Saudi Arabia: Central bank issues regulations for branches of foreign insurers
Source: Middle East Insurance Review | Jan 2019
The Saudi Arabian Monetary Authority (SAMA) has issued licensing and supervision rules for foreign insurers and reinsurers wishing to establish and operate a branch in the kingdom, including capital adequacy and financial suitability for obtaining a licence.
In a statement on 17 December, SAMA said, “As the insurance and reinsurance companies are key components of the financial industry, the new rules are aimed at developing the industry while ensuring the stability and resilience of the financial systems. This initiative forms a part of the Saudi Vision 2030 for creating a thriving and sustainable economy.”
The new rules clarify application of the provisions of the Cooperative Insurance Control Law and associated implementing regulation to the foreign branches. Currently, there are no foreign branches of foreign
(re)insurers in Saudi Arabia. The foreign insurance entities now operate in the kingdom through subsidiaries or a stake in local insurers.
Some of the stipulations in the new rules are:
- SAMA will not grant a licence to the foreign
- (re)insurer to open a branch without confirmation from the home supervisory authority that the applicant is currently licensed to carry out the same proposed line of insurance business in its home jurisdiction, and has been writing the same line of business for the past three years;
- The applicant has to confirm that the paid-up capital of the applicant is equal to, or more than, the amount required for a Saudi established (re)insurance company;
- Any company, prior to commencing branch operations in Saudi Arabia, shall place its capital contribution with the branch, that is a minimum of SAR100m ($26.7m) for insurance and SAR200m for reinsurance;
- The branch establishes appropriate management and accounting procedures in Saudi Arabia similar to what is required of local companies, and to the extent applicable to the branch’s nature, which will enable the preparation of its accounts concerning its business carried out in Saudi Arabia, in addition to keeping all necessary records for this business within Saudi Arabia;
- The foreign insurer shall form a committee of at least three members, after they get SAMA’s prior non-objection to their appointments, to oversee the branch business. This committee shall be treated the same as a board of directors in a local (re)insurance company with regard to its responsibilities and obligations, and it shall annually hold a number of meetings in Saudi Arabia in a manner that is similar to that of a local company’s board of directors;
- A general manager of the branch, who is resident in Saudi Arabia, is appointed and authorised to act on behalf of the applicant;
- All senior managerial roles in the branch are occupied by designated individuals resident in Saudi Arabia and approved by SAMA;
- The applicant has to furnish an irrevocable bank guarantee of SAR100m for the branch, a summary of the reinsurance arrangements for the activities to be carried out, the applicant’s financial statements for the last three years and the classification of the applicant for the last three years from a global credit rating company; and
- The management of the invested assets of the branch shall be through the investment department of the branch or through a licensed Saudi bank. M
SAR1 = $0.27