JEDDAH, 2 March 2006 — The Saudi government has set up rules to enable foreign insurance companies to open and operate in the Kingdom. The Saudi Arabian Monetary Agency (SAMA) posted on its website a working document that lists the rules regulating the establishment of branches in the Kingdom by foreign insurance companies. The foreign insurance companies seeking to operate in Saudi Arabia through a branch have to submit a written response/comments to the document within 60 days of publication on its website.

SAMA listed several measures for licensing foreign insurance companies. The agency is looking for robust companies that are financially and organizationally sound in their home countries.

The measures are to help the monetary agency in evaluating the capability of the foreign candidates in entering and operating in the Saudi market. SAMA focuses on the conditions of the candidate foreign company in its home country.

SAMA mentioned that it is even going to consider the complaint of the foreign candidates with the principles and regulations of international financial bodies.

First, SAMA requires the confirmation that the branch in Saudi Arabia will operate in accordance with the Cooperative Insurance Law and its implementing regulations. Second, it requires that the branch in Saudi Arabia will not engage in any activities other than insurance and reinsurance activities that are authorized by SAMA. For assessing financial capabilities, SAMA requires that the branch possess assets in excess of liabilities in respect of business written in Saudi Arabia amounting to at least SR100 million for an insurer and SR200 million for a reinsurer.

Mohammed Al-Jasser, the vice governor of SAMA, said in the Saudi Insurance Summit, which was held in Jeddah last week, that the agency would not reduce the minimum capital requirement of SR100 million on insurance firms and the SR200 million on reinsurance firms. “The Saudi market is big and it requires insurance companies that are financially sound to fulfill their promises,” he pointed out.

SAMA required, in addition, foreign companies to deposit all the total invested assets of the branch in a Saudi licensed bank; and that the net assets of the branch should not be used to cover solvency requirements of business written outside Saudi Arabia.

In deciding whether to authorize a branch of a foreign insurance company in Saudi Arabia, SAMA will pay close regard to the company’s activities elsewhere and how these activities are regulated. SAMA may consider reports produced by the IMF/World Bank, such as their Financial Sector Assessment Program (FSAP) for any particular territory. If the foreign candidate is not regulated elsewhere or if it is regulated in a jurisdiction not substantially compliant with International Association of Insurance Supervisors’ (IAIS) Core Principles or Financial Action Task Force (FATF) standards, then the application can only be considered after exhaustive enquiries into the firm’s shareholders, management structure and financial position.