Saudi Arabia Insurance Report Q1 2011
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Saudi Arabia Insurance Report Q1 2011 Overview
But for the underdevelopment of the life segment, Saudi Arabia would be the most attractive prospect for international insurance companies that are looking to operate in the Gulf Cooperation Council (GCC) countries. Virtually all other trends are favourable and the market has been opened up to foreign competition. New laws are promoting the development of health insurance and Saudi Arabia’s economy withstood the downturn in energy prices through 2009 well.
Saudi Arabia’s insurance sector differs from others in the Middle East in that it includes at least one indigenous insurer, Tawuniya, that would rank as a large company in most countries. Figures released by Tawuniya to the Tadawul stock exchange on which it is listed indicate that its premiums nearly doubled over the course of 2009. In contrast, the next two largest players, Medgulf (a regional insurance company substantially owned by Saudi interests) and Bupa Arabia (the partly owned subsidiary of UK health insurance giant Bupa), lost ground.
In this report we provide a breakdown of the market shares of the various market participants. We also provide a breakdown of the insurance sector by line, from the point of view of the regulator or trade association. The Saudi market is dominated by health products, which is double the value of the next most popular insurance category, motor. They account for about 40% and 20% of the insurance products marketplace respectively.
At the time of writing, we have been able to ensure that the report includes actual data for 2009. We have generally been able to use data published in 2010 to adjust our estimates for the year as a whole. Taking into account the results published by the listed Saudi insurers for the first nine months of 2010, we estimate total premiums for the whole year of SAR18,342mn. This includes non-life premiums of SAR16,938mn and life premiums of SAR1,404mn. In 2015, the corresponding figures are forecast to be SAR34,359mn, SAR30,132mn and SAR4,227mn. In terms of the key drivers that underpin our forecasts, we expect non-life penetration to rise from 0.98% in 2010 to 1.25% by 2015, and for life density to increase from US per capita to US over the same period. BMI’s Insurance Business Environment Rating for Saudi Arabia is 53 out of 100.
Issues To Watch Islamic Finance
The problems of Dubai World and its affiliates in the UAE in late 2009 overshadowed the long-term strengths of Islamic finance. The absolute size of the capital pools in Saudi Arabia mean that the country has very strong potential as a market for the issuance and distribution of sukuks. Some estimates suggest that contributions to takaful operators account for about a fifth of the Saudi insurance market.
Regional Consolidation There is, and has been for some time, limited cross-border investment by insurance companies based in the Middle East. Medgulf and ARIG are examples of (re)insurers based in the region that operate very effectively across national borders within the GCC and slightly further afield. In Saudi Arabia and the other Arab countries in the region the vast majority of insurance companies are small by anything other than local standards and lack economies of scale. There is scope for consolidation.
Health Insurance This line has emerged as a major and growing line in the non-life segment and should remain so.
