Saudi Arabia would be the most attractive prospect for international insurance companies that are looking to operate in the Gulf Cooperation Council (GCC) countries, the “Saudi Arabia Insurance Report Q3 2010” released by Companiesandmarkets.com on Thursday said. Virtually all other trends are favurable and the market has been opened up to foreign competition. New laws are promoting the development of health insurance, it said. Saudi Arabia's economy has withstood the downturn in energy prices through 2009 well, it added. Saudi Arabia's insurance sector differs from others in the Middle East in that it includes at least one indigenous insurer - Tawuniya - that would rank as a large insurance company in most countries, the report said. Data about Tawuniya published on Tadawul website, showed that its premiums nearly doubled over the course of 2009. By contrast, the next two largest players - Medgulf (a regional insurance company substantially owned by Saudi Arabian interests) and Bupa Arabia (the partly-owned subsidiary of UK health insurance giant Bupa) - lost ground. The Saudi Arabian market is dominated by health products, which is double the value of the next most popular insurance, motor. They account for around 40 percent and 20 percent of the insurance products marketplace, respectively. The report forecast total premiums in 2009 of SR17,480 million. This is made up of non-life premiums of SR16,784 million and life premiums of SAR696 million. In 2014 the corresponding figures are forecast at SR44,618, SR43,295 million and SR1,323 million. It was forecast that the non-life penetration will rise from 1.06 percent in 2009 to 1.80 percent in 2014, and life density from $8 to $13. The Insurance Business Environment Rating for Saudi Arabia is 53.2 out of 100. Moreover, the report noted that the problems of Dubai World and its affiliates in the UAE in late 2009 have overshadowed the long-term strengths of Islamic finance. The absolute size of the capital pools in Saudi Arabia mean that the country has very strong potential as a market for the issuance and distribution of Sukuk. Some estimates suggest that contributions to Takaful operators account for about one-fifth of the Saudi Arabian insurance market. However, it observed that there is limited cross border investment by insurance companies based in the Middle East. Medgulf and ARIG are examples of (re)insurers based within the region that operate very effectively across national borders within the GCC states (and slightly further afield). In Saudi Arabia and all other Arab countries in the region, the vast majority of insurance companies are small by anything other than local standards and lack economies of scale. There is scope for consolidation, it pointed out. Motor insurance premium in Saudi Arabia is anticipated to reach SR 6.5 billion by the end of 2012, another research report said. Saudi Arabia has emerged as the fastest growing country in the Middle East in terms of insurance premium. According to our research report “Saudi Arabia Insurance Market to 2012” by RNCOS, the Saudi Arabia insurance market is expected to grow at a CAGR of more than 32 percent between 2010 and 2012. Our extensive study of the insurance market reveals that the motor insurance segment is the largest among the non life segments and is expected to drive growth in the non life insurance market. The main factor responsible for the prospective growth in the motor insurance is the promotional strategies of the government. The auto sales will rise at a fast rate of 50 percent between 2008 and 2013. This will create demand for the motor insurance on account of mandatory vehicle insurance. Hence, the motor insurance market is expected to grow at a CAGR of around 29 percent between 2010 and 2012. The fastest growing segment in the forecast period will be the protection and savings insurance, which will grow at a CAGR of around 60 percent (2010-2012). The main reason for such a tremendous growth rate is the recent regulatory development which mandate insurers to comply with cooperative insurance.
