The decision by the Saudi Arabian Monetary Authority (SAMA) for the insurance industry to have separate companies for reinsurance and insurance broking operations will lead to more transparency in contractual relations, job opportunities and greater confidence in the local market, say industry professionals.
Mr Salah Al-Jabr, head of the Finance Committee of the Eastern Chamber of Commerce and Industry, believes that the SAMA decision will lead to the establishment of specialised reinsurance broking companies in the kingdom, reported Al Arabiya. SAMA grants brokers a one-year period to complete the segregation of the two types of operations.
The head of the National Insurance Committee, Mr Abdelaziz Abu Al-Saud, adds that the decision is not expected to have a material impact on insurance rates or on insurance companies in the Saudi insurance market.
He further says that SAMA hopes that the move will lead to minimising errant practices in reinsurance business, raising retention rates of local insurance companies, and reducing reinsurance premium rates because reinsurance companies are, for the most part, non-Saudi companies that do not operate locally.
Stating that the decision took immediate effect, SAMA said in a statement on 2 January that the goal is to increase the stability of the insurance sector, boost its contribution to national economic growth and reduce “wrong practices” in the industry.