Mergers and acquisitions (M&As) are expected to pick up again in the Saudi insurance market, following the recent cooling down of such activities, according to insurance sector expert Adel Al Eisa.
Mr Al Eisa said in an interview with Al Arabiya Business that with some companies returning to losses starting in 2024, a new wave of mergers is expected to emerge soon, to form larger and stronger entities that are more capable of continuing and competing with larger companies.
He added that insurance companies in the kingdom are divided into several segments. He categorised them as "very large, large, medium-sized and small" companies.
He stated that the insurers most capable of sustaining their operations are the very large companies, while large, medium and small insurers — if they do not place a greater focus on certain products and services, and the ability to compete—will be doomed to exit the market. In such cases, M&As are a solution for them.
He added that the insurance sector relies heavily on size, and the larger a company is, the more capable it is of controlling expenses, beating the competition, and capturing a share of the market.
Licences of 28 insurance entities revoked
Referring to the Insurance Authority’s recent decision to revoke the licences of 28 insurance entities operating in Saudi Arabia, Mr Al Eisa said the move is part of broader corrective measures to stabilise and enhance the sector’s performance and credibility.
He explained that the 28 companies whose licences were revoked are not insurance companies but can be described as insurance support services companies.
He stated that these companies comprise several insurance agencies, some brokers, a claims management company, an actuarial firm, and a consulting firm, all of which provide support services.
He pointed out that the Insurance Authority had said that some measures were issued about a year ago to regulate the market. It appears that some of these companies did not comply with the regulations, while others have stopped functioning for a long time. This is well-known in the market.
He said the number of insurance support services companies in Saudi Arabia is very large, totalling around 200. Revoking the licences of the 28 companies will reduce their number, and thus more focus will be placed on operating companies and developing them for the insurance sector's growth.