KSA woos foreign investors
The Kingdom of Saudi Arabia has published draft rules for foreign insurers and reinsurers wanting to establish branches in the kingdom, in the latest attempt by the government to woo international investment. SAMA has published Draft Rules of Licensing and Operation of Branches of Foreign Insurance and/or Reinsurance Companies in Saudi Arabia for public and stakeholder consultation, in order to improve transparency and public involvement. This step comes in line with the importance of insurance sector in strengthening the national economy and the economic development the Kingdom is witnessing, under Vision 2030.
Currently, there are no foreign branches of foreign insurers in the kingdom, with such companies instead having to establish fully capitalised subsidiaries or own a limited share of local insurance businesses.
However, the draft did not specify whether foreign insurers setting up branches would be required to have a local partner.
Until now, the central bank, which regulates the insurance industry, has closely controlled the number of licences in the market, with the regulator planning tougher rules for existing insurers as part of a drive to create a smaller number of stronger market players.
At present, there are more than 30 insurance firms in operation serving a population in excess of 30 million people. But industry insurance sources said allowing more foreign entrants would help to boost competitiveness.
The insurance sector has come under pressure after the economy slipped into recession last year, with health insurance suffering in particular as expatriates have left the kingdom and hospital costs have risen, according to a Reuters report. The economy should return to growth this year, but industry margins remain under pressure. S&P recently brought out a report in this regard.
The draft rules made clear that licences from the central bank for specific insurance lines would be dependent on foreign applicants having approval from regulators in their home countries for the same activities for at least the past five years.
They also specified that in order to open a branch, insurers would have to place a deposit, ranging from SAR60 million (USD16 million) for the highest-rated insurers to SAR200 million for the lowest, in a local bank. The deposit requirement was higher for reinsurers.
