The report also mentioned that the energy and accident, and liability insurance classes showed a notable increase in written premiums, where their penetration ratio in the sector increased from 1.3 percent in 2019 to 1.5 percent in 2020.

While talking about underwriting performance, the overall loss ratio positively improved, reaching 77.5 percent and the net profit of the sector increased by 61.1 percent compared to the previous year’s figure, thereby improving the return-on-assets and return-on-equity ratios. Additionally, the report also mentioned that the overall Saudization ratio increased from 74 percent in 2019 to 75 percent in 2020.

The SAMA report noted that even though the sector faced a challenging situation during the Covid-19 pandemic, their insurance sector continued to perform positively while maintaining the safety of their clients and facilitating their insurance trading.

Additionally, the report also noted the constant progress in the IFRS17 implementation journey and the ongoing merger and acquisition in the sector.

After going through the report, we can say that the above-stated developments are positive signs that the insurance sector is consistent with SAMA’s effort to make its presence larger and come out as a major contributor to the economy.

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SAMA’s decision stems from an attempt to boost stability in the insurance sector and add value to the Kingdom’s economic growth. 

Major problems such as insolvency increased in the insurance industry after its liberalisation. For that reason, SAMA noted in a statement that the decision will further prevent ‘wrong practices’ in the industry. Currently, companies that combine both insurance and reinsurance brokerage activities have one year to restrict the practice. 

In a 2017 report, SAMA had noted that it will enforce stringent rules for re/insurers if the restrictions are not followed. The report stated that the new regulation will necessitate insurers to hold more capital to ensure increase in demand for reinsurance protection. 

In fact, SAMA announced that the Rowad Insurance Company of the Cooperative Insurance Agency and Forsan Insurance Agency had failed to comply with regulatory requirements. The two insurance providers were urged to quickly comply within 20 working days or face licence cancellation. 

SAMA’s ban is an important part of Saudi’s Vision 2030 which aims to build a strong non-oil economy. The insurance and reinsurance companies are vital to the Kingdom’s financial landscape. The Kingdom aims to create more insurance and reinsurance opportunities by 2030. SAMA is the central bank of the Kingdom of Saudi Arabia. It is also responsible for monitoring foreign exchange reserves. 

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