Saudi Arabia: Regulator issues surplus distribution policy
Source: Middle East Insurance Review | Apr 2015
The Saudi Arabian Monetary Agency (SAMA) has approved the surplus distribution policy for insurance and reinsurance operations, the financial regulator said in a statement.
The policy presents general principles for the distribution of surplus to policyholders in accordance with the Law on Supervision of Cooperative Insurance Companies and its regulations. An article in the regulations states that “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”. A written approval from SAMA must be obtained for surplus distribution and its timing.
The senior management of the insurance company and the company’s board of directors should be fully conversant with the contents of the policy and ensure implementation of the related policies and procedures.
The policy stipulates several requirements. For example, it requires the insurer to maintain separate registers for each class of insurance (general insurance, health insurance, and protection and saving insurance). The insurer shall deposit the policyholders’ surplus amounts in a separate bank account.
The policy, which also sets out the basis for surplus distribution and the calculation bases for gross earned premiums and gross claims incurred among other requirements, takes effect from this year.