In its latest report on the insurance market in the Kingdom of Saudi Arabia, Standard & Poor’s Ratings Services says that insurance and reinsurance in the Kingdom have entered a new era of strength and opportunity in 2008, despite some inevitable short-term uncertainties during the recent transitional period from an unregulated to a regulated marketplace. “During the past three years, most of the 100 or so unregulated, offshore insurers that traditionally made up much of the Kingdom’s insurance market have ceased trading in Saudi Arabia,” said Standard & Poor’s credit analyst David Anthony in the report. “Those that wished to remain active in the Saudi market have had to comply with the new regulations by bringing their local operations onshore. The resulting, newly established Saudi companies had to be listed on the Riyadh Tadawul stock exchange and a majority of their equity had to be Saudi-owned. Insurers also had to adopt the authorities’ newly defined regulations on minimum capitalization, corporate governance, market conduct, and the employment of Saudi citizens.” Anthony said: “An additional aspect of the new regulations has been to force insurers to structure their operations to implicitly comply with Sharia law. This means operating along cooperative insurance lines, with separate shareholder and policyholder accounts.” For its part, Standard & Poor’s acknowledges the considerable commercial potential for insurers in the health care sector in Saudi Arabia, although the sector appears to be already well-served on a direct basis by the existing leading insurers, and by specialist health providers such as BUPA Arabia. Even those existing insurers that lack sufficient infrastructure to administer a large health book on their own often feel it necessary to offer the line as an accommodation to their corporate clients. They have almost invariably achieved this through the extensive use of third-party administrators, of which about half a dozen already operate in the Kingdom. “Standard & Poor’s believes that no insurer active in Saudi Arabia in 2008 can afford to ignore the health sector when the related premiums are rising toward half the total net premium in the whole market,” added Anthony. “Competition is likely to become intense, particularly for major and prestige group health accounts. For the moment, at least, the larger medical insurers are all still managing to achieve sound, but reducing, underwriting profits on the line.”
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