The new insurance regulations in Saudi Arabia

In its eleventh issue of May 2004, Atlas Magazine dedicated an entire survey to the new law regulating the insurance business and outlined its general framework as well as its provisions.

Ongoing work

Since August 22, 2003, when the royal decree number 125 pertaining to the regulation of insurance was promulgated, the situation has not evolved significantly and the dossier sustained some delay as to the terms of implementation. For the sake of updated information, Atlas Magazine has deemed it wise to shed further light on the latest developments to the case.

Situation prior to the promulgation of the law

Before the adoption of the new regulation, the kingdom's insurance market was characterized by the presence of a sole company that is officially registered in Saudi Arabia: National Company for Cooperative Insurance (NCCI). All other companies were based either in Bahrain or in another country.

Hence the decision taken by the Saudi administration to authorize the official existence of insurance companies stands as a basic step and marks the true birth of a national market poised to witness further development.

Reminder of the insurance law's main provisions

The legal framework

In order to carry out an insurance activity, the companies are required to be registered in Saudi Arabia. The insurance companies have to operate according to cooperative principles. They are required to assume the status of public joint stock companies.


Used with permission from MicrosoftAll the companies are submitted to the obligation of a license. The license shall be granted by the Ministry of Commerce and Industry.
The granted licenses are published by royal decree following a Ministerial Council's resolution and the approval of the Ministry of Commerce and Industry.
A foreign insurance company is not authorized to set up a branch on the Saudi soil. In order to sell insurance products, banks are required to get a license.

Scope of activities

The companies are not authorized to carry out any activities other than those of insurance and reinsurance. Insurance companies are not authorized to invest in direct insurance brokerage companies. Reinsurance companies are not authorized to hold shares in reinsurance brokerage companies. However, direct insurance companies may hold interests in reinsurance brokerage companies.

Supervising authority: SAMA's role

Being the body entrusted with the implementation of the new regulation, the Saudi Arabian Monetary Agency (SAMA) is the supervising authority of the insurance sector. It stands as an interface between the companies and public authorities.

Its main tasks are :

  • To receive license applications and to submit them to the Ministry of Commerce and Industry for approval.
  • To assume technical control of insurance activities.
  • To deliver written permits required for the opening of new offices or branches inside or outside the kingdom.

In terms of rating, SAMA sets the maximum and minimum tariffs for each insurance class of business.


The amount of capital for an insurance company shall not be below 100 million SAR (26.6 million USD).

The amount of capital for a reinsurance company shall not be below 200 million SAR (53.2 million USD).

Each insurance and reinsurance company is required to deposit a guarantee in a local bank for the benefit of SAMA.

Terms pertaining to the liberation of the companies' share capital :

  • 10% within the three months following the issuing of the law,
  • 90% prior to the operations start.

The maximal shareholding participation for a foreign investor in a company's capital is set at 49%.

Minimum capital required for the practise of other insurance activities
Capital in SARCapital in USD
Insurance broker
3 000 000800 000
Insurance agent
 500 000133 000
150 00040 000
Loss Adjuster
500 000133 000
Management and settlement of losses
3 000 000800 000
150 00040 000

Administration and management of companies

The designation of members to the board of directors is submitted to SAMA's approval.

Both the Chairman and the General Manager of an insurance and reinsurance company are accountable to SAMA for any breach to the new regulation.

The general assembly of each company is required to appoint, on an annual basis, two auditors who are approved by the authorities. It shall also be in charge of determining their fees.

A foreign shareholder having less than 49% in stakes may be part of the company's technical management.

Distribution network

A Saudi insurance company may conclude agreements with third parties such as local agents and foreign consultants.

The performance of the activity of an insurance intermediary: broker, agent, surveyor can be allowed only within the framework of a registered company in accordance with the provisions of the new regulation.

However, professionals such as insurance actuaries and consultants may perform an activity as individuals.

An insurance agent can represent only one company. Nonetheless, this restrictive clause should be subject to amendment following a period of three years.


An insurance company or an intermediary must obtain a prior authorization from SAMA in order to cover Saudi risks outside the kingdom.

A licensed insurance company must deal first with local reinsurers before placing risks abroad.

Reinsurance treaties must be submitted for the approval of SAMA which may require possible amendments.

Mutual fund

The mutual fund belonging to the insurance companies can not be considered as a co-insurance body; it operates as a pool, which allows each member of the group to share risks underwritten by other members.


The recruitment of insurance professionals is submitted to qualification criteria controlled by SAMA.

All persons asked to conduct insurance operations with the public must be holders of a license delivered by SAMA.

To obtain this agreement, the candidates are required to meet the following conditions:

  • To be holder of a university degree (minimum) and have a five-year relevant insurance experience or have training in insurance approved by the Agency.
  • To pass a professional exam organised by SAMA.


SAMA has the right to proceed to an inspection of the records and books of the insurance and reinsurance companies. This inspection may be conducted by SAMA's own employees or by auditors appointed by it.


Insurance and reinsurance companies shall deduct at least 20% of their annual profits to be allotted to the legal reserves.

Disputes and sanctions

The disputes that may arise between insurers and insured shall be settled by one or several specialized committees set on the recommendations of the Ministry of Finance.

Any breach of the new regulations shall carry a fine penalty (not exceeding 1 million SAR = 266 600 USD) and a maximum of a four-year prison sentence or one sanction or the other.

The licensed insurance companies

So far and out of the 24 license applications handed to the Ministry of Commerce and Industry, 13 companies have been granted license. The combined capital of these companies amounts to 2.5 billion SAR (666.6 million USD).

Their applications have been forwarded by the Ministerial Council to SAMA in order to achieve last legal procedures.

Capital in SARCapital in USD
Gulf Insurance & Reinsurance Co. (Med Gulf)
600 millions160.0 millions
Bupa Arabia
400 millions106.6 millions
Saudi United Insurance Co.
200 millions53.2 millions
Al Alamya Insurance Co.
200 millions53.2 millions
United Cooperative Assurance
200 millions53.2 millions
Arabian Shield Insurance Co.
200 millions53.2 millions
Saudi Indian Insurance Co.
100 millions26.6 millions
Tokio Marine & Nichido
100 millions26.6 millions
Saudi Arabian Insurance Co.
100 millions26.6 millions
Axa Cooperative Insurance Co.
100 millions26.6 millions
SAAB Takaful
100 millions26.6 millions
Assurance Saudi Fransi
100 millions26.6 millions
Al Ahli Takaful Co.
100 millions26.6 millions

Companies awaiting licence

  • Al Rajhi Co. for Cooperative Insurance
  • Allied Cooperative Insurance Group
  • Malath Insurance Co.
  • Arabian Malaysian Takaful Co.
  • Gulf Union Cooperative Insurance Co.
  • Trade Union Insurance Co.
  • Saudi IAIC for Insurance
  • Sanad for Cooperative Insurance
  • Arabia Insurance Cooperative Co.
  • Al Ahlia Insurance
  • Al Sagr Co for Cooperative Insurance.

A highly-potential market

The market's current volume is estimated at 4 billion SAR (1.06 billion USD), and is distributed as follows:

  • 32% motor insurance
  • 22% health insurance
  • 17% property insurance
  • 29% others


In the light of the accreditation process of the insurance companies, the Saudi market is poised to reach an overall volume over 15 billion SAR (4 billion USD) for the next three years due namely to the high demands of the health and motor classes of business which would respectively amount to 6.3 billion SAR (1.68 billion USD) and 5 billion SAR (1.33 billion USD).

Per capita insurance expenditure should amount to 750 SAR (200 USD) a year, which is likely to raise insurance contribution in GDP by 3 to 5%.

The decision taken by the authorities restricting insurance companies' shareholding to 60% of the capital while opening the remaining 40% to the public is likely to boost the country's economic development, given the injection of insurance-generated resources on the financial market, according to some experts.

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