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Saudi insurance sector to grow by 14 per cent over the next five years

Segment least affected by weaker oil prices, budget cuts and tightening liquidity

Arqaam Capital, the specialist emerging markets investment bank, has forecast that the Saudi insurance sector will maintain strong annual growth averages between 14 per cent and 17 per cent over the next five years.

The bank added that this is mainly driven by employing existing regulations that will stimulate the sector’s activity and enhance its performance.

Jaap Meijer, managing director and head of Equity Research at Arqaam Capital, said: “We expect the Saudi insurance sector to be the least affected by weaker oil prices, budget cuts and the tightening liquidity as the enforcement of existing regulations will propel motor and medical premiums growth at a rate of 15-25 per cent and 14-16 per cent respectively.”

He added: “We estimate that SAMA’s enforcement of mandatory medical and third-party liability (TPL) insurance would account for half of the growth during the next five years, adding 3.5 million medical policyholders and three million insured vehicles”.

Jaap concluded: “The fragmentation of the sector and the depletion of capital are two other major challenges with many small insurers falling short of securing the necessary scale to generate sufficient profits and to maintain top-line growth in line with the market, ceding market share to insurers with more robust solvency and better economies of scale. In our view, consolidation in the sector could be a viable option in the future.”