RIYADH, 28 April 2004 — The Saudi insurance market will have to go through massive structural changes under new executive bylaws which have been approved by the Ministry of Finance.
The changes were announced by Ali Al-Ghaith, deputy governor the Saudi Arabian Monetary Agency (SAMA), during a meeting with Saudi businessmen at the Riyadh Chamber of Commerce and Industry yesterday. He said the insurance companies have been given eight months to switch over to the new system.
It was also disclosed that Saudi commercial banks are moving aggressively toward the establishment of joint stock companies in the insurance sector. There are enormous business opportunities awaiting investors in the sector, which has an annual turnover of SR10 billion and an estimated 110 companies vying for market share. With the promulgation of the executive laws, a majority of insurance companies face restructuring.
Al-Ghaith said the existing companies have three options. They could either go into liquidation and launch a new cooperative insurance company in line with the new regulations or alternatively, they could go into mergers with other companies to secure the minimum capitalization of SR100 million.
Al-Ghaith said the insurance companies are also required to float shares on the Saudi stock market as part of the economic reforms program. He referred to the growing interest among the Saudi commercial banks which are considering the launch of several cooperative insurance companies to take advantage of the robust growth of the insurance market.
Spelling out the new features of the insurance law which has gone into immediate effect, the deputy governor said SAMA would be the regulatory authority for the insurance companies to safeguard the interests of both the insured and the investors. It will also seek to promote fair competition and ensure the stability of the insurance market.
He said the insurance companies had been consulted prior to the promulgation of the laws. SAMA will now hold meetings at the chambers of commerce and industry in Jeddah and Alkhobar next week to explain the specifics of the new law.