Adoption of the regulations for licensing insurance underwriting activity
The Saudi Arabian Insurance Authority (SAI) has announced a new strategic step aimed at reshaping the local insurance sector, officially adopting the licensing requirements for underwriting . This move comes as part of ongoing efforts to develop the regulatory and legislative frameworks for the insurance sector, enhance professional practices, and support financial market stability while raising the level of governance and transparency.
General context and historical background of the insurance sector
The Saudi Insurance Authority was recently established as the sole independent regulatory body responsible for organizing and developing the insurance sector in the Kingdom, a role previously shared between the Saudi Central Bank (SAMA) and the Council of Cooperative Health Insurance. Since its inception, the Authority has been working to address long-standing market challenges, such as price volatility and weak risk management practices by some entities. Regulating insurance underwriting is a crucial step, as this activity is the lifeblood of any insurance company, involving the assessment of insured risks, setting coverage terms, and determining appropriate premiums to ensure pricing discipline.
Key requirements for engaging in insurance underwriting activities
The new regulations included a set of strict requirements to ensure that only strong and qualified entities enter the market, most notably:
- Obtain a prior official license from the Insurance Authority before engaging in the activity.
- The company's headquarters must be located within the territory of the Kingdom of Saudi Arabia.
- The paid-up capital must not be less than one million Saudi Riyals.
- Providing a professional liability insurance policy with a coverage amount of no less than 3 million riyals, to protect clients from any negligence.
- Attracting professional talent and specialized technical expertise in the field of underwriting.
- Full commitment to governance, compliance and risk management requirements, with a clear business plan and organizational structure.
The importance of the event and its expected impact (locally, regionally, and internationally)
At the local level, this regulation will create a healthy competitive environment, positively impacting the quality of services provided to end users. It will also contribute to the localization of specialized jobs in the financial sector, particularly in specialized fields such as actuaries and risk assessors, which aligns directly with the objectives of the Financial Sector Development Program within Saudi Vision 2030.
At the regional level: This decision enhances the Kingdom’s position as the largest and most promising insurance market in the Middle East region, making it a model to be emulated in financial and regulatory regulation among the Gulf Cooperation Council countries.
At the international level: By requiring companies to be headquartered in the Kingdom and to implement global governance standards, the Saudi market will become more attractive to foreign investment. This decision will also encourage global insurance management agencies (MGAs) to establish a direct presence in Riyadh, supporting the national program to attract regional headquarters for international companies.
Clear procedures and sustainable quality of services
The Authority clarified that the regulations include transparent procedures for submitting license applications, encompassing the review of regulatory documents, business plans, and financial studies. It affirmed its complete readiness to receive license applications within the specified timeframes. This comprehensive regulation will not only regulate pricing but will also serve as a cornerstone in building a thriving and sustainable insurance sector capable of supporting the Kingdom's overall economic growth.
