(BUSINESS WIRE)-- The insurance market in Saudi Arabia has changed dramatically in the past decade, with further development anticipated, according to a recently released A.M. Best Co. report.
“Since the Saudi Arabian Monetary Agency (SAMA) began regulating the sector in 2003, there have been significant advancements to the regulatory environment, in particular structural changes to insurers. Companies were required to become majority Saudi-owned and have needed to move onshore to the Kingdom,” said Dean Portelli, Senior Financial Analyst.
The report, “Saudi Arabia’s Insurance Market Adapts to Dramatic Change,” states that insurance penetration in Saudi Arabia is low but has grown rapidly in the past few years. A.M. Best believes the country’s economic outlook supports an increased demand for insurance. Saudi Arabia was mildly affected by the Arab Spring, but whilst political concerns were somewhat heightened, stability was maintained.
“The introduction of compulsory health schemes, which began with expatriates from 2006, has been a major driver of growth in recent years,” said Associate Director of Analytics, Mahesh Mistry. “Health represented 53% of gross written premiums in 2010, compared to 32% in 2006, in a growing market.”
However, he added that the sector also faces challenges. “The majority of business retained by Saudi insurers is retail, in particular, motor and medical, which creates a challenging operating environment for insurers given the competitive nature of these products. Moreover, persistent low rates as a result of intense competition and the zakat burden faced by companies are likely to continue to create a difficult operating environment and pose a risk to shareholders’ equity.”
The report also examines regulatory developments, distribution of insurance products, reinsurance trends and potential risks facing insurers. “The Saudi Arabian insurance market has opportunities for growth, given its population of 28 million,” added Yvette Essen, Director of Industry Research, Europe & Emerging Markets. “Insurance density has increased strongly in recent years, but remains low compared with other countries in the region. However, whilst demand for insurance is increasing, competition remains intense as newer entrants fight for market share.”
To access a free copy of this report, please visit http://www3.ambest.com/bestweek/bestweekreports.asp?rt=ir.
To view a video of Yvette Essen summarising the report, please visit http://www.ambest.com/v.asp?v=essen312.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company.Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.
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Contacts
A.M. Best Co.
Dean Portelli, +(44) 20 7397 0267
Senior Financial Analyst
dean.portelli@ambest.com
Mahesh Mistry, +(44) 20 7397 0325
Associate Director
mahesh.mistry@ambest.com
Yvette Essen, +(44) 20 7397 0322
Director, Industry Research, Europe & Emerging Markets
yvette.essen@ambest.com
Rachelle Morrow, +1-908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
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