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Aug 2022

Saudi Arabia: Motor losses render 1Q2022 extremely challenging for insurers

Source: Middle East Insurance Review | Jul 2022

The first quarter of this year continued to be extremely challenging for the Saudi insurance market and brought higher losses following 2021 which was already one of the toughest years for profitability in the kingdom’s insurance sector, said Badri Management Consultancy (Badri). Most of the 1Q2022 loss was from motor insurance business.
In its report titled ‘Saudi Arabia’s Insurance Industry Performance Analysis – Q1-2022’, the consultancy said that compared with the first three months of 2021, the insurance industry witnessed a dramatic decline in profitability for 1Q2022. It compiled data from 27 listed insurers in the kingdom for its report.
Losses after zakat and tax stood at SAR133m ($35.5m) in 1Q2022, compared to profits of SAR136m for 1Q2021. The change represented a 195% slide into red ink despite overall GWP increasing by 18.5% to SAR14.9bn in 1Q2022 from SAR12.6bn in the corresponding period in 2021.
Lines of business
Motor underwriters have struggled in very challenging market conditions, as underwriting profits plunged by 128% compared with 1Q2021.
The consultancy  said, “This is very much affecting the whole market, and even the largest players struggled as the five largest motor writers had an average loss ratio of 109% during the quarter. Inevitably this will lead to an overall rise in premiums as insurers try to return to profitability. For medical, GWP grew substantially by 21% but underwriting profits were reduced by 11% compared with the first quarter of last year.”
The industry combined ratio in 1Q2022 increased by three percentage points to 105%, compared with 1Q2021 mainly due to a higher industry loss ratio while expense ratios remained at a similar level. Investment returns were positive offsetting some of the underwriting losses.
The motor and medical business lines are the backbone of the Saudi insurance industry. These two lines altogether contribute 81% of GWP in the insurance sector.
The protection and savings insurance line is emerging in the industry and is expected to contribute significantly to the total business written in the insurance sector in future. The life and savings branch saw an increase of 23% in GWP. The profitable P&C lines saw an increase of 45%; however, the business continues to be heavily reinsured.
Badri receives Saudi licence
In connection with the release of the 1Q performance analysis of the performance of the Saudi market, the consultancy announced that its Riyadh-based unit, Badri for Actuarial Services, is now licensed by the Saudi Central Bank to provide actuarial services within the country. M 

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