Competition intensifies in Saudi’s surging insurance industry

In recent years, Saudi Arabia has been building an insurance industry from scratch. In the process, the country has generated home-grown companies and attracted international giants such as Bupa to help cater to rising demand. 

So far, the expansion of insurance in the Kingdom has been dizzying. According to Saudi Arabia’s central bank (SAMA), in 2022 the number of gross written premiums (GWP) increased by 26.9 per cent compared to 2021 as the insurance sector contributed 2.1 per cent to the non-oil GDP of the country.

This surging growth is expected to continue. A recent report by S&P Global indicates that the Saudi insurance market grew by 23 per cent in 2023. The same report expects the sector to grow by 15-20 per cent in 2024 and produce revenues greater than $20bn.

Such impressive figures as these have turned Saudi Arabia’s insurance market into “the main driver of topline growth in the GCC (Gulf Cooperation Council) region”, according to S&P Global. 

Another report by Global Data, a UK-based company specialising in market intelligence, forecasts that the Saudi insurance industry will grow at a slightly more modest 8.1 per cent in 2024. However, it expects a compound annual growth rate of 5.2 per cent over the next four years. According to Global Data, the total value of GWP in the industry is set to increase from $18.2bn in 2024 to $22.3bn between 2024-2028.

The growth of the Saudi insurance market has been driven in part by government policy. Notably, the Saudi government has been attempting to boost coverage for motor and health insurance. Indeed, health and motor insurance accounted for 86 per cent of total general insurance GWP in 2023, according to Global Data. Within this, personal accident and health insurance accounted for 63.2 per cent of GWP and motor insurance accounted for 25.5 per cent of GWP.

The Saudi government’s efforts have been spearheaded by a new Insurance Authority (IA), which began acting as the government’s authorised regulator for the industry in November 2023.

The Insurance Authority has issued the Saudi Insurance Market Report for Year 2023 which highlights the insurance sector’s performance and contribution to the Kingdom’s GDP. The report further highlights significant increase in insurance operations income, with net profit reaching SAR 3.2bn in 2023 compared to a net profit of SAR 244m in 2022.

Tawuniya is the largest insurer in Saudi Arabia, based on gross written premiums (GWP), and recorded a 29 per cent increase in GWP in 2023 to SAR18.5bn on considerable growth in motor and medical insurance lines, according to Fitch.

In 2023, Bupa Arabia achieved GWP of SR 16.7bn, up 20 per cent versus 2022, with total revenue of SAR15.9bn, a growth of 23 per cent versus 2022.

Bupa Arabia claimed to have the biggest market share of the Kingdom’s total insurance sector, with 28 per cent in 2023¹, while Saudi company Tawuniya was close behind at 27 per cent, according to its annual report.²

Analysis of the sector by Arab News indicates that Bupa Arabia captured 35 per cent of total net income in the Saudi insurance sector in the first half of 2024 while Tawuniya hauled in 30 per cent of the sector’s net income. Meanwhile, Al Rajhi capital earned nine per cent of total net income in the sector. 

The successful take-off of insurance serves to demonstrate one of the features of the Saudi market that is most exciting for international investors – it contains vast areas of untapped potential. The Saudi government’s desire to open up the country’s economy and stimulate new industries has opened up the possibility of creating entirely new industries, sectors and services where none previously existed. 

Insurance is one such example of untapped potential, alongside areas such as fintech, cloud computing, clean energy, education and sports. 

Yet with great potential comes great competition. As growth continues to surge in Saudi Arabia’s young insurance industry, the contest between companies is also intensifying.

S&P Global notes that while the insurance industry as a whole experienced a 25 per cent increase in earnings during the first half of 2024, profits were not shared widely across the industry. Instead, fourteen out of the Kingdom’s 25 listed insurance companies reported a decline in underwriting results and profits.

The ratings agency attributes this decline to increasing competition in the Saudi insurance market, as smaller insurers struggle to meet new minimum capital requirements. 

According to S&P Global, roughly one-fifth of Islamic insurance companies in Saudi Arabia have merged in recent years, compared to one-third in the United Arab Emirates.

At the end of July 2024, Medgulf, the Kingdom’s fourth largest insurance company by 2023 turnover, signed a memorandum of understanding to seek a potential merger with the Buruj Cooperative Insurance Company. 

Competitive pressures and market consolidation will ultimately be good for consumers if they improve the efficiency of the market and keep premia low. 

Overall, the outlook for Saudi insurance is positive and the industry looks likely to continue expanding.  

Over the summer, the Saudi government extended health insurance coverage further. In July 2024, the IA and the Saudi Council of Health Insurance (CHI) began to implement a new policy requiring mandatory health insurance for the country’s domestic workers employed by households with more than four staff.

This measure could have major implications for the insurance market: according to data from GASTAT, there were a total of 3,836,513 domestic workers in the Kingdom at the end of 2023.

Last year, the Saudi Arabian Ministry of Human Resources and Social Development defined thirteen categories of domestic workers, which included occupations as various as housekeepers, personal care workers, support workers and house guards.

¹ Bupa Arabia’s 2023 Annual Report.

² Tawuniya’s 2023 Annual Report.