Fitch: New Regulation to Drive Consolidation in Saudi Arabian Insurance Sector 

Link to Fitch Ratings' Report(s): Saudi Arabian Insurance: 2018 Dashboard

https://www.fitchratings.com/site/re/10038308

Fitch Ratings says in a new 'dashboard' report that it expects Saudi Arabia's new solvency framework introduced in 2018 to drive consolidation among the country's smaller insurance companies as minimum capital requirements increase. Foreign participation in the sector is also likely to grow, as the Saudi Arabian Monetary Authority appears to be actively encouraging foreign investment.

The Saudi Arabian insurance market is highly concentrated in its two main product lines of motor and health insurance, due to their compulsory nature. Performance in health insurance has deteriorated, with the loss ratio reaching 88% in 2017 (2016: 78%), driven by increasing claims costs, which we expect to increase further following the implementation of value added tax (VAT) on consultation fees, diagnostic and other clinical procedures.

Total motor insurance gross written premium (GWP) decreased 8% in 2017, reflecting slowing car sales. Fitch expects motor GWP to recover and grow again, as approximately 55% of vehicles in Saudi Arabia remain uninsured, despite motor cover being compulsory. The decision to allow women to drive from 2018 is also likely to lead to GWP growth.

Insurance penetration in Saudi Arabia remains low, at around 1.4% in 2017 (2016: 1.5%), with GWP falling to SAR36.5 billion in 2017 (2016: SAR36.9 billion) as real GDP contracted 0.7%. Fitch expects Saudi Arabia's growth to pick up to 1.8% in 2018 and 1.9% in 2019.

The report 'Saudi Arabian Insurance Dashboard 2018' is available on www.fitchratings.com or by clicking the link above.