In a new circular, The Insurance Authority of Saudi Arabia has issued new rules on reinsurance cessions, requiring local insurers entering into reinsurance agreements to offer 30% of the overall cession to domestic reinsurers first.
Effective January 1st, 2025, this initiative aims to strengthen the role of local reinsurance firms in managing insurance risks. The rules also grant licensed reinsurance companies the first option to accept or decline these assignments.
According to London-domiciled data analytics and consulting company, GlobalData, the Kingdom’s insurance industry is forecast to grow at a compound annual growth rate of 5.2% through 2028, with its market size expected to reach SR83.7 billion ($22.28 billion).
The projected growth has increased from SR68.3 billion in 2024, largely driven by the health and motor insurance sectors, which are expected to account for 86% of total gross written premiums.
Earlier data compiled by Arab News from Bloomberg showed a strong performance in the sector, with earnings increasing by 25% in H1 2024, reaching SR2.2 billion ($585 million) year over year.
In a statement to Tadawul, The Saudi Reinsurance Co. noted that the new mechanism is expected to increase its reinsurance revenues in the Saudi market by more than 5%, with the financial impact reflecting in its earnings from the first quarter of next year.
Walaa Cooperative Insurance Co. stated to Arab News, that “The mechanism will positively affect its financial performance, with results expected to be seen starting in the first quarter of 2025, as one of the companies licensed by the insurance authority to conduct reinsurance activities.”
Mediterranean & Gulf Cooperative Insurance & Reinsurance Co. (MEDGULF) stated the new mechanism presents an opportunity to reassess its strategy regarding accepting additional reinsurance premiums from local insurers.
The Company for Cooperative Insurance (Tawuniya Co.) added, “It is expected that positive financial impact will have an effect on 2025 financial results.”
Gulf Insurance Group (GIG) and LIVA Insurance Co. also stated that the new mechanism is expected to contribute positively to their financial performance starting next year.
According to a statement on the Saudi Stock Exchange, “The mechanism stipulates that when insurance companies wish to reinsure, they must offer at least 30% of their treaty and facultative reinsurance agreements to companies licensed to conduct reinsurance activities within the Kingdom.”
