Saudi Arabia Insurance Report Q1 2012

There are many positive features of Saudi Arabia’s insurance sector. By the standards of most developing countries, it is already reasonably large. It has also been growing rapidly. Life premiums are – nearly – an order of magnitude larger than they were in 2004-05. Non-life penetration has nearly trebled since that time. Foreign multi-nationals participate as minority shareholders and providers of technical knowhow. The vast majority of the insurance companies are listed on Tadawul, the local stock exchange: this means that, at least in theory, they have greater access to capital and are more transparent in reporting about their activities than would otherwise have been the case. Because the law requires the insurers to operate according to the principles of co-operative insurance, they form the largest single shari’a compliant sector in the world – accounting for about half of all takaful contributions written globally.
However, it is the weaknesses of the sector that dominate. The most obvious problem is that social security (or government benevolence) towards locals is so generous that most Saudi households do not need to use life insurance. Protection products have grown enormously from a miniscule base. However, by any metric, life insurance is – and during the forecast period will almost certainly remain – small. The industry is fragmented, in that Tawuniya – the former state-owned monopoly – is the only company that is writing substantially more than US$1bn in annual premiums, while most of the 30 or so insurers have annual premiums of less than US$150mn. Retention ratios (i.e. net premiums as a percentage of gross premiums) are higher than in other GCC countries, but are still – at 72% or so – quite low. Much of the growth in the sector has been due to the introduction of compulsory medical insurance. There is a shortage of skilled labour, as companies struggle to meet the official Saudisation ratio (i.e. the percentage of total staff accounted for by locals rather than by expatriates).
The results released by the listed companies in relation to the first nine months of 2011 suggest that overall premium growth has accelerated to around 17%. The larger companies have been selective about the business that they have been writing. Smaller companies (with the exceptions of the local takaful operators) have generally been growing quickly. There are marked differences between companies in terms of the effect of motor-related claims. A favourable development is that, through 2011 as a whole, most companies achieved significant growth in net investment income – in spite of the volatility in global financial markets.
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Executive Summary 5
Table: Saudi Arabia’s Total Premiums 2008-2016 5
Key Insights And Key Risks 5
SWOT Analysis 7
Saudi Arabia Insurance Industry SWOT 7
Saudi Arabia Political SWOT 8
Saudi Arabia Economic SWOT 9
Saudi Arabia Business Environment SWOT 10
Life Sector 11
Middle East Life Sector Overview 11
Table: Middle East And Africa Life Premiums, 2008-2016 (US$mn) 11
Saudi Arabia Life Sector Update 13
Life Industry Forecast Scenario 13
Table: Saudi Arabia’s Total Life Premiums 2008-2016 14
Growth Drivers And Risk Management Projections 15
Population 15
Table: Saudi Arabia, Insurance Key Drivers, Demographics 2008-2016 15
Non-Life Sector 17
Middle East Non-Life Sector Overview 17
Table: Middle East And Africa Non-Life Premiums, 2008-2016 (US$mn) 17
Saudi Arabia Non-Life Sector Update 20
Table: Saudi Arabia Gross Written Premiums By Line Of Business, 2006-2010 (SARmn) 20
Table: Saudi Arabia Growth In Gross Written Premiums By Line Of Business, 2007-2010 (%) 20
Table: Saudi Arabia Net Written Premiums By Line Of Business, 2006-2010 (SARmn) 21
Table: Saudi Arabia Growth In Net Written Premiums By Line Of Business, 2007-2010 (%) 21
Table: Saudi Arabia Retention Ratios By Line Of Business, 2006-2010 (%) 22
Non-Life Insurance Industry Forecast Scenario 25
Table: Saudi Arabia’s Total Non-Life Premiums 2008-2016 25
Growth Drivers And Risk Management Projections 26
Macroeconomic Outlook 26
Table: Saudi Arabia Economic Activity, 2011-2016 29
Political Stability Outlook 29
Table: Middle East And Africa Defence And Security Ratings 31
Healthcare 31
Health Insurance 34
Epidemiology 36
Table: Saudi Arabia, Insurance Key Drivers, DALYs 2008-2016 39
Motor 41
Table: Saudi Arabia, Insurance Key Drivers, Autos 2008-2015 42
Islamic Finance 42
Table: Takaful And Cooperative Insurance Compared 43
Insurance Risk/Reward 44
Table: Middle East And Africa Insurance Risk/Reward Ratings 44
Saudi Arabia Insurance Report Q1 2012
© Business Monitor International Ltd Page 4
Competitive Landscape 46
Competitive Landscape Analysis 46
Major Players In Saudi Arabia’s Insurance Sector 47
Table: Ranking Of Companies By Premiums, 2009-2010 47
Company Profiles 49
Local Company Profiles 49
Bupa Arabia 49
Medgulf 50
Tawuniya 52
Regional Company Profiles 54
Allianz 54
Arab Insurance Group (ARIG) 56
Aviva 58
AXA 59
Chartis 60
Generali 62
HSBC Insurance 63
MAPFRE 64
MetLife ALICO 65
RSA 67
Zurich Financial Services 69
BMI Methodology 71
Insurance Risk/Reward Ratings 73
Table: Insurance Risk/Reward Indicators And Rationale 73
Table: Weighting Of Indicators 75
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