Saudi insurance companies are projecting improvements in their financial performance following the implementation of a new mechanism requiring a portion of reinsurance premiums to remain within the local market.
The Saudi Insurance Authority introduced the measure, which seeks to strengthen the role of domestic reinsurance firms in managing insurance risks within Saudi Arabia.
According to a report from Arab News, the mechanism mandates that insurance companies allocate at least 30% of their treaty and facultative reinsurance agreements to reinsurance firms licensed in the Kingdom.
Licensed companies will have the first right of refusal for these assignments. The mechanism will take effect on Jan. 1.
Saudi Arabia’s insurance market is expected to expand at a compound annual growth rate of 5.2% through 2028, with its size forecast to reach SR83.7 billion (US$22.28 billion), according to GlobalData. This marks an increase from SR68.3 billion in 2024.
The projected growth is driven primarily by the health and motor insurance sectors, which are expected to account for 86% of total gross written premiums.
Industry data from Bloomberg also showed a 25% year-over-year increase in earnings for Saudi insurers during the first half of 2024, reaching SR2.2 billion (US$585 million). This growth provides further context for the anticipated impact of the new reinsurance directive.
Saudi Reinsurance Co announced that the mechanism is expected to boost its reinsurance revenues in the local market by more than 5%, with the financial impact beginning in the first quarter of 2025.
Similarly, Walaa Cooperative Insurance Co, another licensed reinsurance provider, stated that its financial performance would reflect the mechanism’s effects starting in the same quarter.
Mediterranean & Gulf Cooperative Insurance & Reinsurance Co, known as MEDGULF, noted that the new regulation presents an opportunity to reconsider its strategy regarding the acceptance of additional reinsurance premiums from local insurers.
Tawuniya Co also forecasts a positive financial impact from the mechanism, anticipating its influence on 2025 results.
Other companies, including Gulf Insurance Group and LIVA Insurance Co, have indicated that the regulation will contribute positively to their financial outcomes beginning next year.
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