New regulations to drive consolidation in Saudi insurance sector: Fitch

The new regulations in Saudi Arabia are likely to drive consolidation in the Kingdom’s insurance sector, Fitch Ratings said in a report on Thursday.

Saudi Arabian Monetary Authority (SAMA) is actively encouraging foreign investment and is expected to tighten the solvency requirements, which will further strengthen the Saudi Arabian insurance market, the report added.

“We expect capital requirements to be raised further and rules on internal risk controls to be tightened in the coming years,” it added.

The insurance market in the Kingdom is highly concentrated in its two main product lines of motor and health insurance due to their compulsory nature. “Both the segments accounted for 52 percent and 31 percent of the aggregate gross written premiums (GWPs) in 2017,” the report said.

Also, the recent decision to allow women to drive is seen as a positive move for the motor insurance business and is likely to cause GWP growth to accelerate, Fitch noted.

Insurance penetration in Saudi Arabia remains low at around 1.4 percent in 2017, with GWP falling to SAR 36.5 billion in 2017, as real GDP contracted 0.7 percent.

Fitch expects Saudi Arabia's growth to pick up to 1.8 percent in 2018 and 1.9 percent in 2019.