Saudi Arabia: Insurers must maintain underwriting discipline in 2025
Source: Middle East Insurance Review | Jan 2025
Top-line growth in Saudi Arabia’s insurance sector will moderate to about 10%-15% in 2025, after strong growth since 2022 and a 17% increase in insurance revenue in third-quarter 2024, according to S&P Global Ratings (S&P).
Stiffer competition, particularly in motor third-party liability and further declines in interest rates could exert pressure on insurers’ earnings and capital adequacy in 2025, with investment returns making up nearly two-thirds of insurers’ net profits in third-quarters 2023 and 2024 (investment returns in third-quarter 2024 exclude Al Rajhi Takaful’s fair value gains on unit-linked investments and Saudi Re’s one-off gain on sale of its investment in an equity-accounted investee), S&P credit analyst Mario Chakar said.
Due to increasing regulatory requirements and some insurers’ inability to meet their minimum capital requirements, S&P expects M&A activity will continue in 2025. Eight players are currently engaged in discussions.
Despite geopolitical tensions, “our base-case scenario assumes that the Israel-Hamas war will remain contained”, the analysis said.
S&P expects its ratings on Saudi insurers to remain stable in 2025. This is in line with its rating outlook, which is stable for all rated insurers in Saudi Arabia. M