PHOTO
JEDDAH — The insurance sector in the Kingdom of Saudi Arabia (KSA) will find new opportunities for growth through the National Transformation Plan 2020 and Vision 2030, while simultaneously balancing business and profitability challenges, according to professional services organization EY. At the recent EY Jeddah Insurance Seminar held by the MENA insurance practice, EY experts discussed the opportunities and challenges facing the KSA insurance sector, along with the upcoming regulatory changes. Key executives and board members of leading KSA insurers based in Jeddah attended the event.
Ahmed Reda, Office Managing Partner, EY, Jeddah, said: “EY has been holding seminars across the country with key decision-makers and clients to encourage debate, the sharing of strategies, experiences and insights that will benefit the overall development of the KSA insurance market. The new regulations that are being introduced may cause some initial challenges in the insurance sector upon implementation, but we expect to also see some real opportunities develop as more companies adjust their financial practices to uphold international and local standards.”
Sanjay Jain, EY MENA Insurance Leader, added: “The KSA insurance market is going through a structural evolution with the introduction of stronger regulations, aided by a welcome shift towards the right level of technical pricing. Even though the drop in the price of oil has introduced new vulnerabilities, in the long-term rapid urbanization, growth in the middle class, and the use of mobile technologies could potentially lead to an overall faster growth for insurers. The enforcement of regulations to eradicate fraud, corruption and other abuses will also be critical for the increased growth of this sector, as will the enhanced efforts towards educating consumers.”
At the Jeddah event, Omar Odeh, Director, EY Jeddah, and Adeel Mushtaq, Director, EY, discussed the financial reporting implications of the new IFRS regulations on KSA insurers, which are expected to affect both the assets and liabilities of their balance sheets. The presenters highlighted the potential impact and timelines of the new standards: IFRS 9, IFRS 15, IFRS 16 and IFRS 17. They further emphasized the need for the changes to be analyzed ahead of implementation, taking into account interdependencies, differing timelines and alignment for business synergies.
Rajesh Dalmia, Partner, Actuarial Advisory, EY, discussed the local KSA regulations around technical provisions and capital requirements, comparing them with the requirements under IFRS and Solvency II. Other key regulatory topics that were discussed included, the Risk Appetite Framework introduced by SAMA earlier this year and the potential introduction / impact of Value Added Tax (VAT) on the KSA insurers. Whilst the introduction of GCC-wide VAT is expected to be effective January 2018, insurers would be amongst the initial set of industries to be impacted, due to the nature of annualized premiums of insurance contracts. Whilst this is a tax compliance issue, the impact on the business processes, people, systems and most importantly, the customers, should not be under-estimated, noted Sanjay Jain, EY’s MENA Insurance Leader.
The latest trends and innovations in the global insurance market space and their relevance to the KSA insurance markets were discussed by Jonathan Matchett, Director, MENA Insurance Advisory, EY. Given the challenging technical results of the KSA insurance industry because of fragmentation and price competition, technology and operational transformation are imperative rather than a ‘good to have’. Jonathan further highlighted global and regional case studies around product differentiation, customer centricity, claims management, and process efficiency enabled by robotics, digital, telematics and analytics.
© The Saudi Gazette 2016
