Insurers to get independent body in Saudi Arabia

Unsplash/Carrie Allen

• Insurance Authority to be set up
• Separate from central bank
• Aim is to help sector contribute to economic growth

Saudi Arabia is to create an insurance authority independent from their central bank, as the sector undergoes a wave of consolidation that the government hopes will help make it a significant player in non-oil economic growth. 

The Saudi Press Agency (SPA) said on Wednesday that a cabinet meeting chaired by Crown Prince Mohammed bin Salman had authorised the Insurance Authority to be set up.

No details were given on when the body would come into operation or its leadership. 

Central bank (SAMA) governor Ayman Al-Sayari – appointed to the post in February – said the decision would help “improve efficiency in the sector and increase its contribution to non-oil GDP,” SPA reported. 

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“The new authority will complete SAMA’s mission to develop the insurance sector, by providing the appropriate environment for creating strong insurance entities capable of competing and growing,” SPA cited Al-Sayari as saying. 

It would also support the sector and national economy, and ensure there is no impact from the regulatory shift on the interests of beneficiaries and policy-holders, he said. 

SAMA has been encouraging mergers and acquisitions in the industry to create fewer and stronger companies that are capable of meeting the objectives of Vision 2030, as insurers face increased claims and rising regulatory costs. 

In July Al Sagr Insurance’s board backed a proposed merger with rival Gulf Union Ahlia Insurance. A month earlier Arabian Shield Cooperative Insurance Company said it will acquire Alinma Tokio Marine. And last year the sector saw two mergers, between Walaa and Sabb Takaful and Arabian Shield and Alahli Takaful.

In March S&P Global Ratings forecast gross written premiums – the value of insurance contracts that insurers sell minus costs – would rise around 11 percent in 2023, after a 25 percent increase last year. 

SAMA said in an annual report in May that 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. 

The report said Saudi Arabia’s 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.  

SAMA has been issuing market survey reports since 2008 when the Saudi insurance industry was still in its infancy.