Gross contributions in Saudi Arabia could rise by nearly 25% to over SAR35 billion (US$9.3 billion) this year, principally fuelled by tariff increases, says Standard & Poor’s Ratings Services (S&P).
Although performance varies considerably among Saudi Arabia’s 34 locally incorporated insurance companies, the general trend in the insurance market is a positive one, encompassing improving tariffs, increasing earnings, enhanced capitalisation, and growing total premium volumes, said the rating agency.
In its report, “Tariff Increases And New Business Set To Boost Saudi Insurance Sector By About A Quarter In 2015”, S&P said: “We anticipate that the sector’s full-year 2015 gross premiums will be about 25% higher than those in 2014, largely because of price increases on the main insurance lines—group medical and motor.
“Growing demand for insurance in the near term, combined with regulatory encouragement of highly prudential ‘actuarial pricing’ after the price war of 2012-2013, means that Saudi Arabia’s insurers are showing few signs of being affected by the fall in oil prices. Consequently, we consider that the strong growth in sector premiums is likely being driven by the demographics of an expanding population.”
Following a series of rights issues during 2014 and 2015, many local insurers are now actively choosing to operate at a stronger level of capitalisation than in the past.
In 2014, the industry saw premiums grow by more than 20% to $8.1 billion, helped by premium rate increases in the medical and motor sectors.
Personal accident and health insurance
Separately, Timetric predicts that an improving health insurance market will drive growth in Saudi Arabia’s personal accident and health insurance segment. The segment accounts for 51.1% of the overall Saudi Arabian insurance sector, recording a CAGR of 15.3% over 2009-2013. The drivers behind the strong growth of health insurance are Saudi Arabia’s ageing population and regulatory changes regarding the mandatory purchasing of health insurance.
Timetric notes that the life expectancy of Saudi Arabians is expected to rise from 74.6 years in 2013 to 75.7 years by 2018. Furthermore, the number of people aged over 65 was 0.83 million in 2013 and is forecast reach one million in 2018. As this cohort of the population grows, it is expected to boost demand and result in greater premium revenues being accrued by insurers.
In addition, the increased capacity and availability of healthcare services will enhance the attractiveness of health insurance, making customers more inclined to opt for plans that offer access to higher-quality services.
In 2005, the Saudi Arabian government made purchasing health insurance compulsory for expatriates. Ten years later it has extended this measure to Saudi nationals, who account for 70% of the population.