News Middle East16 Sep 2020

Saudi Arabia:New insurance rules take effect from 1 Nov for vehicles financially leased to individuals

| 16 Sep 2020

The Saudi Arabian Monetary Authority (SAMA) has announced that from 1 November 2020, it will enforce new regulations for comprehensive insurance of motor vehicles financially leased to individuals.

The new rules cover the contractual engagement between leasing companies and their individual clients in relation to insurance coverage for financially leased vehicles.

The insurance coverage including policy conditions, provisions, or exclusions shall not exceed the minimum limits set by these new regulations.

Saudi insurance broking firm Insurance House Company has outlined some of the key changes that include:

  • The lessor will be required to insure the vehicle leased on a year-by-year basis throughout the duration of the financial leasing contract

  • The lessor will be required to source insurance offers from a minimum of three insurance providers, choose the best offer with the lowest price and provide it to the lessee

  • Insurance premiums will be calculated on a year-by-year basis depending on the changes to the sum insured and the pricing factors for the lessee.

  • At the beginning of the leasing contract, both the lessor and lessee are required to agree on the yearly depreciation rate and specify it in the insurance form.

  • At the end of the insurance year, the lessor will be required to determine the balance remaining from what the lessor has paid to the insurer and the premium paid by the lessee. Once this is done, the lessor should hold the balance in a lessee insurance account and provide a copy of it to the policyholder.

  • At the end of the contract, the lessee will be entitled to either receive a refund of the extra amount of premiums paid or liable to pay the extra amount paid by the lessor to the insurance provider for the policy.

  • The lessor and lessee will be required to reach an agreement on how the repairs are carried out, and clearly stated in the insurance form.


 

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