Fitch Ratings predicts that the Saudi Arabian insurance market will strengthen in 2024 and 2025 due to new regulations aligned with the ‘2030 Saudi Vision’. These regulations mandate higher minimum capital requirements, prompting insurance companies to raise funds or merge with other companies, which has been happening since 2021.
In November 2023, Saudi Arabia established the Insurance Authority as a specialised regulator for the insurance industry. Fitch believes this move will enhance the overall financial quality of insurance companies in Saudi Arabia.
Recent regulatory updates include new guidelines for insurtechs and a plan to gradually increase the share of reinsurance held by local companies to 30% by 2025. However, this shift may pose risks if local companies lack financial strength compared to larger international companies.
Health insurance is the biggest part of insurance in Saudi Arabia, making up over half of the business. It’s expected to keep growing as the government aims for universal coverage by 2026.
Fitch further underscores the expanding scope of insurance coverage, noting, “We also expect substantial growth for temporary insurance for religious visits from abroad as travel returns to pre-pandemic levels, with a record number of tourists visiting the kingdom in 2023.”
The increase in expatriate workers driven by the ‘2030 Saudi Vision’ is also expected to contribute to segment growth.
The motor insurance segment is growing due to increased vehicle sales and government efforts to crack down on uninsured vehicles. Despite high claims costs, profitability has significantly improved due to better premium rates.
Fitch believes the “overall profitability will remain strong in the short to medium term for insurance companies in Saudi Arabia.”
Insurance sales as a percentage of the non-oil economy improved significantly in 2023, reflecting the industry’s growth. Better risk assessment practices and government measures against uninsured vehicles have boosted growth and profitability in the motor insurance sector.
Despite challenges such as medical claims costs, Fitch believes the health insurance segment remains stable and growing. Additionally, investment income improved in 2023 due to higher returns on investments.
