Saudi insurers struggle despite rise in motor, medical tariffs

New S&P report says many of country's 32 insurers have posted disappointing results in H1
Saudi insurers struggle despite rise in motor, medical tariffs
Saudi money, Saudi currency, Saudi economy, Saudi finance, GCC currencies
By Staff writer
Tue 27 Sep 2016 07:10 PM

Saudi insurers are reporting disappointing results despite a rise in tariffs for the sector's main lines such as motor and compulsory medical insurance, according to ratings agency Standard & Poor's.

The agency said in a new research note that conditions are favourable for the 32 currently active insurers in Saudi Arabia.

The market is large, business is growing, regulation is generally supportive, new controls are helping reduce the number of large fires, and reinsurance protection is cheap, said S&P.

But it added that a surprising number of insurers are still reporting disappointing or even outright negative results in their 2016 half-year accounts.

"Across the sector as a whole, only some 20 companies appear to be achieving a reasonably satisfactory performance," said S&P Global Ratings analyst David Anthony. "Several companies can claim to be still-maturing start-ups not yet generating sufficient business volumes relative to high fixed costs. But overall, insurance in Saudi Arabia is clearly not without its problems."

S&P said many of the issues appear to be company-specific including failure of internal operations and controls, excessive costs, inadequate distribution, undifferentiated products and services, or insufficient margins on highly competitive commodity lines of business.

The agency added that there may be more change to come for the sector, including the proposal that the insurer of an "at fault" motorist assume the expenses related to any accident victim's medical costs.

"Although there is nothing inherently problematic with this proposal, which increases the role and value of insurance, the additional burden of loss and loss adjustment expenses could push up motor insurance premiums by around a third," said Mr. Anthony.

"This may require substantial additional reserving if the new measure is applied retrospectively, to the further possible detriment of current earnings."

For all the latest GCC news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.