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 Kingdom's economic outlook supports an increased demand for insurance. "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 percent of gross written premiums in 2010, compared to 32 percent 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 is 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, while demand for insurance is increasing, competition remains intense as newer entrants fight for market share." Saudi Arabia's insurance sector, by the standards of most developing countries, is already reasonably large. It has also been growing rapidly. Life premiums are – nearly – an order of magnitude larger than they were in 2004-05. Non-life penetration has nearly trebled since that time. Foreign multi-nationals participate as minority shareholders and providers of technical knowhow. The vast majority of the insurance companies are listed on Tadawul, the local stock exchange: this means that, at least … they have greater access to capital and are more transparent in reporting about their activities than would otherwise have been the case. Because the law requires the insurers to operate according to the principles of co-operative insurance, they form the largest single Shariah compliant sector in the world – accounting for about half of all takaful contributions written globally.