Saudi Arabia: Saudi Arabia’s insurance sector is preparing itself for a game-changing new regulatory body that is set to grow the market and encourage new players in line with the rapid pace of change taking place in the Kingdom.

In August, the Saudi Cabinet, chaired by Crown Prince Mohammed bin Salman, approved the establishment of a new unified and independent regulator for the insurance sector, the Insurance Authority.

Finance Minister Mohammed Al-Jadaan described the new measure as a pivotal and necessary one in the development of the Saudi financial sector — a major component of the Kingdom’s Vision 2030 agenda. The IA is designed to boost the role of the insurance sector in the Kingdom which in turn will grow and enhance the market for Saudi, regional and global businesses operating in the Kingdom.

“The Cabinet’s decision to establish the Saudi Insurance Authority underlines the Kingdom’s commitment to building and developing a world class insurance sector — one set apart by established best practices and international standards,” Adel Al-Eisa, media spokesperson for Insurance Companies in Saudi Arabia told Arab News. “The launch of the Authority marks the latest step taken by the Kingdom to regulate, supervise, control, support and enhance the Saudi insurance sector, and enhancing its effectiveness.”

The new entity will commence operations 90 days after the Cabinet resolution, which, while it has not yet been announced or published, authorities anticipate will be soon. 

Before the IA was set up, the responsibilities in regulating and supervising the insurance sector rested with the Central Bank of Saudi Arabia, also known as SAMA, and the Council of Health Insurance. Both entities will continue to function as regulators until the insurance-related competencies are fully transferred to IA by the end of the 90-day transition period.

IA will then have the existing insurance mandate vested in SAMA and CHI according to the transition plan. Several changes are anticipated. These include the unification of regulatory procedures for the insurance sector within IA, and the transfer of communication channels related to regulation and compliance in the insurance sector to IA.

According to SAMA, for the establishment of the IA, the current laws, regulations, rules and instructions issued by SAMA or CHI in the insurance sector will continue to be enforced and stay unchanged, until other overriding instructions are issued. This includes the current complaint handling processes of the Committee for Resolution of Insurance Disputes and Violations. The rights and responsibilities between the insurers, policyholders and beneficiaries will also remain unchanged.

The new IA serves to further provide impetus for the growth of the Saudi market, both domestically and internationally. 

“The establishment of the Saudi Insurance Authority will serve the greater purpose of enhancing the Kingdom’s insurance sector, bolstering local infrastructure and creating an advanced, thriving ecosystem that empowers both Saudi-based, regional and global businesses — and, of course, the people, communities and businesses they serve,” Al-Eisa told Arab News.

The Authority, he continued, will safeguard the industry by ensuring it meets global standards and is best placed to respond to the changes and challenges of a rapidly evolving global market.

“In doing so, the Authority will place an even greater onus on technical and digital development, aiding the industry’s transformation,” he emphasized.

Mustafa Melhem, group business development manager for insurance at Eastnets, says that the new authority will serve to enhance the development of the Saudi market for both local and global players.

“The importance of the IA for me or for insurance experts in the region is the same: it is one of the most important entities in the development of the insurance sector,” Melhem told Arab News. “There are a lot of gray areas in the insurance policies (benefits, terms, conditions, exclusion etc.), so an independent authority aids to raise better awareness about credible insurance products and most importantly is protecting the rights of the policyholders and beneficiaries.” 

Eastnets is a global leader in providing services to financial institutions, including insurance companies, aiding them to combat financial fraud and crime, and ensuring that they are compliant with new regulations.

This initiative represents an important step in building a strong and stable insurance market in the Kingdom. The Cabinet’s decision reflects the Kingdom’s commitment under Vision 2030 to support the developments of the insurance sector, a key pillar that supports all other economic activities and transformation programs in theKingdom.

“Crucially, the Authority aims to build and implement a comprehensive national strategy that will bolster the Kingdom’s insurance sector, modernizing its systems and regulations, accelerating digital transformation, attracting more national talent and investment,” said Al-Eisa.

Melhem also stressed that the aim of the Authority is to empower the Saudi insurance market in such a way that will lead to growth.

“Revenue will increase from the insurance sector by having a special entity focused on it,” he said. “Crucially, though, it is important to create local insurance talents and experts rather than just attract them from outside.” 

 This way, emphasizes Melhem, the Saudi insurance market can grow at home. Also, the IA will encourage mergers among small companies to strengthen the solvency of these companies. 

“A strong and stable insurance authority in the Kingdom will empower the local insurance market,” says Melhem. “And building partnerships and attracting the global reinsurance companies and re-insurance brokers to have their physical presence in the Saudi market, is one of the biggest benefits that can be achieved. “Also, in addition of protecting the policy holders and beneficiary rights, the IA will protect any third parties’ rights such as healthcare providers and other insurance providers.”

As Al-Eisa underlines: “We recognize that there is an urgent need for the Saudi insurance sector’s rules, regulations and policies to be outlined, implemented and overseen by one entity. This is paramount to growing and developing the Saudi insurance space.”

The Arab world has only a handful of reinsurance companies, which provide insurance to insurance companies. One is Saudi Re, a Saudi joint stock company founded in Riyadh in 2008 as the first reinsurance company established in the Kingdom.

Ultimately, he adds, the AI improves the Saudi Arabian insurance industry’s profile and standing on a global stage.

“It will provide a consistent, singular presence at global engagements and gatherings, such as the G20 and World Economic Forum,” added Al-Eisa.

The new authority is a chance to change the game, grow the Saudi insurance market and encourage new players all in line with the rapid pace of change taking place in the Kingdom.