Orient Insurance has put its expansion plans in Saudi Arabia on hold due to COVID-19.
Owned by Dubai-based conglomerate Al-Futtaim Group, the company had earlier secured an approval from the Saudi Arabian Monetary Authority (SAMA) to open some branches in the kingdom and kicked off its operation this year.
In a filing to the Dubai Financial Market (DFM), the company said it has decided to postpone the plan by two years because of the coronavirus, which continues to gather strength and cripple businesses worldwide.
The company acknowledged that the pandemic has not only impacted travel and trade due to the mobility restrictions, but the economy in general as well.
“Due to the ongoing development resulting out of the spread of the pandemic COVID-19 and the subsequent restrictions on movement and traveling resulting in disruption in economy and trade during the past period, the company has decided to postpone the start of the business that was expected during the current year, to the middle of the year 2022,” the company said in its filing to the Dubai Financial Market (DFM).
By shelving its expansion plan, Orient Insurance said it will be able to “work in a more convenient atmosphere for a proper” entry into one of the region’s biggest insurance markets.
The insurance sector had been facing some challenges due to the decline in oil prices prior to the coronavirus pandemic.
According to Oxford Business Group (OBG), Saudi insurers have faced some stability issues over the last decade, with smaller players in the market being placed under increased scrutiny.
However, there remains a huge potential in the kingdom for newcomers, with the country’s insurance penetration rate pegged at approximately 1.7 percent of the gross domestic product (GDP), according to credit ratings agency Fitch.
“For the better capitalised insurers… the market is a young and increasingly promising one. Insurance penetration in the kingdom remains low,” according to the 2019 OBG report.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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