JEDDAH, 28 August 2007 — Saudi Arabia’s robust economic performance and the introduction of compulsory motor insurance and health insurance have given a shot in the arm to the Kingdom’s insurance market. It grew 35 percent in 2006 with gross written premiums reaching SR6.9 billion as compared to SR5.2 billion in 2005, according to a report by the Saudi Arabian Monetary Agency (SAMA).
General insurance premiums, which represented 65 percent of the insurance market, increased by 25 percent to SR4.5 billion in 2006 as compared to SR3.6 billion in the previous year.
Health insurance premiums, which represented 32 percent of the insurance market, increased by 62 percent to SR2.2 billion last year as compared to SR1.4 billion in 2005.
Protection & savings insurance premiums, which represented 3 percent of insurance market, increased by 13 percent to SR0.22 billion in 2006 as compared to SR0.19 billion in the previous year.
The SAMA report, which was released on Saturday, said as of 2006, 42 insurance companies were operating in the Saudi market. At present the market is in a transition phase, whereby existing companies are allowed to operate under a grace period ending in March 2008. At that point, insurance companies and other insurance service providers must either obtain a license from SAMA (in accordance with the Cooperative Insurance Companies Law, 2003) or exit the market.
During the current year, SAMA received 42 insurance company license applications. So far, 18 license applications have been approved by the Council of Ministers and the remaining are in pending awaiting final decision of the council.
Insurance companies that receive an approval have to undergo an initial public offering (IPO), float their shares on the local stock exchange, and complete subsequent regulatory requirements before receiving a license from SAMA.
The central bank report added that the overall insurance GWP (gross written premiums) grew 35 percent to reach SR6.9 billion in 2006 as compared to SR5.2 billion in 2005. General and health insurance accounted for 65 percent and 32 percent of total GWP in 2006, respectively. Protection and savings insurance remained a small market reaching SR218 million in 2006.
The market growth was driven by the demand growth for general insurance and health insurance of 25 percent and 62 percent, respectively, the report said. The high growth of health insurance premiums reflects, in large part, the enforcement of compulsory health insurance regulations.
According to the SAMA report, the level of insurance penetration in Saudi Arabia was 0.44 percent in 2005 and it increased to 0.53 percent in 2006. The insurance density increased from SR223 in 2005 to SR293 in 2006, an increase of 31 percent.
In 2006, around 60 percent of total GWP was generated by compulsory lines of business, namely motor and health insurance. In 2006, health insurance became the largest line of business accounting for 32 percent of total GWP as compared to 27 percent in 2005. Motor insurance dropped from first place in 2005 to second place in 2006, accounting for 28 percent of GWP.
The fastest growing lines of business were engineering insurance and health insurance, which realized a growth rate of 84 percent and 62 percent, respectively. The slowest growing lines of business were protection and savings insurance and marine insurance, which both realized a growth rate of 13 percent, while aviation premiums fell by 7 percent.
The top 8 insurance companies generated almost two-thirds of the insurance market’s GWP in 2006. The remaining 34 insurance companies included in this survey accounted for the remaining one-third of total market premiums.
Around 84 percent of total NWP (new written premiums) in 2006 was generated by compulsory lines of business, namely motor and health insurance.
In 2006, health insurance became the largest line of business accounting for 42 percent of total NWP as compared to 35 percent in 2005. Motor accounting for 42 percent of NWP, marginally less than health.
In terms of NWP, the fastest growing line of business was health insurance, which realized a growth rate of 66 percent in 2006. The overall retention ratio of insurance companies in the Saudi market was 63 percent.
The report said the total commissions paid by insurance companies increased 23 percent to SR438 million in 2006 as compared to SR356 million in the previous year.
Total gross claims paid increased by 19 percent from SR2.5 billion in 2005 to SR3.0 billion in 2006.
The SAMA report said the insurance market was composed of a large number of companies in 2006, most of which had a capital below SR100 million. The largest company by capital was the National Company for Cooperative Insurance (NCCI), with total equity of SR1.8 billion.
The total number of insurance company employees in Saudi Arabia reached 3,321 in 2006.
Saudi nationals employed by insurance companies account for 43 percent of the total work force, and hold 27 percent of the management positions, the SAMA report said.
