Saudi Arabia: Govt urged to grant incentives for insurance M&A
Source: Middle East Insurance Review | Dec 2017
The government should provide incentives to encourage insurers in Saudi Arabia to merge, Mr Adel Abdulaziz Al-Essa, a spokesman for the insurance industry in the Kingdom, has said.
He told CNBC Arabiya television that mergers are a necessary and strategic option for many insurance companies in Saudi Arabia. He pointed out that there is little or no experience in M&A in general in the Saudi market.
Both the Saudi Arabian Monetary Authority (SAMA) and industry leaders have said several times that insurers, which number 33 currently, should consider M&A to become more competitive. The insurers have a combined market value of around US$11.1 billion, according to market data.
In October, Mr Ahmed Alkholifey, SAMA Governor, told Bloomberg TV that the insurance market needs more consolidation and foreign participation to help create stronger companies capable of competing in the oil-rich nation’s crowded market. Reuters reported in the same month that SAMA is drawing up tougher rules for insurance companies as part of a drive to forge stronger market players. A new supervisory framework will be introduced that will force insurers to boost capital significantly as well as improve internal risk controls.
At present, insurance entities must have a minimum capital of SAR100 million (US$26.7 million) for insurance activities or SAR200 million for reinsurance activities.
Meanwhile, the market has seen some tentative approaches towards M&A. In June, Al-Ahlia Insurance started non-binding talks with Gulf Union on a proposed merger, with an agreement expected to be reached by the first half of 2018. Walaa Insurance is also in serious talks with two insurance companies in Saudi Arabia, about a possible merger. M
SAR1 = US$0.27