I. The Cooperative Insurance Companies Control Law
The Cooperative Insurance Companies Control Law was approved by Royal Decree number (M/32) dated 2/6/1424 H (31 July 2003) which set the stage for the legal framework and supervision of the insurance sector. The Saudi Arabian Monetary Agency (SAMA) was appointed to act as the regulator and responsible body for the supervision of the insurance sector.
Subsequently, Implementing Regulations were issued by Ministerial Decree No (1/596) dated 1/3/1425 H (20/4/2004) to regulate the insurance business in Saudi Arabia. Some of the salient features of Cooperative Insurance Companies Control Law and its Implementing Regulations are as follows:
- Insurance activities within Saudi Arabia shall be carried out by insurance companies established and registered in the Kingdom and operated in a "Cooperative" manner consistent with the principles of Islamic Law and Jurisprudence
- Applicant insurer/reinsurer must be a joint stock company, established primarily to engage in insurance and/or reinsurance activities with direct insurers having a minimum capital of SAR 100 million and reinsurers having a minimum capital of SAR 200 million.
- Gross premiums written should not exceed 10 times the paid capital and reserves of the company.
- Direct insurers to retain at least 30% of total gross written premium and reinsure a minimum of 30% of total gross written premium within the Kingdom of Saudi Arabia.
- 10% of the net surplus shall be distributed to the policyholders directly, or in the form of reduction in premiums for the next year. The remaining 90% of the net surplus shall be transferred to the shareholders' income statement.
- Solvency requirement: using premium as well as loss ratios parameters necessitating adjustment of the shareholders equity wherever necessary for the protection of the policyholders.
- Investment policy guidelines were introduced to ensure the security of the operators' assets.
- SAMA Implementing Regulation Article 37: The Company and the Insurance and Reinsurance services Provider shall set and implement written internal control procedures, the effectiveness of which shall be evaluated by the internal and external auditors shall issue and implement internal audit procedures.
- Specific requirements on Directors and Management of the companies.
II. Market development & Premium Growth
In the last five years, the Saudi insurance industry witnessed a significant growth recording 24% average annual growth, making it one of the world's fastest growing markets. In 2010, the market's gross written premiums reached SAR 16.387 billion, up from SAR 6.937 billion in 2006.
In 2010, Health insurance gross written premiums represented 53% of the insurance market, up from 32% in 2006. This is mainly attributed to the implementation of the mandatory health insurance program. Property &Casualty (Non-Motor) represented 21% of the market's gross written premium, followed by Motor 20% and Pensions &Savings 6%.