New measures to regulate insurance market urged

Updated 12 February 2013
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New measures to regulate insurance market urged

It has been made mandatory for Saudi insurance companies to display their insurance policy premiums for vehicles from March. This follows a decision taken by Saudi Arabian Monetary Agency (SAMA) urging vehicle insurance companies to display their list of policies with the premiums. This has been done after Saudi vehicle insurance companies said in a communication to SAMA that their losses for 2012 were estimated at 80 percent.
Saudi insurance companies urged SAMA to intervene and organize the insurance market with strict regulations. They also asked SAMA to allow them to increase vehicle insurance policies by more than 30 percent to avoid losses.
In the previous two years, vehicles and medical insurance companies were involved in a fierce competition in the Saudi market where most of these companies reduced the prices. As a result, some companies didn’t survive. In this regard, SAMA has promised to regulate the Saudi insurance market and set new appropriate prices to avoid losses.
Arab News spoke to Aadana Khoja, an insurance consultant at Al-Mamoon Insurance Brokers and a former member of the insurance committee at Jeddah Chamber of Commerce and Industry (JCCI), who confirmed that the insurance market needed an urgent regulatory system to survive.
“The war that started recently among medical and vehicle insurance companies led to huge losses, especially among small and medium insurance companies. Vehicle insurance policies had been reduced to the minimum, which is unhealthy for the market,” he said.
He added: “SAMA has asked actuarial experts to study the losses and profits of the insurance sector, and depending on the results the prices will be determined.”
According to Khoja, this strategy will change the Saudi insurance market and drive it upside down, especially when the insurance market has been unorganized for a long time.
“Since the introduction of both medical and vehicle insurance, the companies were working randomly. When SAMA started regulating the market in 2005, the number of companies reduced. In the past there were about 130 insurance companies, after 2005 their number dropped considerably,” he said.
He added: “I believe that when SAMA focuses more on regulating the insurance company market, 50 percent of the current companies will shut down. Otherwise, small companies have to merge in order to face the market challenges.”
Khoja confirmed that small and medium companies were urged to reduce the prices by 50 percent in order to face the challenges.
“If we talk about the third-party insurance, the prices become very low compared to the old prices. For example, the cost of third-party insurance is between SR 200 and SR 350. In the past, the prices were estimated at SR 600, SR 500 or SR 400,” he said.
In case of full insurance the rate of policies on the vehicle is currently estimated at 30 percent of the car’s original price, which is too risky and low, said Khoja.
According to Khoja, one of the main reasons that led vehicle insurance companies to suffer big losses is the recent decision announced by Custodian of the Two Holy Mosques King Abdullah to adjust new (Diya) blood money where it rose from SR 100,000 to SR 300,000. “After issuing the decision to increase the amount of blood money, insurance
companies should have increased the prices, but they didn’t, which is why they suffered huge losses in 2012,” he said.
One of the most important reasons influencing the performance of the insurance portfolio and thus prices of insurance policies are the prices of spare parts. The prices of vehicles continue to rise and are accompanied by a rise in the prices of spare parts, said Muhammed Awad, an insurance consultant at a private company in Jeddah.
He pointed out that the rates of increase in the prices of policies vary from one company to another according to the company’s strategy and the size of the company’s portfolio.
“There are some companies that do not change their prices at all, while other small companies prefer to drop their prices in order to compete with small companies,” he said.
Essam Khalifa, an economist, told Arab News that unorganized insurance market is affecting the Saudi economy negatively.
The only solution to protect all parties — insurance companies, the economy, and customers — is to regulate the market and allow only big companies to continue.
“Small and medium companies should merge into one holding company, so the shares of the companies will increase and they will be able to compete in the market. Otherwise, these small companies wouldn’t be able to survive,” he said.


Barclays chief Staley survives whistleblowing inquiry with fines

Updated 5 min 52 sec ago
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Barclays chief Staley survives whistleblowing inquiry with fines

  • Case marks first test of Britain's "senior managers regime"
  • Decision not to dismiss Staley comes as relief for shareholders

Barclays said Jes Staley will be fined by British regulators for attempting to unmask a whistleblower, but will be able to keep his job as the bank’s chief executive.
The country’s banking watchdogs concluded Staley’s attempt to find out who wrote a letter raising “concerns of a personal nature” about an unnamed senior employee represented a breach of individual conduct, Barclays said on Friday.
Staley’s case is the first big test of Britain’s “senior managers regime” (SMR), aimed at making top banking officials personally accountable for their actions after few were punished for their roles in bank collapses during the financial crisis.
If Staley accepts the findings of the regulators, it would be the first time that a sitting chief executive of a major bank in Britain has been fined by its regulators. A bank spokesman said the size of the fine had yet to be determined.
Barclays said the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) were “not alleging that he (Staley) acted with a lack of integrity or that he lacks fitness and propriety to continue to perform his role as Group Chief Executive Officer.”
News of the FCA and PRA fines follows a more than year-long probe in Britain that had led to speculation among some investors and bank insiders that Staley could have been forced to step down if deemed unfit to continue by those authorities.
Barclays also said that the FCA and PRA will not take enforcement action against the bank, while authorities in the United States are still investigating the case.
“Staley will live on to fight another day – which we welcome as a positive development for the bank and a relief for shareholders,” John Cronin at Irish broker Goodbody said.
“He’s been delivering on the strategy far more effectively than his predecessor had and therefore absent any sort of genuine malpractice we’re pretty keen for him to crack on,” one of the bank’s top 40 investors said.
The British bank, which in April last year said it had reprimanded Staley and would cut his bonus for his attempts to identify the whistleblower, will be required to report to the FCA and PRA on aspects of their whistleblowing programs.
The watchdogs could have banned Staley and opting for a fine could dent the fledgling SMR’s credibility.
“The magnitude of banning the sitting CEO of such a systemically important institution made outcomes other than a fine unlikely, but the case does set an interesting precedent,” said Nicholas Queree, an associate at law firm Peters & Peters.
Staley received the draft warning notice last week and was given 28 days to accept the findings or appeal. If he agrees to pay the two fines he would get a 30 percent discount.
The fines have been set according to a formula that considers the type of offense, the offender’s position in the company, any financial hardship, any previous cases, and whether there was any monetary benefit from the offense.
“We ... will announce the outcome once this issue has reached a conclusion,” the FCA and PRA said in a statement.
Legal experts question whether a light sanction for Staley could send a signal to other potential bank whistleblowers that they risk unmasking if they speak out.
Barclays said it will recommend Staley’s re-election as a director at its board meeting on May 1. At the last annual meeting he faced resignation calls, but was given a public endorsement from Chairman John McFarlane.
Staley’s pay package was £3.88 million ($5.45 million) in 2017, 8.5 percent less than the previous year.