RIYADH, 12 October 2006 — Saudi Arabian Monetary Agency (SAMA) Governor Hamad Al-Sayari announced yesterday that the 13 insurance companies licensed by the Council of Ministers would inject SR2.6 billion into the market, of which SR936 million would be channeled into initial public offerings (IPOs).

Commenting on the government’s decision, the SAMA governor said the launch of the IPOs would be coordinated by the Capital Market Authority (CMA) under a phased program so as not to affect the market. “It will definitely boost the market and promote stability as well as diversity in the listed companies.”

According to him, the 13 licensed companies will help provide 10,000 jobs for Saudi youth in the coming years. He said these companies would be required to set up training programs in order to absorb them into the employment market.

Abdul Aziz Abu Al-Saud, vice president of the insurance committee at the Riyadh Chamber of Commerce and Industries and also president of one of the licensed companies, said the government’s approval would give a boost to the insurance market and would create a greater awareness of the insurance market. It would also provide a new investment avenue for citizens when the companies go public.

Speaking on behalf of the National Company for Cooperative Insurance (NCCI), Ali-Al-Subaihin, its CEO, said that as a result of the government’s initiative, the insurance market would double over the next five years from its current level of SR4.7 billion.

Asked if NCCI would be affected by the move, he said: “We don’t anticipate any negative impact on NCCI as a result of licensing of these companies. NCCI is used to working in a competitive environment. In the past it was competing with over 70 companies. Now the number of companies has been reduced to only 13.”

He added that the ministerial council decree would encourage the introduction of more new compulsory insurance laws, especially those related to specific professions, such as the medical and legal professions. It will also contribute to the speedy application of compulsory laws such as motor vehicle liability insurance and medical malpractice insurance law.

Describing it as a step in the right direction, R.R. Nair, CEO of Saudi-Indian Insurance Co. (SIIC), told Arab News that it would help in launching new products on the insurance market at competitive rates. “The consumer will be the ultimate beneficiary,” he observed.

The move, it is pointed out, will lead to greater professionalism in the market and speed up the delivery of service. In the past, Arab News has reported instances in which motorists in some remote areas were imprisoned even though they had Ruksa insurance. The reason was that either the insurance firm had closed down or the policy had lapsed.

Nair said all such things would be eliminated as the market is now well-regulated. Moreover, it would lead to the induction of e-governance resulting in faster turnaround in terms of service delivery.

SIIC, which leverages the strength of three major players — the Life Insurance Corporation of India, New India Assurance and the Fawaz Al-Hokair Group — has already invested SR100 million, of which SR40 million will be allocated for the IPO probably before the end of this year, according to Nair.

“The capital injection of SR100 million is just for the start-up by the founders. More capital will be brought in as soon as we get the CR, or commercial registration. We are planning to set up three regional offices in Riyadh, Jeddah and the Eastern Province within the framework of our plan which calls for setting up 10 branches in due course.”

Nair said Saudi manpower would be trained for handling operations. The company, he said, will offer a full range of services in terms of perceivable risk coverage as well as savings and Takaful insurance products, extending their reach into the field of Islamic insurance.

Elaborating on Nair’s comments, S.M.I. Hassan, general manager, SIIC (Life), said the element of competition would lead to competitive pricing of products and services. The insurance business is now customer-driven. As a result, more products and services could be expected to come on the market as a result of customer demand.

— With input from Abdul Hannan Faisal Tago