Saudi Arabia's insurance industry is making impressive strides, with policy take-up growing, premiums increasing, and the sector's regulatory body strengthening. The insurance sector is playing an increasingly significant role in Saudi Arabia's economy, with far greater funds at its disposal as more businesses and individuals recognize the importance of having coverage. Data issued earlier this year by the Saudi Arabian Monetary Agency (SAMA), the regulator of the Kingdom's financial services sector, including the insurance industry, estimated the total value of premiums written in 2010 rose by 12.4 percent over the previous year's performance - a rise from $3.9 billion to $4.3 billion. This strong growth helped push the insurance sector's contribution to GDP to the equivalent of 1 percent, according to SAMA. Last year was also good for the industry regarding payouts. SAMA estimated claims processed came to $1.25 billion, down from $1.54 billion in 2009, which allowed some firms to build up reserves. The impressive rate of growth seen in 2010 looks poised to continue, with Saudi Arabia's insurance sector believed to be one of the regional industry's prime movers. A report released in late August by Dubai-based investment bank Alpen Capital said premium growth across the GCC region would increase by some 20 percent a year between 2011 and 2015, lifting total premium values from the current $18bn to $37bn. Of that total, 75 percent would be concentrated in Saudi Arabia and the UAE. The report also found the Kingdom's insurance profile will diverge from other GCC member states, with a much stronger anticipated uptake in life insurance policies. The life insurance sector is expected to have a compounded annual growth rate (CAGR) of 48 percent, while the non-life sector will grow at a steadier CAGR of 14 percent, according to Alpen. Overall, the Saudi insurance sector is forecasted to expand by a CAGR of 18 percent by the middle of the decade, reaching a total value of $9.23 billion. SAMA's Vice-Governor, Abdulrahman Al Hamidy, said early this year that though much progress had been made in improving services and results, as well as boosting compliance with laws and regulations, more must be done to modernize the industry. A major step toward fulfilling the vice-governor's goals was unveiled at the end of July, when SAMA issued a draft of its audit committee regulations for insurance and reinsurance companies. Among key reforms in the new regulation is the creation of audit committees by all insurers and reinsurers operating in Saudi Arabia. Firms must also establish appropriate written controls and procedures to ensure and monitor compliance with mandatory requirements. The newly established audit committees will be required to submit reports and recommendations directly to SAMA, and companies must maintain adequate records to demonstrate regulation compliance. Each committee must also have a degree of independence, with three of its five members required to come from outside of the company's board. Members also cannot be appointed from among the company's executive managers, employees or consultants. SAMA's new regulation - which the industry can comment on until late September - is intended to strengthen transparency and accountability within the insurance sector and to put it on a more solid footing to build on recent successes.
