The Saudi insurance market is projected to grow by 15 percent per annum in total volume of gross premiums written (GPW) across the sector, driven primarily by demand from the Kingdom’s young population, especially for motor and medical insurance, Standard & Poor’s Rating Services said in its recent report titled “Cooperative & Takaful Insurance in Saudi Arabia in 2012”.
Author of the report David Anthony said “the sector constitutes an already large and still expanding market in a country, which in many ways dominates the region. Basic drivers of insurable activity in the Kingdom are state-funded infrastructure spending which fuels the commercial and industrial sectors and, on the retail side, the insurance requirement of Saudi baby-boomers from the 1980s and 1990s who are now acquiring possessions – most notably cars – and setting up their own households as they come of age.”
However, perhaps the most important key driver of insurance in the Kingdom, as in many countries, is compulsion through government policy and legislation such as compulsory health insurance for expatriate workers and motor third party liability insurance (ruksha) for all drivers.
Medical insurance in fact accounts for 60 percent of the Saudi insurance market, followed by motor insurance, which accounts for 20 percent of the market.
Besides, the adoption earlier this month of the Saudi Arabian Mortgage Law by the Council of Ministers will inevitably result in a massive new boost for the Saudi insurance market, especially for mortgage takaful.
No mortgage finance provider would finance a house without the requisite insurance – building and contents, for instance. It is not clear whether mortgage law allows this or whether this comes under the Cooperative Insurance Companies Control Law of the Kingdom.
The Kingdom a few years ago did introduce a the Cooperative Insurance Law which is based on the concept of Ta’awuni (mutuality or cooperativeness). Not surprisingly Islamic banks such as Bank Al Jazira established dedicated Takaful Ta’awuni operations for general (motor and fire) and family (life) takaful.
The Saudi Gazette
