The Saudi insurance market requires consolidation
 King Abdullah Financial District, Riyadh © King Eliot, CC BY-SA 4.0 |
The Saudi insurance industry is in trouble.
The market is highly fragmented: Out of the 35 operating insurers, three generate nearly 53% of total turnover. The 10 smallest companies account for a market share below 5%.
In 2014, 10 insurance companies asked Capital Markets Authorities (CMA) for authorization to raise capital, which is indicative of a drastic deterioration in the companies’ shareholders’ equity.
Out of the 35 market players, 10 posted cumulative losses of 500 million SAR (133 million USD) in 2014. In 2013, 21 insurers sustained losses amounting to 1.65 billion SAR (440 million USD). Some insurers are too small to make profits. Their presence promotes strong competition but contributes to the deterioration of prices. The authorities are working to restore market profitability. SAMA has repeatedly announced its keenness on the consolidation of the sector.
Several factors hinder this process: differences between the valuations carried out by each party, the poor quality of portfolios, limitation of foreign investment and the refusal of the governing bodies of family companies to give up their domination.
