JEDDAH: Saudi Arabia’s insurance market witnessed a substantial growth of 24 percent in 2007, with gross written premiums reaching SR8.6 billion compared to SR6.9 billion in 2006. The persisting favorable economic conditions, as well as the expansion of compulsory motor insurance and health insurance are driving the growth of the insurance industry.
According to the Saudi Arabian Monetary Agency (SAMA) report, general insurance gross written premiums, which represented 60 percent of the insurance market, increased by 15 percent to SR5.2 billion in 2007 compared to SR4.5 billion in 2006.
Health insurance gross written premiums, which represented 36 percent of the insurance market, increased by 38 percent to SR3 billion in 2007 compared to SR2.2 billion in 2006.
Protection & savings insurance gross written premiums, which represented 4 percent of the insurance market, increased by 50 percent to SR0.33 billion in 2007 compared to SR0.22 billion in 2006.
In 2007, 42 insurance companies were operating in the Saudi market. In accordance with the Cooperative Insurance Companies Law (2003), existing companies that have not applied for a license are to exit the market, the grace period having ended on April 9. Insurance companies and other insurance service providers that are in the process of obtaining a license from SAMA are granted an extension varying between 2 and 6 months, depending on their advancement in the licensing process.
As of end of March 2008, 11 insurance companies are fully licensed to operate in the Kingdom, 9 of which have foreign participation. In addition, 10 insurance companies have obtained the approval from the Council of Ministers and 8 are under the process of licensing at the Ministry of Commerce and Industry. Eighteen insurance companies are listed in the Saudi stock market, and an additional 3 are to be listed soon.
The overall insurance GWP reached SR8.6 billion in 2007, compared to SR6.9 billion in 2006. This translates into an overall growth rate of 24 percent.
General and health insurance accounted for 60 percent and 36 percent of total GWP in 2007, respectively. Protection and savings insurance remained a small market reaching SR327 million in 2007.
The market growth was driven by the demand growth for general insurance and health insurance of 15 percent and 38 percent, respectively.
The level of insurance penetration in Saudi Arabia was 0.53 percent in 2006 and increased to 0.61 percent in 2007.
Insurance density is defined as GWP per capita. The insurance density increased from SR293 in 2006 to SR354 in 2007, an increase of 21 percent.
The penetration and density of protection and savings insurance remain particularly low in absolute terms, and relative to general and health insurance, at 0.02 percent and SR14 per capita.
In 2007 around 64 percent of total GWP were generated by compulsory lines of business, namely motor and health insurance.
In 2007, health insurance remained the largest line of business accounting for 36 percent of total GWP compared to 32 percent in 2006.
Motor insurance remained in second place in 2007, accounting for 28 percent of GWP.
The fastest growing lines of business were Energy insurance and protection and savings insurance, which realized a growth rate of 141 percent and 50 percent, respectively. For energy insurance, the strong growth is due to a significant rise in the GWP of one of the top eight insurance companies operating in KSA. The slowest growing lines of business were marine insurance and motor insurance, which realized a growth rate of 23 percent and 27 percent, respectively, whilst property, aviation, and engineering premiums fell by 4 percent, 9 percent, and 12 percent, respectively.
In 2007, the top 8 insurance companies generated around 61 percent of the insurance market’s GWP, down from 65.6 percent in 2006.
The remaining 34 insurance companies accounted for the remaining 39 percent of total market premiums. Around 84 percent of total NWP in 2007 was generated by compulsory lines of business, namely motor and health insurance.
In 2007, health remained the largest line of business accounting for 43 percent of total NWP compared to 42 percent in 2006. Motor insurance remained in second place in 2007, accounting for 41 percent of NWP.
In terms of NWP, the fastest growing line of business was protection and savings insurance which realized a growth rate of 74 percent in 2007.
The overall retention ratio of insurance companies in the Saudi market was 65 percent, the SAMA report said. This ratio is largely skewed by the high retention ratio of motor and health insurance which collectively account for around 61 percent of total GWP. In 2007, the retention ratios for motor and health insurance were 94 percent and 78 percent, respectively.
The weighted average retention ratio of other insurance lines of business was 21 percent.
The lowest retention ratios were for aviation insurance and energy insurance of 3.1 percent and 0.8 percent, respectively.
Total commissions paid by insurance companies amounted to SR 576 million in 2007, compared to SR440 million in 2006.
General insurance related commissions accounted for 81 percent and 76 percent of total commission paid in 2006 and 2007, respectively. Energy insurance commissions paid witnessed the largest growth rate of 239 percent between 2006 and 2007.
Total gross claims paid increased by 34 percent from SR3 billion in 2006 to SR4 billion in 2007.
Health and motor insurance accounted for 74 percent and 77 percent of all gross claims paid in 2006 and 2007, respectively.
In 2007, the highest growth rate in gross claims paid are related to health insurance. Total gross claims paid increased by 34 percent from SR3 billion in 2006 to SR4 billion in 2007.
The total number of insurance companies’ employees in Saudi Arabia reached 4,922 in 2007.
