Saudi insurance sector grew 2.3% in 2020, ‘notable’ increase for energy and accident classes

Insurance premiums in Saudi Arabia grew by 2.3% in 2020 to 38.78 billion riyals ($10.34 billion) with a “notable” increase for the energy and accident classes, according to the central bank’s annual sector report released on May 6.

Health insurance is still the largest line of business, growing at 1.6%. Its contribution to total gross written premiums was 58.9%.

General insurance contribution to total gross written premiums was almost flat, reaching 37.9% from 37.7% in 2019.

The energy and accident liability classes showed “notable” growth, said the central bank, increasing from 1.3% penetration rate in 2019 to 1.5% last year.  

The overall insurance sector’s profitability improved, with net profit after zakat and tax increasing by 61.6% to 1.39 billion riyals.

Saudi Arabia’s ratio of insurance premiums to GDP nudged up to 1.48% from 1.28% in 2019.

The central bank pointed out that from 2016 to 2020, the compound annual growth rate for insurance penetration was -0.13%.

Saudi Arabia’s insurance market is consolidating with mergers and acquisitions to strengthen their financial positions. The sector was identified as a key driver of the country’s Financial Sector Development Program to achieve the objectives of Saudi Vision 2030, the blueprint to diversify the Kingdom away from heavy reliance on hydrocarbons.

There were 30 insurance companies in 2020, with the top eight generating 75.8% of the market’s gross written premiums, according to the central bank.

The first of the sector’s mergers happened in 2020, between Walaa and Metlife-AIG-ANB Cooperative Insurance Company, followed by Gulf Union and Alahlia Cooperative Insurance.

There will be more mergers this year. A binding merger agreement was signed last year between Aljazira Takaful and Solidarity, and Enaya and Amanah Insurance inked an understanding for their potential merger.

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