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Saudi insurance market liberalisation ensures growth

JEDDAH -- The two-day Second Saudi Insurance Summit, organised by IIR Middle East , began here on Monday night.

It was gathered from the summit that the opening up and liberalisation of the Saudi insurance market has assured the growth of the business in the Kingdom and holds promise to change the market dramatically.

So far, 18 companies have been licenced, with 24 more expecting to be granted approval.

All insurance companies operating in the Kingdom have to obtain a licence by March 2008 or cease operations.

The capital requirements for gaining a license are $26.67 million for insurers and $53.33 million for reinsurers with an additional 10 per cent statutory deposit. Companies are also obliged to float at least 25 per cent of their shares on the Tadawul (stock exchange) and meet other regulatory requirements.

According to Mohammed Abbas Abdul Jaleel, assistant general manager of Allied Cooperative Insurance Group , the insurance market will witness a rapid growth due to the government's new rule which would enable all expatriates to be covered under the health insurance scheme.

He added that the existing SR 7 billion market would reach SR 15 billion in 2009 and this will be doubled when the government introduced compulsory health insurance for all its 16 million population.

"We see the impact of new insurance market regulations, licensing of new companies, floating of shares in the Saudi stock market, implementation of new compulsory insurance laws and increase of competition," said Ali A. Al Subaihin, chairman of the summit.

"And with these developments, a number of significant issues are arising," said Al Subaihin, CEO of Tawuniya (formerly NCCI National Company for Cooperative Insurance).

He explained that these issues include the impact of compulsory insurance laws, effect of the competitive environment on enhancing business practices, future of cooperative (Shariah-compliant) insurance and the main elements for setting the base for a strong and sophisticated insurance industry.

"A healthy investment environment equates to a healthy insurance industry," said Brad Bourland, chief economist, Jadwa Investment Company

Prince Mohammed bin Bandar bin Abdul Aziz, chairman of Al Ahliah Cooperative Insurance Company, said that the concept of insurance in the Kingdom is new for its people. He added that it tends to grow faster due to increasing demand.

In addition to health insurance, licensed insurance companies in the Kingdom are planning to introduce new products and services in the field of insurance in automobiles, movable and immovable properties, life, sea, engineering and medical errors.

According to a recent report from the Saudi Arabian Monetary Agency (SAMA) , the insurance market witnessed a 64 per cent growth, from only SR5.2 billion in 2005, with the introduction of mandatory health insurance for expatriates.

SAMA has given a deadline for all companies to cover their workers with health insurance by March 2008.

According to Dr. Abdullah Al Shareef, secretary-general of the Cooperative Health Insurance Council, seven million expatriates would come under the scheme through 18 insurance companies.

He said that so far, a sizable number of expatriates who are working in companies that have a large workforce have been covered under this scheme.

He added that the programme is being implemented in phases to cover all sectors. The first phase covered those establishments that have more than 500 employees. They were given a deadline to cover their staff with medical insurance in July this year.

Al Shareef said that resident permit (Iqama) will be renewed only on production of a health insurance cover for foreign workers. He added that the mandatory scheme would cover small and big companies and even foreign domestic aides who work under individual sponsors. He said the minister of health has appointed a special committee to look into enforcement and violations of this regulation. It would also take remedial steps to solve teething problems and bring violators to book.

© Khaleej Times 2007