I. The Cooperative Insurance Companies Control Law
The Cooperative Insurance Companies Control Law was approved by Royal Decree number (M/32) dated 2/6/1424 H (31 July 2003) which set the stage for the legal framework and supervision of the insurance sector. The Saudi Arabian Monetary Agency (SAMA) was appointed to act as the regulator and responsible body for the supervision of the insurance sector.
Subsequently, Implementing Regulations were issued by Ministerial Decree No (1/596) dated 1/3/1425 H (20/4/2004) to regulate the insurance business in Saudi Arabia. Some of the salient features of Cooperative Insurance Companies Control Law and its Implementing Regulations are as follows:
- Insurance activities within Saudi Arabia shall be carried out by insurance companies established and registered in the Kingdom and operated in a "Cooperative" manner consistent with the principles of Islamic Law and Jurisprudence
- Applicant insurer/reinsurer must be a joint stock company, established primarily to engage in insurance and/or reinsurance activities with direct insurers having a minimum capital of SAR 100 million and reinsurers having a minimum capital of SAR 200 million.
- Gross premiums written should not exceed 10 times the paid capital and reserves of the company.
- Direct insurers to retain at least 30% of total gross written premium and reinsure a minimum of 30% of total gross written premium within the Kingdom of Saudi Arabia.
- 10% of the net surplus shall be distributed to the policyholders directly, or in the form of reduction in premiums for the next year. The remaining 90% of the net surplus shall be transferred to the shareholders' income statement.
- Solvency requirement: using premium as well as loss ratios parameters necessitating adjustment of the shareholders equity wherever necessary for the protection of the policyholders.
- Investment policy guidelines were introduced to ensure the security of the operators' assets.
II. Market Development & Premium Growth
In the last ten years, the Saudi insurance industry witnessed a significant growth recording an 18% average annual growth, making it one of the world's fastest growing markets. In 2016, the market gross written premiums reached SAR 36.9 billion, up from SAR 8.6 billion in 2007.
In 2016, Health insurance gross written premiums represented 51% of the insurance market, while Motor represented 33% of the market gross written premium, followed by Property & Casualty (P&C) 14% and Protection & Savings (P&S) 3%.