News Middle East25 Feb 2019

Saudi Arabia:Authorities urged to pass M&A rules for insurers

| 25 Feb 2019

Calls are being made in Saudi Arabia for the introduction of effective initiatives to overcome the obstacles hindering the mergers and acquisitions of insurance companies, in the wake of the failure of merger talks between two insurers in the kingdom.

Al Ahlia Cooperative Insurance announced last week that its shareholders had not approved a proposed merger with Union Gulf.

Mr Sulaiman Bin Mayouf, an insurance expert, said that the first reason for the failed insurance merger is the absence of regulations governing M&As. He suggested that rules be laid out covering the corporate voting mechanism, including the number of votes and proportion of shares, reported the newspaper Al Riyadh.

He also said that lawmakers have to introduce initiatives to make the M&A process more professional and transparent.

Mr Abdul-Wahab Al-Kahtani, an associate professor who teaches management at King Fahd University of Petroleum & Minerals, said that failure in M&A talks may be due to differences of views between the parties involved, lack of harmony in objectives and differences in culture.

In addition, last July, Malath Cooperative Insurance and Allied Cooperative Insurance Group announced they were ending merger talks after they failed to reach a preliminary agreement on the valuation method.

Nevertheless, industry players are expecting M&As to take place in the Saudi insurance market because the Saudi Arabian Monetary Agency (SAMA) is working to modernise the regulatory framework for insurance companies with stricter and risk-based capital requirements that will strengthen the insurance market.


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