Independent authority to regulate Saudi Arabia’s insurance sector 
The Saudi Central Bank was given the responsibility of overseeing the insurance sector in Saudi Arabia in 2003. Since then, there has been significant growth in the number of insurance service providers, as well as the variety of products and services offered in the sector.
The insurance sector experienced substantial growth of 26.9 percent in 2022, which is a significant increase compared to the 8.4 percent growth observed in 2021.
In 2022, gross written premiums for the insurance sector reached $14.1 billion. Additionally, the penetration ratio of the sector to non-oil gross domestic product increased from 1.9 percent in 2021 to 2.1 percent in 2022.
The insurance sector reported a net income of $183 million in 2022, indicating a significant improvement compared to the loss of $12.5 million reported the previous year.
Despite the improved financial results posted by the insurance sector in 2022, there is still room for further improvement and robust performance in the Kingdom. It is worth noting that the growth in 2022 was primarily driven by only two insurance segments.
The health and motor insurance segments accounted for 79.1 percent of total GWP in 2022. The remaining 20.9 percent consisted of other insurance segments, including protection and savings, as well as marine insurance.
In 2022, the sector penetration ratio, which measures total insurance premiums relative to GDP, stood at 1.8 percent in the Kingdom. This figure is notably lower than the global average of 7 percent.
I believe that establishing an independent authority in the Kingdom will help overcome the fragmentation of management — which is divided between the Saudi Central Bank and the Council of Health Insurance — in the sector.
According to Cafemutual, Taiwan, South Africa, the US, and the UK recorded penetration ratios of 14.8, 12.2, 11.7 and 11.1, respectively, in 2021-2022.
In 2022, the insurance density ratio, which measures the ratio of premiums collected by insurance companies relative to the country’s population, stood at $417 in the Kingdom. This figure is lower than the global average of $874 in 2021-2022.
Recently, the Council of Ministers approved the establishment of the independent Insurance Authority. The main objective of the new regulator is to boost the efficiency of the insurance sector and increase its contribution to the Kingdom’s non-oil gross domestic product.
According to Ayman Al-Sayari, the governor of the Saudi Central Bank, the creation of an independent Insurance Authority reflects the Kingdom’s commitment to unlocking the full potential of the sector. The move aims to establish the insurance industry as a vital pillar of the national economy and to foster robust risk management systems.
The establishment of an independent Insurance Authority, tasked with regulating and supervising the insurance sector in the Kingdom, is expected to enhance the sector’s efficiency, increase its contribution to non-oil GDP and ensure adherence to the latest global trends in the industry, Al-Sayari added.
I believe that establishing an independent authority in the Kingdom will help overcome the fragmentation of management — which is divided between the Saudi Central Bank and the Council of Health Insurance — in the sector.
Additionally, the establishment of the independent Insurance Authority is expected to not only increase the efficiency of the insurance sector and its contribution to the non-oil GDP of the Kingdom, but also improve financial indicators such as penetration and density ratios to align with international standards.
Lastly, I believe that it will enhance the quality of insurance products and services, protect the rights of customers and strengthen the financial positions of insurance companies. This will be achieved through improvements in capitalization, the creation of international competition and the development of specialized technical expertise among national professionals.
• Talat Zaki Hafiz is an economist and financial analyst. X (formerly known as Twitter): @TalatHafiz
