JEDDAH, 9 March 2005 — Saudi Arabian General Investment Authority (SAGIA) yesterday issued licenses to 13 companies worth SR2.5 billion to provide insurance and reinsurance services in the Kingdom.
Amr Al-Dabbagh, governor of SAGIA, said the licensees included well-known insurance companies from Britain, Germany, Switzerland, Japan, India, Holland, the United States, Bahrain, Jordan, Lebanon and France.
“About 25 to 40 percent of shares in these companies will be floated for public subscription by Saudi citizens,” the Saudi Press Agency quoted the SAGIA chief as saying.
The Mediterranean & Gulf Insurance & Reinsurance Co. (MedGulf) stands top among the licensees with the highest capital of SR600 million, followed by BUPA Arabia (SR400 million), Saudi United Cooperative Insurance Company, Al-Alamiya Insurance Co., United Cooperative Assurance Co. and Arabian Shield Insurance Co. (all with a capital of SR200 million).
Other license winners are: Saudi-Indian Insurance Company, Tokio Marine & Nichido, Saudi National Insurance Co., AXA Insurance Company, Saab Takaful Company, Saudi-French Insurance Company, and National Takaful Co. (all with a capital of SR100 million).
“SAGIA completed licensing procedures of these joint investment projects within 24 hours after receiving approval from the Saudi Arabian Monetary Agency,” Dabbagh said.
However, he pointed out that the licensees must get the endorsement of higher authorities to carry out their activities in the Kingdom.
The SAGIA chief said the intent of Saudi and international companies to invest in the insurance sector reflected Saudi Arabia’s ability to attract large-scale investments.
The licensing of companies comes at a time when the government plans to introduce compulsory cooperative health insurance scheme on expatriates from June 1, 2005.
The Health Ministry has instructed that any company with a work force of 500 or more expatriates must provide them with medical insurance coverage before the expatriates will be issued an iqama (residence permit).
The scheme would be implemented in three phases. The second phase will involve companies with a non-Saudi work force of 100 to 500 and the third stage companies with a non-Saudi work force of less then 100. SAMA, the Kingdom’s insurance regulator, picked the 13 insurance companies after they fulfilled the necessary conditions.
The required paid-up capital for an insurance company is SR100 million and for an insurance company conducting in-ward facultative reinsurance business is SR200 million, SAMA said.
The enforcement of the new insurance law is expected to give a big boost to the insurance market which is estimated to be worth SR15 billion in the next five years.
Insurance market sources believe that once the three phases of the health insurance scheme are implemented, they will generate some SR5 billion annually in the sector.
That figure is based on the assumption that the annual premium for five million expatriates in the Kingdom is fixed at SR1,000 per person.
According to Article 40 of the new insurance law, a company shall retain at least 30 percent of its total insurance premium and reinsure thirty percent of its total premium in the Kingdom.
SAMA has instructed that insurance professionals such as brokers, agents, loss adjusters, loss assessors must conduct their profession through a licensed company in the Kingdom.
“Therefore, individuals are not allowed to conduct any one of these insurance professions without establishing a company. Licensed companies must recruit employees to conduct its business such as accountants, economists, clerks, agents, and brokers,” SAMA said.
According to Article 14, the company and all insurance and reinsurance services providers shall obtain prior written approval of the agency before dealing with Lloyd’s insurance brokers or foreign companies to cover risks that cannot be covered through a licensed company in the Kingdom.
Brokers are allowed to cover risk through insurance companies outside the Kingdom but they will have to prove that they had tried to place these risks with a licensed insurance or reinsurance company in the Kingdom.