RIYADH, 14 May — The government is currently putting the final touches to regulations that permit the establishment of Saudi insurance companies. The regulations also aim at ending tax and zakah evasions by insurance operators in the Kingdom and their foreign partners, according to an informed source.
Minister of Finance and National Economy Ibrahim Al-Assaf confirmed that the new regulations, which were drawn up jointly by the Department of Zakah and Income, Saudi Arabian Monetary Agency and the Ministry of Commerce, are currently being examined by a special committee of the Shoura Council before a general debate. The source also emphasized that the new regulations will plug the loopholes for tax evasion by foreign insurance companies operating in the Kingdom and for their local representatives dodging zakah payment. These agents and their foreign collaborators earlier argued that foreign companies did not have a Saudi license making them liable to pay tax here. They also said their operations in the Kingdom were based on an agreement with the local agents to reinsure the amounts the agents collected from clients.
The regulations in the pipeline will allow Saudis or foreigners to set up insurance companies in keeping with the Shariah. The only licensed insurance company in the Kingdom is the National Company for Cooperative Insurance. New companies, which will be liable to pay zakah or tax, can be established with a minimum capitalization of SR50 million. The regulations also guarantee the protection of customers’ interests. They have a right to sue against a company if it violates the terms of the contract.
According to the insurance regulations drawn up by the Ministry of Finance and National Economy earlier, an insurance company could be established with foreign participation, but only with majority Saudi shareholding. This clause has been dropped in the new regulations in keeping with the Kingdom’s new investment regulations that allow a foreign investor to own the whole company. The new regulations also aim to cope with the anticipated boom in the Saudi insurance market with the implementation of the mandatory health insurance system covering the entire 6 million expat workers in the country. Kingdom’s insurance market, which is estimated at SR2.3 billion, is projected to cross the SR10 billion mark with the introduction of the health insurance scheme.
