RIYADH, 22 December 2004 — The number of insurance firms in the Kingdom, currently estimated at 75, could come down to a little over 25 once the new regulations requiring a capital base of SR100 million, among other things, go into effect from Jan. 9 next year. The last date for registration with the Saudi Arabian Monetary Agency has been fixed as Dec. 29, while the final picture of the companies approved under the insurance law will emerge on Jan. 9.
“Some of the companies may have to sell their insurance portfolios to other companies, while others will have to merge in order to meet the capital requirement,” Mousa Al-Rubaian, chief executive officer of National Company for Cooperative Insurance (NCCI), told Arab News.
He was speaking on the occasion of the initial public offering (IPO) of NCCI shares to the public through the Saudi British Bank (SABB). Sulaiman Al-Hamdan, deputy managing director of SABB, was also present.
The opening day saw a group of Saudi children among those subscribing to the shares. Seventy percent of NCCI shares — or seven million — will be floated to the public over a two-week period at the rate of SR205 each. The company expects to raise SR1.435 billion through the IPO, the third under the Kingdom’s privatization program.
The Saudi Telecom Company and the newly established Ettihad Etisalat have already seen their respective shares oversubscribed several fold following the launch of the IPOs during the last two years.
Referring to the impact of the insurance law on the market, Al-Rubaian said that besides closures and mergers, many banks are in the process of adding insurance to their line of business. “The potential is huge,” he said, adding that the health insurance sector alone is expected to reach a market figure of SR18 billion over the next five years from the current estimated level of SR8 billion. The contribution of insurance to the gross national product (GNP), currently estimated at 0.7 percent, is projected to grow to 3.7 percent in the near future.
In response to a question, Al-Rubaian quoted Dr. Ali Al-Ghaith of SAMA as saying that 66 insurance companies have so far shown interest in registering themselves with the monetary agency. “We know that nine or ten firms are almost ready,” he pointed out.
Asked whether the lack of enthusiasm at the IPO was due to the high share issuance fee, Al-Rubaian said it would be premature to come to any conclusion in the initial stage of the IPO.
