Growth in the Saudi insurance sector is expected to be at the best tepid or negative in the short-to-medium term, with challenges such as loyalty of motor policyholders and intense motor competition affecting growth, according to a report by Al Rajhi Capital.
In the long term, prospects for the Saudi insurance sector call for a monitoring of the economy, said the financial services firm.
“Previous data from insurance companies show inconsistent earnings distribution, high sensitivity to premium rates, the likelihood of regime change and the impact of interest rate increases from the Fed compared to Saudi banks,” the report said.
For the 3Q2017 quarterly figures, which are the latest available, GWP of the Saudi insurance sector edged down 1.2% in the first nine months of the year, hitting SAR27.6 billion (US$7.4 billion).
Net profit fell by 25% to SAR1.17 billion for the first three quarters of 2017.
The decline in financial performance has been attributed to higher operating expenses and lower operating revenues, as well as lower reinsurance premiums.
Growth in the Kingdom’s insurance sector is dependent on regulatory changes, increased employment and public health insurance, said Al Rajhi Capital.
For instance, the Council of Cooperative Health Insurance (CCHI) recently expanded coverage in the mandatory health insurance scheme to include dental and gum treatment, early test programmes for hearing problems, newborns’ heart problems and gastric-sleeve surgeries for those with a BMI of at least 45.
Changes such as compulsory insurance for nationals in private companies, stricter implementation of third-party motor insurance, allowing women to drive, and higher private employment are positive for the industry, but the potential could be inflated and growth delayed, said the report. M
SAR1 = US$0.27