The Cooperative Insurance Companies Control Law was approved through a Royal Decree number (M/32) dated 31 July 2003 which set the stage for the legal framework and supervision of the insurance sector. SAMA was appointed to act as a 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 govern 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 to be carried out by insurance companies established and registered in Saudi Arabia and operated in a “Cooperative/Takaful” manner consistent with the principles of Islamic Law and Jurisprudence.

Gross premiums written should not exceed 10 times of the paid up capital 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

Transfer of 90% of the net surplus from insurance operations to the shareholders' income statement and the balance of 10% to be distributed to the policyholders either directly or in the form of a future reduction in premiums

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Direct insurers must reinsure a minimum of 30% of total gross written premium within the Kingdom of Saudi Arabia

Solvency requirement: using premium as well as loss ratios parameters necessitating adjustment of the shareholders equity where necessary for the protection of the policy holders

Investment policy guidelines were introduced to secure that the assets position are Industry conform

Safe operational practices were introduced: two auditors, internal as well as external actuaries securing appropriate pricing of risks underwritten, financial and technical reporting to the regulators

Special requirement on directors and management of the companies.