Saudi Arabia’s insurance industry saw major developments over the past two years, setting the stage to meet Vision 2030 targets. The rising capital strength, new opportunities at home and abroad, business scale and evolving regulatory environment position the country as a natural regional hub, says WTW Re CEO Mohammed AlSudairy.
The insurance industry in Saudi Arabia has shown strong growth momentum in recent years, on the back of major regulatory and structural developments for both direct and reinsurance providers. While the market’s total GWP reached SAR76.1bn ($20.3bn) in 2024 against SAR65.5bn in 2023, representing robust growth of 16.3%, ceded reinsurance premiums grew to SAR11bn from SAR9bn in 2023, a 22.2% jump, said Mr AlSudairy.
In treaty business, he said that reinsurance retention rates are increasing because insurers have accumulated the necessary underwriting expertise. “Surplus lines are dropping heavily as well, a sign that the marketing is gradually maturing.”
Another reason for higher retention rates is that reinsurers are pushing in this direction by limiting commissions and imposing other stringent measures, he said. “But, at the same time, top insurers have the capabilities and capacities to retain more risks compared to in the past.”
In facultative business, the dynamics are changing because local insurers are writing reinsurance business heavily and keeping it on their books, he said. “This is creating a positive dynamic in terms of capacity and scope of coverage. Pricing, though, varies depending on the line of business.”
Overall, the Insurance Authority (IA) mandating higher minimum capital requirements should help companies, especially at a time when quota shares and surpluses are decreasing, he said. “Capital strength plays a key role in this case.”
New reinsurance setting
In January 2025, in a major regulatory move, the IA directed that a minimum of 30% of reinsurance cessions should be placed with domestic (re)insurers before seeking coverage from international markets. “This mandate will enhance technical capabilities and expertise, which will help Saudi providers gradually access more non-Saudi business,” said Mr AlSudairy.
He is confident that insurers licensed to transact reinsurance business will build the capacity and expertise to diversify their business. “From the accumulation perspective, it will give the market a competitive edge. Local insurers will also have the opportunity to launch new products, which will diversify their portfolios. In addition, Saudi providers will have new opportunities in the local market as well as markets in Asia and Africa.”
Moreover, the new mandate will encourage international players to open shop in the kingdom to benefit from the local compulsory cession requirement, he said. “This will also encourage forging fruitful partnerships with international providers.”
Aside from local cessions, there are other opportunities, he said. “For example, there are certain segments that were categorised under facilities or line slips, but which have now been restructured to be part of the market operations. According to current regulations, brokers are not allowed to have a market facility because they are not MGAs – this opens new market opportunities for reinsurers.”
Challenges posed by new reinsurance mandate
The new mandate is expected to present certain challenges at the beginning, said Mr AlSudairy. “One main challenge is the need to strengthen risk management. The market needs expertise to help set up the right risk processes, risk surveys, and develop other sophisticated areas.”
These challenges will create opportunities in the medium to long term, he said. “Therefore, local insurers are developing their capabilities. They realise that this is their chance to become leaders at the local and regional level.”
Another major hurdle is finding talent, he added. “Insurance is not ingrained in our common culture. Some neighbouring markets have introduced insurance at the high school level to equip young people with a basic understanding of insurance and risk transfer principles, as well as to boost the image of the industry. This will make insurance appealing as a career path for young people and will create a new culture among the public that appreciates insurance.”
Saudi Arabia as a reinsurance hub
Saudi Arabia possesses the necessary elements to make it a reliable hub for (re)insurance business, said Mr AlSudairy. “The kingdom’s strategic location, political weight and status as a global economic powerhouse are factors that should entice (re)insurance players to assume a greater regional role.”
The recent regulatory strategies the country has adopted are in tandem with this goal, he said. “The establishment of an independent regulatory body is one key step in the direction of establishing a solid and reliable insurance sector.” Here, he was referring to the IA whose establishment was approved by the government in August 2023.
Reflecting confidence in the Saudi and regional insurance markets, WTW launched its regional headquarters in Saudi Arabia at the beginning of this year to make a greater impact as a global (re)insurance broker eyeing business beyond the kingdom, he said. “Local (re)insurance providers have the capability to serve neighbouring markets by developing facultative and treaty business. This will expand the market.”
In the past two years since the establishment of the IA, the Saudi insurance market has witnessed notable progress in the development of the regulatory framework and the enhancement of market expertise, said Mr AlSudairy. “The progress is ongoing and will continue in the coming years.
“We are making progress in stages, though we are not close yet to the levels in advanced markets. But, relatively speaking, we have achieved a lot of ground in a short period of time. The IA’s new strategy bodes well for the sector, especially with higher levels of coordination. There is a healthy interaction between the market and the regulatory authorities.”
Lifting the penetration rate
A key Vision 2030 goal for the Saudi insurance industry is to raise insurance penetration to 4.5% by 2030, from its current level of 2.3%. “To achieve the aspired penetration rate by 2030, the market size should reach SAR150bn,” said Mr AlSudairy.
He added that though the targeted penetration rate appears ambitious, it is in line with the government’s Vision 2030 goal to increase the non-oil sector’s contribution to the national economy to 50%. “Within this framework, the establishment of the IA is key to enhancing the performance of the insurance industry and developing its size. Providers, on their part, are doing their bit in meeting Vision 2030 objectives.”
A supporting growth factor is that economic scale has expanded substantially over the years, he said. “For instance, 10 years ago, SMEs used to be valued at SAR50m to SAR100m. Today, the value of an SME can reach SAR1bn. This will further help insurers achieve the targeted penetration rate.”
Furthermore, several economic sectors have grown strongly, like tourism, which currently contributes 5% of the country’s GDP against 3% in 2019. “Tourism’s contribution to the GDP is targeted to reach 10% by 2030. Insurers can benefit from this by expanding their products and sales in areas such as travel insurance, embedded medical insurance and some other small products that are relevant to tourism.”
Life insurance is another important segment, he said. “In 2024, life insurance business increased by 200% and is forecast to grow fivefold by 2030.” According to “The Saudi Insurance Market Report 2024”, published by the IA, premiums generated by the life insurance (protection and savings insurance) branch surged by 200.2% to SAR7.70bn ($2.05bn) in 2024, from SAR2.57bn in 2023.
New initiatives
Insurance providers can come up with new initiatives to support the market’s growth aspirations, said Mr AlSudairy. “Agriculture insurance is a promising line of business. There are 35m palm trees in Saudi Arabia generating a revenue of SAR7.5bn, which remain uninsured. Insurers and brokers should launch initiatives to address such areas without waiting for the government to make the business compulsory. Providers have a role to advise the IA and cooperate to expand the marketplace.”
He also urged providers to introduce parametric insurance solutions to cover uninsured risks.
Expectations
On the reinsurance front, competition is set to intensify with the entry of new players, said Mr AlSudairy. “A new local reinsurance player is going to enter the market in the coming period, while some international reinsurers are showing interest in stepping in as well. More players will help Saudi Arabia become a recognised hub.”
The local market will continue to grow with new initiatives and products in underinsured areas, he said. “The market will hopefully achieve its aspired penetration rate. We are optimistic that Saudi Arabia will become a leading insurance market and will grow stronger arms to reach and write business in new markets.
“Most importantly, the market dynamics and the available opportunities are reshaping the industry positively,” he said. M