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InsuranceLong term growth insuredThe insurance sector in KSA, which has the largest population in the GCC, has undergone asea change in the past few years. KSA’s insurance sector emerged stronger on the back ofeconomic growth, increased market liberalization, favorable demographics, and a shift inregulatory patterns. According to Saudi Arabian Monetary Agency (SAMA)’s survey 2006–07report , the Saudi insurance market registered robust growth of 24.0% YoY in 2007, with grosswritten premium increasing from SR6.9bn in 2006 to SR8.6bn in 2007. KSA was the secondlargest insurance market in total premium in the GCC in 2007.In June 2008, 42 insurance companies operated in the Saudi market, 21 of which were fullylicensed to operate in the Kingdom. In addition, eight have applied to the Ministry of Commerceand Industry for licenses. Increasing liberalization and implementation of positive regulatorychanges have led to a marked improvement in the investment climate in KSA’s insurance sectorof late.Low insurance penetration andlow density relative to regionalmarkets indicate future growthpotentialWe believe the insurance sector in KSA is promising in the long term, given that insurancepenetration rates are very low and the sector is at a nascent stage. Although, insurancepenetration in KSA increased from 0.53% in 2006 to 0.61% in 2007, it remained one of the mostunder-penetrated markets in the GCC in 2007. The average insurance penetration level in theGCC (excluding Bahrain) in 2007 was 1.02. Insurance density (gross written premium percapita) in KSA was also the lowest in the GCC (excluding Bahrain).Exhibit 102: Insurance density and penetration – 2006 and 2007Insurance penetration (in % of GDP) Insurance density (per capita in USD)Country 2006 2007 2006 2007KSA 0.5 0.6 63 92Kuwait 0.7 0.6 227 257Oman 1.0 1.1 133 159Qatar 1.1 0.9 683 640UAE 1.7 1.9 585 812Source: Swiss Re SigmaHowever, new rules mandate insurance players to maintain gross premiums below 10x theircapital and reinsure at least 30% of gross written premiums within the Kingdom. Companiesalso have to distribute 10% of net surplus from insurance operations to policyholders in line withthe Mudarabah model of Islamic cooperative insurance. Hence, although the market is expectedto expand in future, the legal framework might make if difficult for new players seeking entry intothe market.Buoyed by cultural factors,Takaful insurance is gainingimportance in GCCThe GCC insurance sector has experienced exceptional growth over the past few years, drivenby improved business and legal environment and increasing maturity of the GCC economies.There has been a paradigm shift in the region’s appetite for insurance, which, in turn, hasattracted many foreign insurers and paved the way for consolidation among local players in theSaudi insurance sector. The GCC insurance market essentially relies on Takaful, an insuranceconcept based on the Islamic banking law, thus making insurance a more widely acceptableand accessible product. According to Swiss Re Sigma, KSA’s insurance sector is the largestgrowth market for Takaful products. KSA alone accounted for approximately 30% of the totalgross premium market in the GCC (excluding Bahrain) in 2007.JUNE 2009 SAUDI ARABIA FACTBOOK 69