JEDDAH, 14 August 2006 -- Some 13 insurance companies are expected to get license for operating in the Kingdom within a month as the Council of Ministers has returned their files to the Saudi Arabian Monetary Agency (SAMA) to complete legal procedures, Al-Eqtisadiah business daily reported quoting informed market sources. "Owners of insurance companies that have applied for license are awaiting a Cabinet decision on the matter within a short period," said Mousa Al-Rubaiaan, chairman of the National Insurance Committee, an affiliate of the Council of Saudi Chambers of Commerce and Industry.

He did not name the companies that will be licensed by the Cabinet. But a statement issued by Saudi Arabian General Investment Authority (SAGIA) in March 2005 said it had licensed 13 companies with a combined capital of SR2.5 billion to provide insurance and reinsurance services in the Kingdom.

They included well-known insurance companies from Britain, Germany, Switzerland, Japan, India, Holland, the United States, Bahrain, Jordan, Lebanon and France. The Mediterranean & Gulf Insurance & Reinsurance Co. (MedGulf) stands top among the licensees with the highest capital of SR600 million and followed by BUPA Arabia (SR400 million).

Other SAGIA license winners are: Saudi United Cooperative Insurance Company, Al-Alamiya Insurance Co., United Cooperative Assurance Co., Arabian Shield Insurance Co. (all with a capital of SR200 million), Saudi-Indian Insurance Co., Tokio Marine & Nichido, Saudi Arabian Insurance Co., AXA Cooperative Insurance Co., SABB Takaful Co., Assurance Saudi Fransi and Al-Ahli Takaful Co. (SR100 million).

"SAGIA completed licensing procedures of these joint ventures within 24 hours after receiving approval from the Saudi Arabian Monetary Agency," Amr Al-Dabbagh, the authority's governor said. However, he pointed out that the licensees must get the endorsement of higher authorities. SAMA, the Kingdom's insurance market regulator, said it had presented the files of 24 companies to the Ministry of Commerce and Industry for approval. These companies including the 13 licensed by SAGIA that are currently operating in the Kingdom have presented their complete papers. "The licensing procedures of these companies have reached advanced stages," a report carried by the SAMA website said.

Other prospective license winners, according to the website, are: Al-Rajhi Co. for Cooperative Insurance, Allied Cooperative Insurance Group, Malath Insurance Co., Arabian Malaysian Takaful Co., Gulf Union Cooperative Insurance Co., Trade Union Insurance Co., Saudi IAIC for Insurance, Sanad for Cooperative Insurance, Arabia Insurance Cooperative Co., Al-Ahlia Insurance and Al-Sagr Co. for Cooperative Insurance. The licensing of companies is significant as the government has introduced compulsory cooperative health insurance scheme on expatriates from June 1, 2005.

Ali Abdul Rahman Al-Subaiheen, executive president of the National Company for Cooperative Insurance (NCCI), estimated the current insurance market volume at some SR4 billion with car insurance holding the largest share at 32 percent, followed by medical insurance at 22 percent, property insurance at 17 percent and others at 29 percent. He expects the market would exceed SR15 billion by 2009 as a result of the growing demand for medical and car insurance policies. Car insurance is expected to grow to SR5 billion and medical insurance to SR6.3 billion within the next four years, he added. He expected the per capita spending on insurance could increase to SR750 per year, thus raising the sector's contribution to the GDP to three to five percent.

With the government decision on limiting foreign ownerships in the operating companies to only a 60 percent stake and requiring them to offer the remaining 40 percent to the public, the insurance sector is set to spur the country's economic development. The benefits of issuing and trading new stocks of insurance companies to the financial sector are immense since the sector can absorb the entire excess surplus in the stock market. This in turn will decrease random speculation in the stock market and diversify the Kingdom's financial investment channels.

By P.K. Abdul Ghafour

© Arab News 2006