The Saudi insurance market will consolidate in 2024 and 2025

The Saudi insurance market is expected to see further consolidation in 2024 and 2025 on the back of the ‘2030 Saudi Vision’, according to Fitch Ratings.

New minimum capital requirements are helping drive this consolidation, as insurers are forced to raise new capital or seek M&A deals to maintain solvency under the new rules, resulting in heightened M&A activity from 2021.

Saudi Arabia launched the Insurance Authority as a dedicated insurance regulator in November 2023. Fitch believes the increasing technical sophistication and regulatory enhancements are positive for the overall credit quality of Saudi insurers.

The market is expected to achieve a CAGR of more than 6% during 2023-2027.

Saudi Arabia’s insurance market, the second largest in the Gulf region by gross written premium after the UAE, offers a vibrant and competitive environment. Growth in recent years has been attributed to economic development creating new insurable assets, and new lines of mandatory coverage.

The Saudi insurance market is expected to see further consolidation in 2024 and 2025 on the back of the '2030 Saudi Vision'

Insurance market in Saudi Arabia continued grow in 2023 with gross written premiums at SR53.3 bn ($14.2 bn) and rising 26.8%. The Saudi central bank (SAMA) reported that the local insurers recorded a 8.4% turnover increase. The latter went from 338.8 bn SAR (10.3 bn) in 2021 to 42 bn SAR (11.2 bn) in 2022.

Brokers captured 38.4% of the market, and agents claimed 5.2%. Commissions paid by insurance companies amounted to SR2.1 bn ($559.9 mn).

Recent regulatory enhancements include new rules for InsurTechs and the implementation of staggered reinsurance cessions to the local market of up to 30% by 2025.

The requirement to offer a share of treaties to the local reinsurer, if exercised, may increase counterparty concentration and credit risk if premium is retained locally and larger international reinsurers are replaced with a less financially strong local company.

With Vision 2030 providing the overarching framework and direction of travel, the insurance sector’s evolutionary process for the remainder of the decade is clear: insurers are to consolidate, in the process, amassing deeper capital reserves to lower systemic risks across the financial sector.

They are also expected to embrace digitalisation opportunities evidenced in global trends across the industry.

Both retail and commercial consumers can expect to find more options for interacting with insurers and intermediaries, in particular via smartphone applications.

Digitalisation will also overhaul back-office functions and procedures, enhancing the processes for activities like claims, compliance and accounting.