RIYADH, 10 February 2005 — Usually, an insurance policyholder’s biggest concern is making sure the premium is paid up, but for Saudi policyholders, the biggest concern now is whether the insurer is still in business.
The Saudi Arabian Monetary Agency (SAMA) has warned the public against dealing with unlicensed insurance companies that ceased to have any legal status as of yesterday.
In a notification issued here and also posted on its website, SAMA said that by Feb. 9, the last date to submit and complete all the documentation procedures, 32 companies had applied for registration with the agency.
They include 23 existing companies and nine newcomers in the start-up stage. However, market sources point out that only a handful of applicants will fill the bill, obliging the rest either to merge or opt out of the market.
With the deadline passed, the National Company for Cooperative Insurance (NCCI) was the only company fully licensed by SAMA until the status of the other applicants becomes known.
According to SAMA, no new company will be licensed for the next five years. Thereafter, it will evaluate the market potential to determine the future requirements of the insurance sector.
Market sources indicate that in the meantime unlicensed insurance companies must be warned against accepting premiums for the issuance or renewal of insurance policies starting today. There were cases of insurance firms that fled the market along with their subscribers’ money when the deadline for submitting letters of intent passed on Dec. 29 last year.
Since SAMA has not yet announced the list of the approved companies, those intending to take out new policies have been advised to contact the agency to find out the legal status of the company with which they intend to do business.
Customers also should insist that the company produce the SAMA license to establish its accreditation.
Meanwhile, the agency has stated that insurance companies that neither applied nor fulfilled the conditions should coordinate their exit strategy with SAMA. They should also close down all offices in the Kingdom, SAMA said, adding that it reserves the right to take all necessary actions under the Cooperative Insurance Companies Control Law to ensure compliance with the deadlines and directives.
Further, the companies have been asked to cease underwriting new business activities or policy renewals without the written approval of SAMA.
According to Mousa Al-Rubaian, chief executive officer of NCCI, 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 capitalization 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.
