LONDON - Monday, May 12th 2014
Saudi Arabia’s insurance market remains one of the main markets within the Gulf Cooperation Council (GCC), with premiums expected to surpass the United Arab Emirates over the next five years, according to a new report from A.M. Best. The insurance market saw premiums expand significantly in 2013, and although growth is expected to slow in 2014, it remains above historical levels.
According to the report, "Competition, Top-line Growth Dampen Saudi Insurers’ 2013 Performance," while growth in recent years has been mainly driven by compulsory motor and medical, the Saudi market saw a substantial loss-making year in 2013, stemming mainly from inadequate pricing and material reserve deficiencies in the motor and medical portfolios. Most of the market’s premium growth comes from rate increases in these lines of business, with rates likely to continue rising, as actuaries will need to review technical pricing over the coming years.
Mahesh Mistry, director, analytics, said: “The challenge that the Saudi insurance market has faced in recent years has strained not just underwriting performance but also capital adequacy, which has been in decline in recent years, with net underwriting leverage substantially increasing. Many insurers have seen a significant erosion of capital and surplus over the past two years. The market overall needs a capital injection to replenish capital levels, while the process of infusing capital needs to be accelerated.”
A.M. Best expects that strains on capital adequacy and profitability will likely continue for Saudi insurers in 2014. Many insurers are still below minimum capital requirements. Continued pressure on operating performance will likely cause a further strain on risk-adjusted capitalisation. Solvency margins that are under strain may encourage reinsurers to offer capital relief programmes.
The uncertainties over the effects of the Saudi Arabian Monetary Agency’s (SAMA) 2013 actuarial review of the technical pricing of both medical and motor insurance have several implications. Vasilis Katsipis, general manager, market development – MENA, South & Central Asia, added: “A.M. Best believes that underperforming companies may become less competitive in the market as their franchises may be affected, while the top performers in these business lines may have greater flexibility in pricing.”
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=224126.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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Contacts
A.M. Best
Mahesh Mistry, +(44) 20 7397 0325
Director, Analytics
mahesh.mistry@ambest.com
A.M. Best - MENA, South & Central Asia
Vasilis Katsipis, +(971) 4375 2782
General Manager, Market Development
vasilis.katsipis@ambest.com
Rachelle Morrow, +1-908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
Jim Peavy, +1-908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
Permalink: http://me-newswire.net/news/10954/en
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