Riyadh—Amlak
The adoption of the mortgage system in general led to a 20% increase in insurance premiums underwritten in the Saudi market during the first quarter of this year, reaching 6.9 billion riyals compared to the same period in 2012, However, despite this, operating insurance companies recorded a decline in their consolidated profits, falling into the red with a loss of 18 million riyals.
According to a report by Al-Bilad Investment Company on the performance of the insurance sector in the Saudi financial market for the first quarter of 2013, which measures the growth rate of written premiums, earned premiums, and net claims incurred, as well as the sector’s net income at the company level, the net income margin for the insurance sector declined due to an increase in net claims incurred at a rate of 30% compared to the same period last year. This was driven by a 54% increase in net claims incurred for auto insurance and a 15% increase for health insurance.
Although the sector’s profitability declined in the first quarter due to pressure on health insurance profit margins and growth in motor insurance claims, the report expressed cautious optimism for the next two years based on three key factors, foremost among which is the continued growth of the technical insurance sector.
The second of these factors is the Saudi Arabian Monetary Authority’s—which oversees the insurance sector—effort to implement more efficient pricing policies in the insurance sector, while the third factor is the adoption of a mortgage system, which is expected to support the insurance sector by boosting the growth of insurance policies linked to the implementation of the mortgage system in the medium and long term.
This comes as an international economic report announced that the Saudi insurance sector is the fastest-growing in the world, benefiting from local economic developments and the introduction of mandatory insurance areas, foremost among which are health insurance, third-party auto insurance, and professional liability insurance. The Saudi insurance sector has achieved growth of 21.5% over the past four years, with the health insurance segment accounting for 52% of its operations, while the protection and savings segment was the fastest-growing segment of the insurance sector, with an average growth rate of 35% over the same period.
The report revealed that three insurance companies out of the 31 listed on the Saudi stock market dominate 50% of the sector’s market share, and that competition for the remaining share among smaller companies has intensified, amid support from the Saudi Arabian Monetary Authority (SAMA) and oversight of the sector’s operations and products—factors the report considered to be instrumental in increasing and maintaining profitability.