RIYADH, 30 September — The Shoura Council yesterday voted to pass a draft bill to regulate the Kingdom’s lucrative insurance sector, a step expected to boost the market’s turnover substantially.
The consultative council referred the bill to the government which must endorse it to become law, council Secretary-General Hamoud Al-Badr said following the weekly session. Only two national companies are among about 100 insurance firms operating in the Kingdom with an annual turnover of SR10 billion ($2.7 billion), but the market has remained for years without a legal cover.
The bill is centered around the Islamic concept of cooperative insurance where the insured are treated almost like shareholders and are entitled to extra profits and liable to pay more in case of unexpected losses.
Under the bill, the Saudi Arabian Monetary Agency (SAMA) will supervise the insurance sector as it does with the banking sector.
Experts have predicted that the market organization will create some 10,000 jobs, mostly for Saudis, and its annual turnover will jump to SR50 billion ($13.3 billion) in five years.
The new law is also expected to open the door for the establishment of many new national companies and reduce the flight of capital by encouraging local investment.
The bill bars insurance companies from ceasing their operations in the Saudi market without obtaining prior permission from SAMA. This is aimed at stopping companies from cheating customers. It is also expected to accelerate the opening up of the insurance sector to foreign firms, one of the prerequisites to facilitate Saudi Arabia’s entry into the World Trade Organization (WTO). Insurance is not popular in Saudi Arabia because of certain religious constraints, but a fatwa (religious edict), by Saudi senior clerics some 25 years ago paved the way for insurance activity.
Vehicle insurance in the Kingdom, where more than three million cars are on the roads and the accident rate is high, was made compulsory only late last year but has not yet been implemented.
Third party vehicle insurance is slated to be enforced in November.
Saudi Arabia began early September implementing the first phase of mandatory health insurance on foreign residents. These two sectors alone should generate billions of dollars within the next few years.
