Profitability in the Saudi insurance market has been volatile over time, with competitive pressures driving frequent changes in the pricing cycle, said Moody's Ratings.
In a report titled “H1 2025 update: Profit declines on weak pricing in key motor and medical lines”, Moody’s says that for many insurers, price reductions are a key tool for gaining market share, leading to volatile industry profitability.
Following strong performance in 2023 and 2024 that resulted from price strengthening in 2022, the industry is again facing weaker profitability in 2025. However, Moody’s expects this to improve as insurers return to more disciplined pricing and underwriting. This intense cyclicality highlights the relative immaturity of the market, with many smaller insurers seeking to build scale and market share.
Weak pricing
Despite stronger revenue, the combined net profit of the Saudi insurance industry fell to SAR1.3bn ($345m) in 1H2025, down by 40% year over year. Of the country’s 25 listed insurers, 72% reported weaker profit in 1H2025. Their average combined operating ratio, measured as costs and claims as a percentage of premiums, deteriorated to 96% from 94% in the year-earlier period.
The deterioration reflected a weaker underwriting performance in the dominant motor third-party liability (TPL) and medical insurance markets — where pricing is weak and competition intense — as well as reduced investment income.
Without significant price increases, losses will deepen for many small to medium-sized insurers over the remainder of the year. Conversely, larger providers will scale up as the industry continues to consolidate, unlocking efficiencies. This will improve market stability in the next few years.
Economic growth supports premiums
Saudi Arabia’s economy continues to grow and diversify away from the hydrocarbon sector, supporting demand for insurance. The spread of compulsory insurance covers, rising demand for health and life coverage, and the country’s low insurance penetration (premiums as a share of GDP) also contribute to this growth. These factors drove a 7% average increase in listed primary insurers’ revenue in 1H2025. Reinsurance premiums also rose, aided by new regulations obliging local primary insurers to cede at least 30% of their risk to domestic reinsurers.
M&A will continue amid growing regulatory scrutiny. Saudi Arabia's insurance sector is witnessing accelerated consolidation, largely driven by tighter capital standards imposed by the Insurance Authority (IA), as well as higher operational costs. The regulator aims to introduce enhanced economic risk-based capital standards in the next few years, and has increased scrutiny of non-compliant firms. This is likely to exert pressure on smaller insurers, accelerating consolidation in the fragmented Saudi market.