The direct impact of the conflict in the Middle East on Saudi Arabia's Gulf Union Alahlia Cooperative Insurance (Gulf Union) is expected to be limited, according to Fitch Ratings.
The reason is the company's low net retentions on business lines exposed to war risk. However, a prolonged conflict may create broader macroeconomic challenges and hinder the company's ability to deliver a sustained turnaround in financial performance, Fitch added.
Ratings affirmed, outlook revised
The global credit rating agency has revised Gulf Union's outlook to ‘Negative ‘from ‘Stable’, while affirming the company’s Insurer Financial Strength Rating (IFS) at 'BBB+' and National IFS Rating at 'AA-(sau)'.
“The outlook revision reflects our expectation that challenges from limited operating scale and a constrained ability to influence pricing trends may threaten Gulf Union's earnings recovery following its weaker results for 2025,” Fitch said.
The ratings continue to reflect the insurer's strong capitalisation, partly offset by its small size in the Saudi insurance market.
Aside from the regional conflict’s limited impact on Gulf Union, other factors driving the insurer’s ratings include:
Significant challenges to performance recovery: Fitch expects the Gulf Union to face significant challenges as they seek an improvement in financial performance from the loss reported in 2025. Fitch expects a sustained recovery to depend on the insurer's ability to manage the challenges posed by intense competition in the motor and medical insurance segments, particularly for smaller insurers with limited scale and pricing power.
Gulf Union reported a net loss of SAR84m ($22.4m) in 2025 (profit of SAR44m in 2024), due mainly to underwriting losses in the motor third-party liability (TPL) and medical lines. The Fitch-calculated combined ratio deteriorated to 108% at end-2025 from 95% at end-2024.
Small franchise, limited competitive advantages: Fitch's assessment of Gulf Union's business profile reflects the insurer's small operating scale and franchise, and limited competitive positioning. Gross written premiums (GWP) slightly increased to SAR1bn at end-2025 from SAR976m at end-2024, representing 1% of Saudi Arabian GWPs in 2025. Fitch expect sthe company's premium levels to remain broadly stable in 2026 as the company takes corrective pricing actions, pivoting towards profitable growth.
Fitch’s assessment of Gulf Union's business profile factors in the insurer's well-diversified product mix in Saudi Arabia. At end-2025, medical insurance accounted for 46% of GWP, followed by motor at 35%, and property and casualty lines at 19%.
Strong capitalisation: Fitch’s assessment of Gulf Union's capitalisation is reflected in a Prism Global score of 'Extremely Strong' at end-2025, unchanged from end-2024, although the score weakened within the category. Fitch expects the Prism score to remain at least 'Strong' in the short-to-medium term. However, persistent and material underwriting losses could further weaken the company's capitalisation. The regulatory solvency ratio fell sharply in 2025, primarily due to the company's weaker financial performance, but it remained above the regulatory minimum. Financial leverage was zero, which also supports our assessment of capitalisation and leverage.
Good reserving practice: Most of Gulf Union's policies are short-tailed, which limits the impact of significant claims experience on reserve adequacy. The insurer sets reserves at best-estimate levels, based on regular evaluation of historical results and expectations of claims experience. Its reserving methodology is in line with market standards.
Conservative investment mix: Fitch regards Gulf Union's investment risk as low. Cash, deposits and other fixed-income investments make up over 70% of its investment portfolio. Most of its fixed-income investments are in Saudi Arabian ('A+/Stable') government sukuk. Exposure to equity and mutual fund investments remains limited.