Yemisi Izuora
Saudi Arabia’s insurance market is the second-fastest growing in the Gulf Cooperation Council and has good potential for further gains due to its low insurance penetration levels and improved profitability.
According to Moody’s Investors Service, results in 2014 showed a rebound with Saudi Arabia’s 37 listed insurance companies reporting an overall combined profit of about $0.2bn in 2014, compared to a loss of over $0.38bn in 2013.
Saudi Arabia’s insurance market had premiums worth $8.1bn in 2014, the second biggest in the GCC and was also the GCC’s second-fastest growing insurance market in 2014, with an eight-year Compound Annual Growth Rate (CAGR) of 20.3 per cent.
The kingdom’s insurance premiums grew by more than 20 per cent in 2014, helped by premium rate increases in the medical and motor sectors.
However, Saudi Arabia’s insurance penetration levels (1.1 per cent) are still significantly below those of most advanced economies.
“Despite this significant growth, Saudi Arabia has the lowest insurance density in the GCC and one of the region’s lowest penetration levels.
This suggests that there is a high degree of untapped potential in the market,” said Mohammad Ali Londe, Moody’s insurance sector analyst.
Saudi Arabia’s insurance market has been witnessing strong growth over the last few years largely due to the Saudi Arabian authority making health and motor third-party-motor coverage compulsory; the increasing awareness of the need to purchase insurance products; the favourable economic conditions and prudent actuarial reserve modelling introduced by the regulator in 2013.
While medical and health insurance dominate the Saudi insurance market, Moody’s expects other types of cover, including life and non-life insurance, to gain ground in the coming years.
The Saudi population’s increasing wealth and greater awareness of the benefits of insurance are likely to fuel this growth.
The remainder of non-life as well as life (protection and savings) products individually account for only a few percentage points of the market, with the non-life being a small number of sizeable commercial insurance contracts related to high-risk infrastructure projects.
The country’s insurance market is highly competitive, with 37 licensed insurance and reinsurance companies and 76 brokers and 76 insurance agencies.
The Saudi insurance sector strengthened its capitalisation in 2014.
Eight insurers recapitalised in 2014, resulting in an increase of the overall industry equity by almost 14 per cent to $2.7bn.