Saudi Insurance Industry Moving Towards Consolidation

 

According to the head of Saudi Arabia’s largest insurance company ‘Tawuniya’, the Saudi insurance sector has entered the phase of consolidation since new players squeeze into already crowded market, as reported by MAKTOOB.

 

The Saudi Central Bank has given green signal to as many as 30 new insurance companies over the last three years to make their foothold and intensify competition in the industry. This has made Saudi Arabia one the most crowded insurance market in the world.

 

Despite the entrance of such large number of players, Saudi Arabia comes under some of the least-insured countries worldwide partly due to orthodox thinking of Muslims who believe that buying insurance cover would desist them from their religion.

 

A leading market research firm RNCOS has also said in its report “Saudi Arabia Insurance Market to 2012” that Saudi Arabia is a lucrative market for insurers to expand their business and make huge profits by exploiting the prevailing situation through massive campaigns about the benefits of insurance. Protection & savings and health insurance have made healthy progress in the country, with health insurance accounted for nearly 44% of the total market at the end of 2008.

 

Besides, long-term growth of the insurance market partly depends on the growth of protection and saving insurance, said the report. The protection and saving insurance premium are projected to grow at a CAGR of around 55% during 2009-2013.

Dr Mohammad Al Jasser, Governor of the Saudi Arabian Monetary Agency (Sama) said, “Most insurance companies in the kingdom are scoring excellent performance results as a service sector even though some of them have posted losses,” as reported by GULFNEWS on October 12, 2009.

 

"I do not rule out the merger of some of the insurance companies over the coming years," he said.

 

According to a Research Analyst at RNCOS, “While the global economic crisis has had a severe impact on other industrial sectors, the insurance industry maintained healthy annual growth rate on account of compulsory insurance lines. The concept of mergers and acquisitions is trying to make stronghold in the market. Many insurance companies are presently wriggling out all their resources and channels to harness maximum capital for proving themselves in the market but this strategy is not the right solution to the problem when consider keeping long term growth in mind. Hence, they need to transform their expansion and marketing approach to attractive, innovative and customized solutions that encourage people to invest in insurance policies.”