In 2023 Saudi Arabia’s insurance sector witnessed substantial growth, driven by a combination of regulatory reforms, economic diversification and increased awareness of risk management. The sector’s gross written premium (GWP) experienced a notable rise, up 22.7% over the course of the year, with total GWP reaching SR65.5bn ($17.5bn) – as compared to SR53.4bn ($14.2bn) in 2022 – according to data from the Kingdom’s Insurance Authority (IA). This growth was fuelled by the robust performance of the economy, rising health insurance coverage – including mandatory coverage for all expatriates and nationals employed in the private sector – increased vehicle sales and a thriving construction industry, among other contributing factors. Health insurance alone represented 59% of GWP in 2023, highlighting its dominance of the overall market in the Kingdom. Additionally, motor insurance – the growth of which has been driven by increasing vehicle sales and higher premium – has also played a significant role in the industry’s continued expansion.
The IA, which began operations in late November 2023, is widely expected to further industry consolidation, greater international investment and a growth in premium across segments in the coming years. Combined with the broader objectives of the Kingdom’s Vision 2030 economic plan, this regulatory advance is expected to sustain and accelerate the growth trajectory of the insurance sector for the foreseeable future. Forecasts by UK-based research firm GlobalData project the sector to sustain a compound annual growth rate (CAGR) of 5.2% for GWP through to 2028, which would put that year’s premium at SR83.7bn ($22.3bn), a rise that is projected to be led by rising health and motor premium.
Structure & Oversight
Saudi Arabia’s insurance sector is categorised into three primary segments: health, general, and protection and savings (P&S) insurance. The industry comprises 28 registered insurers, including takaful (Islamic insurance) providers and reinsurers, supported by 186 brokers and various service entities. There is also one foreign insurer – Cigna Worldwide Insurance Company – operating in the Saudi market. Despite the diverse array of market participants, profitability is predominantly concentrated among a few top-tier insurers. Many smaller and mid-sized insurers therefore face financial difficulties, exacerbated by rising claims and regulatory compliance costs. For example, in 2023 the top-10 insurance brokers accounted for 76% of total insurance brokerage GWP, with 78 different entities comprising the remaining 24%. This profit concentration highlights the challenges that smaller entities encounter, potentially threatening their long-term sustainability in an increasingly competitive and regulated environment.
Partly in response to this issue – and driven in large part by regulatory advances – the industry has been actively undergoing consolidation through mergers and acquisitions (M&A) to enhance market stability and reduce systemic risks, as well as to reach the sector goal of surpassing 4% of non-oil GDP by 2030. Six M&A were completed in the industry between 2020 and 2023, reducing the number of insurers in the Kingdom from 34 to 28. The most recent example was the merger between Arabian Shield and Alinma Tokio Marine that concluded in February 2024. Given new minimum capital requirements and the heavy concentration of premium with market leaders, this trend is expected to continue over the coming years. The ongoing consolidation efforts are expected to reshape the market, with the aim of bringing about a more robust and resilient insurance landscape within the Kingdom.
Regulatory Environment
The modern insurance industry in Saudi Arabia dates to July 2003 with the introduction the Cooperative Insurance Companies Control Law. This legislation mandated cooperative insurance models, which allow policyholders to join with others with similar risks to purchase more extensive coverage at more affordable rates. While the model is similar to takaful, cooperative insurers offer products that differ significantly from standard takaful products in several ways, including requiring neither fund segregation nor a standalone board of sharia scholars to approve every product. Moreover, Saudi insurers are required to retain at least 30% of their underwritten premium, and to reinsure at least 30% of GWP in the Kingdom.
The transformation of the industry in the coming years is set to be overseen by the IA, which replaced the Saudi Central Bank (SAMA) as the industry regulator in November 2023. The new authority aims to consolidate regulatory functions, streamline and standardise industry practices, protect the Kingdom’s growing insured population and foster greater competition. It will oversee the licensing and regulation of insurers, takaful providers and reinsurers; ensure adherence to international standards and best practices; collect data on the industry; liaise with companies seeking oversight regarding best practices and standards; and produce annual reports on industry advancements and growth. These efforts are part of the broader Vision 2030 initiative, which seeks to diversify the economy and develop a more robust financial sector.
In January 2023 SAMA announced that the Saudi insurance market had formally signed on to a suite of new International Financial Reporting Standards (IFRS) – namely IFRS 9, which deals with financial instruments; and IFRS 17, which governs insurance contracts. The announcement of the new standards is in line with the implementation date set by the International Accounting Standards Board and signals the Kingdom’s commitment to following international best practices. The new standards aim to make the accounting measurement models used by Saudi insurance companies comparable to those used worldwide. This will allow for accurate comparisons of the size and value of the local market with global insurance markets.
Top-Line Performance
In 2023 the industry saw premium grow 22.7% to SR65.5bn ($17.5bn) from SR53.4bn ($14.2bn) at the end of 2022. As is the norm in the Kingdom, the bulk of the sector’s insurance premium growth took place in the health and general insurance segments, which expanded by 21.4% and 23.5% in 2023, respectively. By the end of 2023 health GWP surpassed SR38.6bn ($10.3bn) – equal to 59% of total sector premium for the year and up from around SR31.8bn ($8.5bn) in 2022. General insurance, which consists primarily of motor coverage, brought in roughly SR24.3bn ($6.5bn) in GWP in 2023, or 37.1% of total industry premium for the year, compared to SR19.7bn ($5.3bn) in 2022. In 2023 P&S premium grew by 36.9%, with segment premium reaching SR2.6bn ($693m), up from SR1.9bn ($507m) in 2022. In 2023 the P&S segment accounted for 3.9% of sector premium.
In 2022 two-thirds of the Kingdom’s insurers reported underwriting losses due to a substantial number of health and motor claims, plus rising competition in the wake of the Covid-19 pandemic. However, the situation improved markedly in 2023, with Saudi insurers reporting net income of SR3.2bn ($853m) for the year compared to SR244m ($65.1m) in 2022. Regardless, overall insurance penetration and density still has room to improve when it comes to reaching international benchmarks, reflecting the industry’s relative youth in comparison to more established sectors elsewhere.
While the Kingdom is the largest insurance market in the GCC region by a significant degree, with rapidly expanding coverage across numerous segments, the IA reported the overall insurance penetration rate – which measures the ratio of total insurance premium to GDP – at 1.6% in 2023, up from 1.3% in 2022. This reflects the continued growth of insurance penetration in the Kingdom, as the CAGR for this measurement has been 5.5% since 2019. Insurance density – which measures GWP per capita – was approximately SR2035 ($542) in 2023, up by more than 30% from the 2022 rate of approximately SR1564 ($417). Since 2019 the CAGR for insurance density in the Kingdom has been 14.2%.
In early February 2023 SAMA announced that a branch of the US-owned health insurer Cigna Group had been licensed to carry out business in Saudi Arabia, marking the first time a foreign insurer had moved into the Kingdom. Cigna Group’s entry into the market is in line with Vision 2030-related goals to boost foreign direct investment into Saudi Arabia, with the aim being to encourage innovation in financial services and enhance local service quality.
Health
In 2023 health GWP accounted for some 59% of Saudi Arabia’s insurance market. More importantly, insurers retained some SR38.6bn ($10.3bn) in health GWP for a retention rate of nearly 98%, making the segment the single-most valuable line of business within the sector in terms of GWP. For the second quarter of 2024 the retention ratio decreased slightly, reaching 96.4%.
Since 2017 growth in the health segment has been driven largely by a series of regulatory decisions put in place by SAMA in collaboration with the Ministry of Health (MoH) to require employers to offer coverage to their employees. In 2017 the mandatory unified health insurance scheme obliged private sector employers to provide coverage to employees, including Saudis, expatriates and their dependents. In June 2022 the MoH established the Health Holding Company to provide health care services previously provided by the MoH via the development of clusters around the Kingdom in cooperation with the private sector.
In July 2024 the Kingdom introduced mandatory health insurance for domestic workers employed in households with more than four staff members. According to a December 2021 report by the International Labour Organisation, Saudi Arabia had some 3.7m domestic workers as of 2019, accounting for around 28% of total employment at the time. With Saudi households employing more domestic workers than any other country in the world, the introduction of mandatory health insurance stands not only to cover a vulnerable population, but to bring about a considerable boost in health coverage.
Motor
In 2023 motor policies accounted for 21.8% of total market GWP, or approximately SR14.3bn ($3.8bn). This represents an increase of 38.2% from the previous year, when the motor segment accounted for roughly SR10.3bn ($2.7bn) in premium. Profitability has also risen in recent years, with net written premium topping SR14bn ($3.7bn) in 2023, up 42.5% from nearly SR9.9bn ($2.6bn) the previous year. In 2023 insurers retained 98.3% of their motor premium, while nearly SR8.9bn ($2.4bn) in net claims incurred resulted in a loss ratio of 74.8%. However, these figures were both improvements from 2022, when the retention ratio was 95.4% and the loss ratio 91.5%. The increase in retained premium is due to greater discipline in the industry’s underwriting practices, as well as to a government crackdown on uninsured vehicles.
As across much of the GCC region and the rest of the world, it is compulsory for all vehicles in the Kingdom to have at least third-party liability insurance, while comprehensive coverage remains optional. In November 2023 SAMA amended the rules regarding the Kingdom’s comprehensive motor insurance rules, with the aim of broadening coverage by including relatives, domestic workers – primarily drivers or chauffeurs – and sponsored labourers who work for an insured driver. Driven by an expanding population, the motor segment is expected to expand at a CAGR of 5.1% between 2024 and 2029, according to India-based research firm Mordor Intelligence.
Other Categories
Several additional market segments have seen growth in recent years, including property, engineering, marine and aviation, energy, and accident and liability underwriting. With the exception of energy, each of these lines experienced an improvement in 2023 compared to the previous year. Property policies, which accounted for 4.3% of total GWP in 2023, were worth more than SR2.8bn ($746m) for the year, up from nearly SR2.5bn ($667m) in 2022. However, the property segment saw a retention rate of 18.9% and a loss ratio of 70% in 2023, compared to 19.9% and 54.3% during the previous year, respectively. Engineering coverage accounted for approximately 3.2% of total GWP, while accident and liability – a broad category that includes products ranging from personal accident, professional and medical liability, to theft and burglary policies – accounted for 4.2% of total GWP.
The marine segment comprised 1.1% of overall market returns, with approximately SR748m ($199m) in GWP. The segment has benefitted from regulatory upgrades of late, which are expected to generate premium growth in the coming years. In April 2023 SAMA published new marine insurance coverage instructions, marking the first step towards establishing related mandatory and voluntary policies in the Kingdom. This would align the industry with international best practices, as per the global shipping industry. Newly announced protocols include policies ranging from wreck removal and pollution risks related to hydrocarbons-based marine fuels, to rules concerning dispute resolution.
Distribution Channels
Most insurance premium in the Saudi market is sold and collected directly by insurance companies, though the brokerage segment has grown in recent years. According to the IA, 46.2% of GWP was sold directly by firms themselves in 2023, while brokers directly sold 34.6% and insurance agents 3.6%. The remaining 15.6% of premium was sold online by companies and brokers, with the latter accounting for more than two-thirds of online sales. Brokers pulled in more than SR1.7bn ($453m) in commissions in 2023, up from more than SR1.5bn ($400m) in 2022 and significantly more than the 2023 figure of SR197m ($52.5m) reported for insurance agents. Similar to the rest of the insurance market, the brokerage segment is highly concentrated. The top-10 brokers comprised 76.4% of related GWP, or SR23.9bn ($6.4bn), while the market’s other 78 insurance brokers accounted for the remaining 23.6%, or SR7.4bn ($2bn).
In July 2023 SAMA introduced new regulations on insurance technology (insurtech), covering any new technological solutions deployed by insurance companies. The regulations, which were a response to rising online premium sales in recent years, are meant to safeguard consumer rights. They require companies that wish to provide insurance through online channels to obtain a licence to do so, as well as to record client information and other sensitive data in a responsible manner. Such entities are also required to submit quarterly reports to SAMA and receive approval for any outsourcing of activities.
In September 2023 SAMA announced that two new insurance aggregation companies had been licensed to provide services in the Kingdom. The new entrants – Al-Tizam for Electronic Insurance Brokerage and Altheqa Insurance Brokers – joined three other insurance aggregators already operating in the Kingdom. In October 2023 SAMA announced that it had also issued a licence to the ReTech Reinsurance Brokers Company, which plans to offer online reinsurance brokerage services to the Saudi market.
Reinsurance
The Kingdom’s insurance industry, like other such markets across the Middle East, tends to rely heavily on reinsurance protection. The IA has affirmed plans to retain a steadily rising percentage of local risk within the Kingdom to develop the domestic sector further. The government’s plan originated in November 2022, when the central bank announced a mandatory reinsurance cession – meaning the transfer of an insurer’s obligations to a reinsurer – of 20% in 2023, climbing to 25% in 2024 and 30% in 2025. This gradual increase is expected to benefit Saudi Re most significantly of all, as the firm is allowed the right of first refusal.
Workforce Development
As of 2023 insurance companies in Saudi Arabia employed 10,623 individuals, according to IA data, up slightly from 10,428 in 2022. In 2023 Saudi nationals accounted for 79% of the sector’s workforce. This figure has held relatively steady in recent years, and Saudis occupy a larger share of non-managerial positions, accounting for 82% compared to 69% in managerial positions in 2023. These figures are expected to continue to grow the coming years as a result of a recent plan aimed at boosting employment rates for Saudi nationals by requiring all sales positions to be staffed by Saudi citizens. Announced in December 2023 by the IA in conjunction with the Ministry of Human Resources and Social Development – and effective as of April 2024 – the new regulation seeks to develop domestic talent in such sales.
Outlook
The Kingdom’s insurance market is poised for a significant surge in the coming years, driven largely by the country’s strategic shift towards non-oil economic growth. As part of Vision 2030, Saudi Arabia is actively diversifying its economy, reducing its dependency on oil revenue by investing heavily in various sectors such as clean technology, entertainment, health care, logistics and tourism.
This economic diversification is expected to generate substantial new opportunities for the industry, including health, property and liability insurance. For example, the burgeoning tourism and entertainment sectors are expected to require comprehensive coverage for new hotels, resorts and entertainment venues. Similarly, large-scale infrastructure development projects are likely to necessitate extensive property and casualty insurance, which is expected to be provided more and more by the local market.
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