The 2026 profitability outlook of the insurance industry is subject to greater uncertainty than the 2025 results alone suggest, says the Insurance Authority in its "Saudi Insurance Market Report 2025" report.
The sector remained profitable in 2025, with net income of SAR1.9bn ($507m). However, profitability declined materially compared with 2024, reflecting weaker underwriting. The decline in net income was driven primarily by the insurance service result, says the report. Premium growth continued to support revenue, but claims and service expenses increased sufficiently to compress underwriting margins. The net combined ratio deteriorated from 97.7% in 2024 to 99.9% in 2025 – this included an increase in attributable expense ratio from 12.2% to 14.6%.
The net combined ratio moved to within 0.1% of break-even and earnings became more sensitive to underwriting discipline, claims inflation and investment income.
The Insurance Authority said, “Underwriting margins deteriorated and investment income did not fully offset the pressure, making sustainable underwriting performance a key priority for 2026.”
Scenario analysis illustrates how different combinations of pricing, claims, reinsurance and investment conditions could affect the sector’s underwriting trajectory. The central case assumes partial margin recovery, while downside and upside paths reflect different outcomes for Motor pricing, Medical inflation, reinsurance terms and rate-sensitive investment income.
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Upside Scenario – Broad-Based Underwriting Recovery
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Baseline Scenario – Gradual Recovery
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Downside Scenario – Extended Margin Pressure
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• Motor profitability inflects positively as pricing corrections persist and earn through whilst claims frequency and repair cost inflation remains stable and the sector-wide Motor combined ratio moves below 100%.
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• Motor profitability inflects positively as pricing corrections earn through, claims frequency and repair cost inflation remains stable and the sector-wide Motor combined ratio moves below 100%, however improvement is incremental.
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• Motor pricing discipline reverses - competitive dynamics keep average rates below technical adequacy whilst claims inflation increases ticks up. This results in motor combined ratios remaining elevated.
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• Health margins improve marginally as premium-per-life growth keeps pace with medical utilisation and inflation, supported by disciplined insurer repricing behaviour.
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• Health remains the sector's earnings anchor, though claims inflation and utilisation upticks continue keeping margins stable.
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• Medical inflation outpaces insurer repricing capacity, compressing Health margins.
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• Investment income remains resilient, underpinned by a stable interest rate environment.
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• Investment income contribution remains elevated.
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• A deterioration in the interest rate environment or equity market volatility erodes investment income.
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These scenarios are not forecasts. They are illustrative pathways based on observed 2025 trends and selected forward-looking risk factors. They do not model material shocks, including a significant deterioration in the geopolitical environment, major disruption to reinsurance or Marine war-risk capacity, or severe macroeconomic stress.
Source: “Saudi Insurance Market Report 2025” report
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