The insurance industry in Saudi Arabia has experienced a remarkable 25 percent surge in profits during the first half of 2024, with earnings reaching SR2.2 billion ($585 million) in comparison to the previous year’s figures.
According to data sourced from financial markets, Bupa Arabia has taken the lead in the sector, garnering 35 percent of the total net income for the period, amounting to SR758.2 million in profits.
This signifies a 35.4 percent jump from the prior year. The disclosed statistics represent adjusted net income, which factors out one-time, non-operational, or exceptional items to give a more accurate representation of operational success.
Coming in second, Tawuniya, also known as the Company for Cooperative Insurance, reported earnings of SR656.5 million, contributing 30 percent to the sector’s overall income. This represents a notable 105 percent upswing in earnings, marking the most significant yearly growth among the sector’s major entities.
The earnings boost underscores the industry’s robust performance despite the broader economic headwinds. The growth is ascribed to strategic investments and expansions within the sector, solidifying Saudi Arabia’s position as a pivotal player in the regional insurance landscape.
Al Rajhi Co. accounted for a 9 percent share of the earnings, totaling SR201.1 million, indicating a 47 percent increase. Meanwhile, Saudi Reinsurance Co. held a modest 3 percent share, with earnings of SR75.3 million, reflecting a 6 percent annual rise.
For the second quarter alone, the sector’s earnings hit SR1.29 billion, marking a 10 percent increase from the corresponding quarter in the previous year. Tawuniya led the quarter with 36 percent of net income, closely followed by Bupa Arabia at 31 percent.
An August analysis by S&P Global accentuates Saudi Arabia’s central role in the burgeoning Islamic insurance market within the Gulf Cooperation Council, with revenues expected to surpass the $20 billion mark in 2024. The anticipation of a 15 to 20 percent growth in the subsequent year is largely spurred by Saudi Arabia’s initiatives.
The same analysis underscores efforts by Saudi authorities to broaden insurance coverage through strategies like insuring previously uninsured vehicles and introducing mandatory medical insurance rules. These measures are predicted to heighten insurance demand and premium income.
While noting stable credit ratings for insurers in the GCC, S&P Global warned that geopolitical unrest and enhanced competition might pose risks. They projected continued mergers among smaller insurers in Saudi Arabia and the UAE due to competitive strain and regulatory requirements.
Despite the overall increase in earnings, it was reported that 14 out of 25 listed insurers in Saudi Arabia experienced declines in underwriting results and profits, highlighting the increasing competition within the market.
Health insurance
The Insurance Authority’s Saudi Insurance Market report for 2023 shows that health insurance is the largest sector, having grown by 21.4 percent. It contributed to 59 percent of the total gross written premiums, which amounted to SR38.63 billion, with large enterprises representing 70.1 percent of this market.
The net written premiums, which signify the portion retained by insurers after reinsurance, reached SR37.82 billion, making up 67.2 percent of total NWP in 2023.
Bupa Arabia’s report from that same year identifies the rise in insured individuals and the effects of medical inflation as two main drivers of health insurance growth. As the number of insured people increases, so does the demand for healthcare, thereby expanding the sector.
Medical inflation, propelled by the escalating costs of healthcare services, treatments, drugs, and medical apparatus, puts pressure on the sector. Insurance companies are adjusting premiums to cope with these increased costs, which in turn propels the health insurance market’s expansion in the Kingdom.
In July, the Council of Health Insurance and the Saudi Insurance Authority mandated compulsory insurance for domestic workers in households with over four members. This directive requires employers to fill out a medical disclosure form, get approval from an insurance firm, and cover all domestic workers. The aim is to guarantee comprehensive healthcare, enhance coverage sustainability, and stimulate innovation in health insurance products.
The coverage includes primary care, public health services, emergency cases, and hospitalization with no deductibles, as well as unrestricted clinic visits, such as for vaccinations and exams.
Sector forecasts
Projections for Saudi Arabia’s insurance industry indicate a compound annual growth rate of 5.2 percent through 2028, potentially enlarging the market size to SR83.7 billion, up from SR68.3 billion in 2024. This anticipated growth is chiefly driven by the health and motor insurance segments, expected to constitute 86 percent of the total gross written premiums.
Even though the general insurance sector saw significant growth in 2022 and 2023, with 27.7 percent and 22.8 percent increases respectively, growth is expected to level off post-2024.
Favorable regulatory changes, an uptick in specialized healthcare demand, and rising vehicle sales are benefiting health and motor insurance.
In 2023, personal accident and health insurance dominated the market, capturing a 63.2 percent share of gross written premiums. This segment is predicted to grow at a CAGR of 6.3 percent through 2028, driven by heightened health consciousness, an increase in private health beneficiaries, and the government’s healthcare transformation initiatives under Vision 2030.
Motor insurance, which held a 23.1 percent market share in 2023, buoyed by a robust 41.4 percent growth that year, is backed by increasing vehicle sales and a burgeoning electric vehicle market in the Kingdom. The segment is anticipated to maintain its momentum with a projected CAGR of 5 percent through 2028, thanks to regulatory policies like the comprehensive motor insurance policy introduced by the Saudi Central Bank.
Property insurance, accounting for 9.1 percent of gross written premiums in 2023, is also on a growth trajectory, with an expected CAGR of 5.9 percent. This rise is propelled by ongoing construction projects integral to Vision 2030, such as NEOM and various residential developments.
Other insurance lines, including marine, aviation, transit, and liability insurance, represented 4.5 percent of gross written premiums in 2023. The Kingdom’s diversification efforts are likely to create ample opportunities for insurance companies across various sectors in the forthcoming years.
The establishment of the Saudi Insurance Authority in November 2023 is a testament to the Kingdom’s dedication to fostering a resilient insurance sector that aligns with Vision 2030 objectives. This regulatory body is set to boost the sector’s efficiency and stability, supporting local infrastructure and nurturing a dynamic business ecosystem.