JEDDAH, 11 October 2006 -- The Council of Ministers yesterday licensed 13 new insurance companies in the Kingdom in a move that will dramatically change Saudi Arabia's insurance market. The change ends the current monopoly held by the National Company for Cooperative Insurance (NCCI). It is expected to create thousands of jobs.
"The Cabinet approved a request from the minister of commerce and industry to license 13 joint stock companies for cooperative insurance," the Saudi Press Agency reported, quoting a Cabinet statement.
The new companies are: Gulf Union Cooperative Insurance, Arabian Shield Insurance, Sanad for Cooperative Insurance, Saudi United Cooperative Insurance (Amity), Assurance Saudi Fransi, Al-Ahlia Insurance, Mediterranean & Gulf Insurance & Reinsurance (MedGulf), Malath Insurance, Saudi Indian Insurance, Saudi IAIC for Insurance, Allied Cooperative Insurance Group, SABB Takaful and Saudi Arabian Insurance.
"It 's a giant step forward," said economist and Shoura Council member Ihsan Buhulaiga. It would also boost the economy, he told Arab News. He believed it would draw billions of dollars of foreign investment into Kingdom.
Most of the new businesses are joint ventures with foreign insurance companies and they have to retain 30 percent of income in the Kingdom to cover payouts.
Buhulaiga said the listing of the new joint stock companies on the Saudi bourse would also strengthen and diversify the Kingdom's capital market. "It's a wise decision. It will organize the market and grow its volume to SR30 billion," said Abdul Ilah Saati, professor of insurance at King Abdul Aziz University, and member of the International Insurance Association.
Saati urged the government to license yet more insurance companies to meet market demand. He was sure there would be public confidence in the new companies. "The activities of the newly licensed companies will be regulated by Saudi Arabian Monetary Agency and this will increase business trust in these companies," he believed.
Businessmen also welcomed the much-awaited Cabinet decision saying it would have significant impact on business and economy.
"This is very good news for businesses in the Kingdom," said Rafeek Younus, general manager of the Alkhobar-based Saudi Engineering Group International. "Up until now we have had to depend on NCCI, the only licensed insurance company in the Kingdom. The licensing of the 13 new companies would increase competition in the market and improve services. It's also good for both employers and employees," Younus told Arab News.
Hamad Al-Sayari, governor of SAMA, said the decision to license the 13 new companies had involved considerable effort including the preparation of a new law to monitor insurance firms. "Following the law's drafting, SAMA has taken steps to organize the market, protect the rights of investors and ensure fair competition among the firms," he said. Al-Sayari also spoke about strict procedures adopted by the agency to license the new firms.
The 13 companies will have a total capital of SR2.62 billion and they will float shares worth SR936.44 million for public subscription.
The capital of the companies ranges between SR100 million and SR800 million. One has agreed to float 47.49 percent of its shares, nine will float 40 percent and the remainder between 25 and 31 percent of shares. Al-Sayari also believed the licensing of new companies would promote fair competition, improve the quality of service and make it available at reasonable prices.
The Cabinet approval came more than a year after the Saudi Arabian General Investment Authority (SAGIA) issued investment licenses -- the first step to doing business in the Kingdom -- to 13 insurance firms, some of which have now won their operational license, while others still await Cabinet endorsement. The latter are BUPA Arabia, Al-Alamiya Insurance, United Cooperative Assurance, Tokio Marine & Nichido, and AXA Cooperative Insurance.
The decision to approve the new companies follows the government's ruling earlier this summer on compulsory health insurance for the Kingdom's seven million expatriate workers. By the end of the year, all foreigners will have to provide evidence that they have health insurance cover to obtain or renew work or residence permits (iqamas).
According to Health Minister Dr. Hamad Al-Manie, the number of people who have joined a cooperative health insurance scheme increased 335.5 percent in August 2006, up from 60,179 to 262,055 policy holders. The ministry has approved 393 health service providers -- hospitals, clinics and surgeries -- in different parts of the Kingdom, he added.
According to the latest economic report by National Commercial Bank, the development of health insurance will result in a further SR30 billion being invested in the Saudi health sector. The bank also predicts that the Kingdom's insurance market will jump from SR8 billion to SR18 billion within the next five years.
Culture and Information Minister Iyad Madani said Monday's Cabinet meeting also took a number of other important decisions including the licensing of a transport company. The new joint stock firm will engage in transporting posts and other parcels within and outside the Kingdom, providing cargo and customs clearance services, SPA said. The Cabinet also approved conditions regulating donation of organs by non-relatives. In such cases the donor will receive SR50,000 ($13,333) for donating one of his organs or part of an organ.
By P.K. Abdul Ghafour
© Arab News 2006
