Saudi insurance sector grows 22% with health as primary driver

Saudi insurance firms saw a 22 percent increase in gross written premiums, totaling SR48.96 billion ($13.05 billion) for the nine months ending in September 2023, surpassing the previous year’s corresponding period.

The latest data from the Saudi Central Bank highlighted health insurance as the primary driver, constituting 61 percent of premiums and witnessing a 25 percent increase.

Health insurance in Saudi Arabia, totaling SR29.92 billion in GWP, experienced substantial growth, propelled by mandatory medical coverage for private sector employees and dependents. By the end of 2022, beneficiaries had increased by 18 percent to 11.5 million.

The sector aims to extend coverage to 25 million beneficiaries by 2030, as reported earlier this month by the Council of Health Insurance.

In its second quarter 2023 report, Bupa Arabia identified medical inflation as the second significant factor, alongside the growing number of insured individuals, driving the rise in insurance premiums in the sector. This encompasses increasing costs of medical goods and services, including hospital services, physician fees, medications, and other healthcare-related expenses over time.

Therefore, an independent regulatory body was established in August last year to mitigate the adverse effects of rising medical inflation. Its focus is on ensuring fair practices, implementing cost controls within the private insurance sector, and striking a balance between the interests of policyholders and the sustainability of private insurance companies.

Expected to reach SR61 billion in 2030, health insurance is likely to contribute approximately 2 percent to the gross domestic product. The council introduced the National Platform for Health and Insurance Exchange Services, aiming to enhance service quality, streamline claims procedures, and facilitate electronic integration for financial transactions between insurers and healthcare providers.

Sectors with soaring GWP

Motor insurance witnessed a 45 percent growth, reaching SR10.71 billion, making it the second-largest contributor to overall insurance premium growth. Despite constituting 22 percent of total premiums, this segment exhibited the highest growth rate in the period.

In October, the central bank introduced the Amended Comprehensive Motor Insurance Rules draft, targeting an expansion of insurance coverage to include relatives, private drivers, and sponsorees of the insured.

The amendment restricts coverage to individual clients, providing corporate clients greater flexibility to customize insurance coverage and benefits according to their specific needs.

The draft amendment was published on a public platform for all stakeholders to offer their views and comments.

Engineering insurance, a specialized form tailored to construction, engineering projects, and heavy machinery operations, exhibited the second-highest growth in GWP at 35 percent, totaling SR1.67 billion.

Saudi Arabia has assumed a leading position in the Middle East and North Africa construction market, representing 67 percent of the total project value in the first half of 2023, according to the global property consultant JLL.

In its report, JLL noted that the MENA region awarded projects worth $101 billion in the first six months of the year, with Saudi Arabia contributing approximately $44 billion.

The report also projected a 4 percent annual average growth rate for the Kingdom’s construction market between 2024 and 2027, driven by the Vision 2030 plan.

Sectors facing GWP decline

Energy insurance experienced a 31 percent decline in GWP during this period, reaching SR984.5 million.

This decline can be attributed to reduced production in the energy sector, following voluntary output production cuts. This strategy is part of the policy adopted by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, aimed at stabilizing global crude markets.

Protection and safety insurance, or life insurance, witnessed a 4.24 percent decline in GWP during this period, reaching SR1.5 billion.

Despite a moderate annual decline in the first nine months of 2023, this segment experienced significant annual growth from 2019 to 2022, particularly with the introduction of Shariah-compliant products.

For instance, Al Rajhi Takaful offers Shariah-compliant solutions fully aligned with the Kingdom’s 2030 Vision. Their life insurance provides protection and savings, aiming to alleviate financial burdens for clients and their families. This is achieved by helping them be better prepared for sudden events and achieve long-term financial goals, with a frequently paid premium that is invested in funds after deducting administrative fees.

According to Fitch Ratings’ 2022 report, the Saudi insurance market views life insurance as a minor player, with growth is limited by robust social security measures for the local population. Moreover, non-Saudi employees have the option to acquire life insurance from neighboring countries, further restricting expansion in this sector.