers. We expect there will be a speeding up of mergers in the coming period,” he said, adding that this would help improve the sector’s low profitability in comparison to global peers. 

Sama, which has regulated the sector since the early 2000s, has been encouraging mergers and acquisitions to create fewer and stronger companies capable of meeting the objectives of Vision 2030, as insurers face increased claims and rising regulatory costs. 

The insurance sector grew by 26.9 percent in 2022, bringing gross written premiums to 53 billion Saudi riyals ($14 billion), up from 42 billion, with health and motor insurance driving the increase.