Saudi Arabia’s insurance industry put on a strong
showing in 2006, lifting total premium income 35 percent compared
with 2005 to SAR6.9 billion ($1.84 billion), according to the Saudi
Arabian Monetary Agency’s (SAMA) annual survey report published in
August.
Health insurance was the primary growth driver in
2006, recording a hefty 62 percent increase in premium income to
SAR2.2 billion, one-third of the total insurance market. General
insurance also did well, recording a 25 percent increase in premium
income to SAR4.5 billion.
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Life insurance premiums, however, put in a comparatively lacklustre
showing, increasing by 13 percent to SAR220 million or 0.02 percent
of Saudi Arabia’s GDP. Still in its infancy, Saudi Arabia’s life
insurance market dates to the launch of the country’s first
Sharia-compliant (takaful) protection life products by the Takaful
Ta’awuni Division of Bank AlJazira in 2001.
Health insurance premiums grew strongly on the back of legislation
that came into force in February 2006 making it compulsory for all
companies with more than 500 expatriate workers to have medical
insurance for those employees. The move is aimed at easing the
financial burden on the government, which at the time of the
legislation’s introduction offered free medical services to about
22 million people, including about 8 million foreigners.
In June 2006 the second phase of the legislation came into force
whereby companies with more than 100 expatriate workers must
provide them with medical insurance. Companies with a non-Saudi
work force of less than 100 will be covered in the third and final
phase.
Mandatory insurance
The ultimate aim, said UK health insurer BUPA, is to introduce
mandatory medical insurance for all for Saudi citizens. Indicative
of the market’s potential, a report published by Saudi Arabia’s
National Commercial Bank in 2006 estimated that health insurance
premium income in the country could reach SAR18 billion by about
2011.
BUPA Middle East is one of 14 health insurers that received
preliminary approval to provide health insurance services following
the adoption of the Co-operative Insurance Companies Supervision
Act in 2004. The act introduced the first formal regulatory
structure for the insurance industry and allowed insurers a grace
period until March 2008 to apply for licences. BUPA has had its
licence application approved by SAMA and is currently awaiting
final approval from the Saudi Royal Cabinet.
All 42 insurers operating in Saudi Arabia have applied for
licences, of which 18 have been approved, according to SAMA.
Insurance companies that receive an approval have to undergo an
initial public offering (IPO) and list their shares on the local
stock exchange. Seven insurers have so far listed, all having
enjoyed heavily over-subscribed IPOs.
