News Middle East18 Jun 2019

Saudi Arabia:Insurers see premium slowdown, yet several positive market factors prevail

| 18 Jun 2019

Premiums in the Saudi insurance market in 2018 witnessed the first-ever noticeable slowdown when they declined by 4% to SAR34.2bn ($9.1bn). This decrease pulled down the compound annual growth rate for the market to 3% for the last five years (2014-2018), down from 10% at the end of last year (2013-2017), according to an analysis by Arabian Shield Insurance in its report titled "Saudi Insurance Market 2018".

The table below shows the gross premiums generated in the Saudi market in the last five years:

Year

SAR bn

Y-o-Y Growth rate % 

2018

34.2

-4

2017

35.4

-1

2016

35.8

+1

2015

35.6

+20

2014

29.7

+24

 

Although the sector’s aggregate premiums have declined, a range of mandatory insurance is expected to fuel growth in the upcoming few years, particularly in the medical insurance arena due to the complete enforcement in the private sector as well as compulsory medical coverage by visitors to the kingdom, says the report.

For motor insurance, recent studies show that the penetration level, at best, stands at 55%. Women drivers have yet to contribute significantly to the number of insured vehicles, and the regulator will help the industry achieve higher penetration of the market through its mandates.

On the other hand, the departure of expatriates from the kingdom has been expected to affect insurance premiums adversely.

In motor business, alongside increased competition, the effects of commercial vehicles insured as private vehicles and the increased base of eligible customers earning loyalty and no claims discounts reflected on the top line showing a decrease of 15% in 2018. Medical business had been expected to show a decrease in the insurance premiums; however, 2018 produced a 4% growth. One major contributor was the increase in premiums as a result of the introduction of new benefits provided for in the unified policy by the Council of Cooperative Health Insurance in July 2018. Meanwhile, although more Saudi nationals are expected to acquire medical insurance, competition among insurers is expected to drag down growth.

In spite of the regulator’s clearer guidelines on issuing new protection and savings, or life Insurance, products, the Saudi insurance market remains underdeveloped in this segment. The majority of life insurance premiums relate to group schemes while the retail business is negligible.

 

 

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