RIYADH: The Saudi insurance market is ripe for mergers and acquisitions but these await a nod from the central bank, the chief executive of the Kingdom's biggest insurance firm Tawuniya said. Ali Al-Subaihin also told the Reuters Middle East Investment Summit that Tawuniya does not plan to tap the debt market after Standard & Poor's Ratings Services revised its outlook on the firm to stable from negative earlier this week. With the lowest penetration rate in the Middle East, Saudi Arabia's insurance sector is a sleeping giant in the Arab world's largest economy and most populous country in the oil-exporting Gulf Arab region. The sector's potential is shackled mainly by the predominant view in the Islamic kingdom that buying an insurance policy would indicate a lack of faith and therefore contradicts Shariah. Plans to make health insurance mandatory for private sector employees and more interest in motor insurance has led to a shift in mentality. Saudi authorities - keen to create jobs for a rapidly-growing population, cut reliance on oil receipts and limit state aid to firms and individuals after unpredictable events - have licensed some 30 new insurance firms. The pace of licensing may have been too abrupt to allow the new players to become quickly profitable, industry analysts say, forcing many to consider mergers or become acquisition targets. But that needs encouragement from the Saudi central bank, Tawuniya's Subaihin said. “Consolidation is bound to happen, if it does not happen this year, it will happen next year or the year after. The catalyst would be for the regulator to intervene and suggest that some firms merge or for some firms to seek the regulator's approval to merge,” Subaihin said. “The sector is ripe for consolidation... it does not look like the regulator will license more insurance firms. For us, we will consider any viable opportunity, the only problem is that we have yet to find the right opportunity,” he added. The head of the Saudi central bank's insurance sector could not immediately be reached for a comment. Insurance penetration in Saudi Arabia, while rising, is still far below that in the United Arab Emirates.
