New regulatory guidance seeks to increase insurance uptake in Saudi Arabia


Saudi Arabia is home to the second-largest insurance market in the GCC, accounting for approximately 33.6% of the region’s gross written premium (GWP) in 2018. Much of the sector’s growth over recent years has been the result of government action: the Kingdom ranks joint-second in the GCC region in terms of the breadth of its mandatory insurance requirements, with compulsory insurance lines including health cover for both Saudi Arabian nationals and expatriates; vehicle liability; workers’ compensation; and professional liability cover for health care workers and insurance consultants.

“In recent years we have witnessed premium growth across the sector due to the implementation of compulsory motor and health insurance coverage,” Gary Lewin, CEO of Axa Saudi Arabia, told OBG. Insurance penetration in the country remains low, however, representing 1.2% of GDP in 2018, according to the Saudi Arabian Monetary Authority (SAMA), the Kingdom’s central bank. As the government continues to implement a national development strategy aimed at boosting private sector activity, the uptake of insurance products is expected to grow in the short to medium term.


As of the first quarter of 2020 there were approximately 33 insurance and reinsurance companies licensed to operate in Saudi Arabia, according to SAMA. Because there are large number of insurers and brokers operating in the Kingdom, the prospect of rationalisation has been an industry talking point for some time. “The insurance market is currently heavily fragmented. While capital requirements have been raised, we are expecting to see additional consolidation through mergers and acquisitions with a large number of insurers and brokers,” Mohammad Al Suliman, CEO of Najm for Insurance Services, told OBG.

Despite many players, a significant amount of premium in the country is concentrated among only a handful of companies. According to the most recent data from SAMA, in 2018 the Kingdom’s top-eight insurers were responsible for 73.4% of GWP, leaving 26.6% for the remaining 25 companies. The topthree firms in terms of GWP in FY 2019 were BUPA, with SR10.4bn ($2.8bn); Tawyniya, with SR8.4bn ($2.2bn); and Al Rajhi, with SR2.6bn ($693.2m). Other prominent players in the Kingdom include Medgulf, Axa, Walaa and Allianz. The country’s sole reinsurer, Saudi Re, was the fourth largest in the MENA region in 2018. Although the firm’s GWP fell 23.5% from $251m in 2017 to $192.1m, it remains an important player in the regional market. In addition, Saudi Re enjoys a preferential position in the domestic market due to a right of first refusal on a portion of premium ceded by primary carriers.

Looking to the wider sector, SAMA currently licenses 86 brokers and 64 insurance agents, as well as a growing number of actuaries, loss assessors, adjusters and other insurance intermediaries. The number of foreign players is likely to increase in the years ahead as Saudi Arabia removed the 49% ownership limit for foreign investors in local listed companies in June 2019 as part of its strategy to attract global capital to the stock exchange.

The Saudi Model

The Kingdom’s insurers are required by law to adopt a cooperative insurance model, which is Islamic in nature. Saudi Arabia is therefore contested by some as the largest takaful (Islamic insurance) market in the world, accounting for around 50% of worldwide premium. However, the cooperative model differs from the standard takaful model in a number of ways. Under the cooperative framework there is no requirement in regard to segregating policyholders’ funds from shareholder funds, and cooperative insurers are not expected to invest in accordance with sharia principles. Additionally, insurance companies in Saudi Arabia are not required to appoint a sharia supervisory board, which the takaful model – as applied in most jurisdictions in the region and beyond – requires.

The Saudi cooperative model offers a number of advantages to industry participants. The more lenient investment regime means that insurers are able to establish more sophisticated investment strategies. In addition, the fact that the policyholders fund can access the shareholders fund makes the cooperative model more stable than traditional takaful in the eyes of some industry observers.


Saudi Arabia’s insurance industry is regulated by SAMA, with its General Department of Insurance Control responsible for overseeing the sector in accordance with the 2003 Insurance Law. The regulator publishes circulars in order to clarify points of law as well as introduce new regulations that address specific areas of the market when deemed necessary. SAMA works in tandem with the Council of Cooperative Health Insurance (CCHI), which oversees the Kingdom’s health insurance system, and the Capital Markets Authority (CMA), which is the body charged with regulating the Saudi Stock Exchange (Tadawul), where much of the insurance industry’s investment activity is targeted.

Financial stability has been a key concern for the regulator in recent years. After the implementation of the Solvency II directive in European markets, SAMA has begun to introduce disclosure requirements and internal risk controls as a first step towards a more efficient risk-based approach in line with the European model. These measures include standard reserve reporting templates for annual and quarterly submissions, and benchmarking techniques for the assessment and monitoring of technical provisions held by insurance companies.

In March 2020 the regulator made efforts to provide greater stability for the industry by improving actuarial performance through the issuance of the Actuarial Work Regulation for Insurance directive. According to SAMA, the new rules aim to support the growth of the actuarial segment in order to encourage “a financially strong and thriving insurance industry”. The regulator also sought to make the market more attractive to investors through the issuance of licensing and controlling rules for foreign insurance and reinsurance companies in December 2018. The regulations allow foreign investors to increase their share of ownership of Saudi insurers, with the aim of promoting competitiveness within the local market.

The sector also stands to benefit from the Kingdom’s wider digitalisation drive, which stakeholders argue will improve the process of training. “Thanks to digitalisation and new technologies such as virtual reality, training courses in the insurance sector have become increasingly accessible,” Samy Al Ali, CEO of Jadara Alalamia Brokerage, told OBG.

In September 2019 SAMA updated the Unified Compulsory Motor Insurance Policy, which established a no-claims discount framework and updated existing regulations for third-party liabilities. These changes were introduced to encourage an increase in motor insurance uptake, particularly among new drivers, as the number of motorists has grown since women were first permitted to drive in July 2018.

Additionally, new measures to increase consumer protection were introduced in May 2019 through the establishment of a resolution centre for individual vehicle insurance disputes. The new platform is open to individuals making claims of under SR50,000 ($13,300) against any insurance company that has signed the centre’s membership agreement.


The Saudi Arabian insurance market has faced challenging circumstances in recent years. Although the Kingdom’s total GWP expanded at a compound annual growth rate (CAGR) of 8.3% between 2013 and 2018, largely driven by compulsory health and motor insurance, the sector has seen muted performance since 2016. This was largely caused by lower oil prices, tightening regulatory oversight, a decline in the size of the Kingdom’s expatriate population as a result of localisation policies and the introduction of higher no-claims discounts for motor insurance cover in 2018.

According to the most recent “Saudi Insurance Market Report” published by SAMA, GWP totalled SR35bn ($9.3bn) in 2018, down 4.1% from SR36.5bn ($9.7bn) in 2017. The central bank attributed this decline to the reduction in the average cost of vehicle insurance policies as a result of regulatory changes introduced that year. High levels of competition in the sector also negatively affected premium growth during this period. “The non-life insurance market is becoming increasingly competitive and we are witnessing a price war when it comes to premium,” Samer Kanj, CEO of Buruj Cooperative Insurance, told OBG. “As a result, net underwriting surplus is decreasing, which affects profitability.”

According to local media, approximately 10 of the Kingdom’s 33 insurance companies recorded a net loss in 2019, with the majority of profits shared by just two companies – BUPA and Tawuniya. In February 2020 SAMA announced plans to raise capital requirements for insurance companies in an effort to strengthen the sector and encourage greater consolidation. The minimum capital requirement for a company offering insurance services is currently SR100m ($26.7m), while for firms offering both insurance and reinsurance the requirement is SR200m ($53.3m). The central bank has previously proposed an increase in capital requirements to SR500m ($133.3m) and SR1bn ($266.6m), respectively, although no time line for the higher thresholds been released as of March 2020.

Despite muted performance since 2016, one area that the Kingdom’s insurers have performed relatively well in is premium retention. Saudi Arabia posted the highest retention rate in the GCC in 2018, at 76.2%. As with other jurisdictions in the region, retention rates have received a boost from the growth of motor and health insurance uptake, where less premium is generally ceded. SAMA has also taken steps to reduce the amount of premium transferred to foreign reinsurance institutions, imposing a maximum cession rate of 30%.


The Kingdom’s largest insurance segment is health coverage, which accounted for approximately 56.8% of total GWP in 2018. Saudi Arabia was one of the first GCC nations to introduce mandatory health insurance for residents: since 2011 all private sector employees, whether native or expatriate, are required by law to acquire private health cover. The compulsory health insurance framework has undergone a number of updates since its introduction. The CCHI issued its most recent health policy in 2018, which established a new electronic system aimed at reducing administration costs and the potential for fraud. The platform includes an e-portal, through which patients can review their health records, and a health practitioner portal to access authorised information. In 2019 the CCHI also introduced compulsory health insurance for visitors to the Kingdom, which is available for purchase at the same time as the tourist visa.

The anticipated expansion of the private sector should ensure that the health insurance segment continues to drive premium growth. In recent years government entities have also started to offer private health cover to their employees, using this as a way to attract and retain staff.

General Cover

General insurance is the country’s second-largest segment, accounting for 40.1% of GWP in 2018. Since the introduction of compulsory third-party liability cover in 2002, the Kingdom’s market has become dominated by motor coverage, which accounted for 67.2% of general insurance premium in 2018. However, with nearly 30 insurers offering motor insurance, intense competition has at times eroded underwriting quality in the segment. SAMA has sought to overcome this issue through a number of measures: in 2017 new regulations were introduced to promote the collection of exchange of motor insurance information among companies, and in 2018 the regulator signed an agreement with the General Directorate of Traffic automatically check insurance records in cases where drivers have committed traffic violations.

This was followed by the property and fire category, which represented 12.1% of general insurance premium in 2018, followed by accident and liability cover with 7.1%. Other forms of general insurance accounted for the remaining 13.7%.


The Kingdom’s life insurance policies, which are known as protection and savings (P&S) cover locally, contributed 3.1% of total GWP in 2018. This is largely due to cultural reservations about the concept of insurance in addition to the existence of social welfare schemes for nationals. The Public Pension Agency’s civil pension scheme had approximately 1.2m subscribers as of early 2019, while the number of private entities subscribed to the social insurance scheme – the General Organisation for Social Insurance – stood at 453,800.

The availability of generous state benefits for Saudi nationals means that marketing for P&S products are largely targeted towards expatriates, with group life policies covering employees in larger corporations tending to dominate the segment. However, Saudi Arabia’s strategy of reducing the government’s role in the economy, as outlined in Vision 2030, the nation’s long-term economic development blueprint, suggests a sense of optimism regarding the segment’s long-term growth.

Growth Ahead

Despite slowed growth in recent years, Saudi Arabia’s insurance market has considerable potential in the near and long term. Although the Kingdom is the second-largest insurance market in the GCC, it ranks fourth in the region in terms of insurance density. This suggests that there is room for greater market penetration.

The domestic insurance industry will expand in tandem with economic growth. In January 2020 the IMF released a GDP growth forecast for the Kingdom for 2020 of 1.9%, down 0.2% from its projection one year prior. This may see additional change following the global onset of Covid-19 and the resulting economic impact in the first half of the year. According to regional investment bank Alpen Capital, the GCC insurance market is projected to expand at a CAGR of 4.3% between 2019 and 2024, driven by population growth, infrastructure development and economic diversification strategies in the region. The Kingdom’s insurance market, benefitting from the investment and reform agenda, is expected to outperform the regional average, with an anticipated CAGR of 5% over the period.


The ongoing process of privatisation driven by Vision 2030 is slated to provide opportunities to assess or cover risk, both for the government and investors looking to take on state assets. Furthermore, as Saudi companies and citizens take up more financial tools, the insurance sector is likely to benefit. Coverage of risks in areas such as trade credit and investment in foreign markets have already emerged as more active market segments, with new products targeting specific concerns such as seizure of assets by a foreign jurisdiction. “While compulsory insurance lines have been a fundamental source of income for insurers and brokers in the last few years, there are a number of non-compulsory segments such as events insurance, and IT and cybersecurity protection, which the sector stands to benefit from moving forward,” Mahmoud El Madhoun, CEO of Kingdom Brokerage, told OBG.

However, downside risks remain for the Kingdom’s insurers. Volatile capital markets caused by the economic fallout from the global outbreak of Covid-19 may result in lower returns. As such, the market may well experience consolidation in the year ahead.


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