OVERVIEW OF SAUDI ARABIA INSURANCE REGULATORY 2023
22 February 2024
Arushi Dhawan
The Saudi insurance sector witnessed substantial growth in 2022, with a remarkable 26.9% increase, propelling Gross Written Premiums (GWP) to across 53 billion Riyals.
Dubai: The Financial Sector Development Programme (FSPD) envisions further expansion, targeting a GWP percentage of 2.4% by 2025 and 4.3% by 2030. Recognizing the need for robust regulation to foster growth, Saudi authorities introduced a significant development – the Insurance Authority (IA), an independent regulator superseding the Saudi Arabian Monetary Authority (SAMA).
The Key Regulatory Changes in 2023 are summarized as follows:
1. Insurance Authority (IA) Emergence:
The IA, established by the royal decree number 85 on 28/1/1445AH corresponding to 15/08/2023, officially commending its duties on the 23rd of November 2023, assumes responsibility for regulating and supervising the insurance sector, marking a pivotal shift in regulatory dynamics. With a focus on enhancing sector effectiveness, developing insurance awareness, and safeguarding the rights of insured parties, the IA aims to propel the industry forward.
2. Adoption of International Financial Reporting Standards (IFRS 17 and IFRS 9):
SAMA embraced global accounting standards, adopting IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments from 1st of January 2023. This move enhances transparency and facilitates accurate financial reporting, positioning Saudi Arabia among the early adopters of these standards.
3. InsurTech Rules Implementation:
30th of July 2023 witnessed the approval of InsurTech Rules by SAMA, a framework aimed at ensuring consumer protection and supporting innovation while ensuring the sector remains compliant with the rules and regulations. These rules and regulations provide guidelines for InsurTech activities, emphasizing licensing requirements and reporting obligations within the scope of Insurance Activities.
4. Licensing Milestones:
SAMA granted licenses to the first foreign-owned health insurance branch (Cigna Worldwide Insurance Company) and two insurance aggregators (Al-tizam and Altheqa) on 6th of February 2023 and 14th of September 2023, respectively. Additionally, an online reinsurance brokerage (ReTech Reinsurance Brokers Co) received a license on 26th of October 2023.
5. Comprehensive Motor Insurance Rules Amendments:
7th of November 2023 saw amendments to the Comprehensive Motor Insurance Rules, expanding coverage to include relatives, domestic workers, and those working for an insured based on labor laws. These changes aim to provide flexibility and strengthen beneficiary rights.
6. Merger and Market Consolidation:
A significant development was the merger between Alinma Tokio Marine Company and Arabian Shield Cooperative Insurance Company in early November 2023, aligning with SAMA's strategy to encourage consolidation in the insurance market and marking the sixth merger in Saudi’s insurance market.
7. Localization Initiatives:
on 13th of December 2023, the Insurance Authority announced plans to localize all sales positions in insurance product sales, which shall be effective from 15th of April 2024. This initiative aims to enhance national competencies and capabilities within the insurance sector.
8. Looking Ahead to 2024:
With the establishment of the IA and the strategic regulatory changes, 2024 holds promise for Saudi Arabia's insurance sector. The commitment to technological innovation, Saudization efforts, and continued market consolidation positions the industry for sustained growth and adaptability.
IN CONCLUSION
As Saudi Arabia's insurance sector embarks on a transformative journey marked by the emergence of the Insurance Authority (IA) and a cascade of regulatory milestones, 2023 sets the stage for a dynamic and resilient industry. With a steadfast commitment to global standards, technological innovation, and strategic mergers, the Kingdom's insurance landscape is poised for unparalleled growth. As we anticipate the unfolding chapters of 2024, the IA's influence, coupled with visionary initiatives, promises a captivating narrative that will redefine the contours of Saudi Arabia's insurance future
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