Watching the rise of Saudi Arabia as it looks set to become the biggest insurance market in the MENA region is like watching a huge truck that is gradually picking up speed – with the momentum becoming virtually unstoppable.
It is now a well-documented fact that Vision 2030 is succeeding in driving the transition of the Saudi economy away from a dependence on hydrocarbons and onto more value-added services – although this did not stop Saudi Aramco, the state-owned energy company, from reporting its second-highest annual profit in 2023 and paying a dividend of almost $100bn.
Saudi Arabia itself still owns 82% of Aramco and controls a further 16% through the Public Investment Fund, the nation’s sovereign wealth fund, and the dividend windfall will continue to play a large part in funding the diversification plan outlined in Vision 2030.
As Middle East Insurance Review has reported in the past, Saudi is keen that multinational companies that are active in the MENA region should establish their regional headquarters in the kingdom – an effort that is being termed ‘Programme HQ’.
The carrot to doing so is that firms that make the switch will be eligible to participate in big government contracts. Already 350 of the world’s biggest players have heeded the call and obtained their regional headquarter licenses or are in the process of doing so – including the likes of Boeing, Eli Lilly, PepsiCo, PwC and Unilever – although there has not yet been a flood of financial services firms joining the throng.
Part of this hesitation doubtless stemmed from the regulatory environment - which, in turn, is why the Saudi authorities saw fit to establish the Insurance Authority in 2023 – to give the comfort that only a world-class regulator can give to (re)insurers that must operate under a heavy burden of compliance.
According to the frequently-asked questions posted on SAMA’s website in August 2023, “The Insurance Authority will have the existing insurance mandate vested in the Saudi Central Bank (SAMA) and the Council of Health Insurance according to a transition plan. The decision aims to unify the regulator of the insurance sector in the kingdom to support the sector, raise insurance awareness, protect the rights of policyholders and beneficiaries, ensure stability of the insurance sector, ensure financial stability, grow and develop the sector and work to consolidate the principles and pillars of the insurance contractual relationship.”
It is this element of unifying the regulator that will give most comfort to global (re)insurance players looking to set up their headquarters in Riyadh. And it is only by doing so that they will be allowed to tender for the contracts that will come along with the massive infrastructure spend that Saudi is presently undertaking.
According to real estate agency Knight Frank, the cumulative value of property and infrastructure projects announced under Vision 2030 has crossed $1.25tn. More than 17 vast projects ranging from Neom to King Abdullah Financial District, Jeddah Economic City to Red Sea Global, the list goes on.
The (re)insurance future of the nation is being written now. But taking part in it means being part of it. M
Paul McNamara
Editorial director
Middle East Insurance Review