Saudi Insurance business poised for rapid boom
Jeddah (Reuters) Saudi Arabia's fledgling insurance industry is set for rapid growth after the introduction of laws regulating the $1 billion sector, the Saudi unit of a UAE insurer said.
The laws regulate the local and foreign insurance firms in the kingdom, which joined the World Trade Organisation (WTO) in December. The laws and a drive to make health and care insurance compulsory could raise annual growth to 30 per cent until 2010. "Premiums are set to rise to $3 billion by the end of 2010". said Saleh Jameel malaikah, CEO of the Saudi subsidiary of Salama Islamic Arab Insurance Co (IAIC).
"Providing that gross domestic product grows by 5-6 percent a year, the insurance sector's contribution will more than double from the current 0.7 percent of GDP to 1.5 percent in 2010." malaikah said in an interview last week.
Specialising in Takaful, IAIC is expanding its presence in Saudi Arabia. It holds up to a 3 percent share in a market that had been monopolised by the Saudi Company for Cooperative Insurance.
The insurance laws also provide for the establishment of a locally incorporated public joint stock company to operate in Saudi Arabia, of which 40 percent of the capital has to be floated on the bourse. Insurance firms have to deposit a minimum of 100 million riyals ($26.7 million) and invest 90 percent of the amount in the schemes supervised by the Saudi central bank.
"Per capital premium is extremely, extremely minute at around $40. It is one of the lowest in the world and market penetration is very small compared to other financial sectors such as banking. The new regulatory environment ensures the industry is healthy. The current situation is very encouraging, then general environment will be very supportive," Malaika said.
Gulf News, UAE.
18 February 2006