Premium growth in Saudi Arabia in recent years has been substantial, thanks to rapid economic expansion, rate adjustments, and the adoption of new mandatory covers, according to S&P Global Ratings (S&P) credit analyst Emir Mujkic.
In a report titled ‘GCC Insurers' Growth Prospects Could Slow In Some Markets’, released on 3 March, Mr Mujkic said that apart from premium growth, other tailwinds favouring the Saudi insurance market were:
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The volatility of investment portfolios is relatively low, thanks to the primarily fixed-income composition.
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Further consolidation and capital raising among midsize and smaller players could strengthen companies.
In the report, Mr Mujkic also outlined the headwinds affecting the Saudi insurance sector. These include:
- The insurance market is highly concentrated, with the top five players generating about 70%-75% of total revenues and earnings, leaving the remaining 21 insurers with low margins.
- Intense competition in motor and medical lines causes a cyclical pricing environment.
Stiff competition, weak capital buffers and regulatory incentives have contributed to consolidation in Saudi Arabia since 2018.
This view was outlined too in a December 2024 report titled 'Saudi Insurers Must Maintain Underwriting Discipline In 2025' in which S&P Global Ratings credit analyst Mario Chakar said, "We expect our ratings on Saudi insurers will remain stable in 2025. Yet 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.
“Due to increasing regulatory requirements and some insurers' inability to meet their minimum capital requirements, we expect M&A activity will continue in 2025.”