AM Best: Saudi market improves but concern remains over growth prospects

It notes that of the 33 primary insurers in the country, 27 showed an operating profit in 2016, compared to 19 in 2015. Improvements in earnings have largely stemmed from the core insurance operations of companies, rather than benefiting from gains from investment activities.

It adds that a review of preliminary disclosures by national insurers in the Kingdom of Saudi Arabia shows a marked improvement in operating performance in 2016, with the market more than doubling its profits during the year.

However, the market grew at just 1% in 2016, largely driven by rate increases in motor insurance. And Best notes that fiscal pressures on public spending, driven by persistently low oil prices, reduced demand for property and engineering insurance, which fell by 9% in 2016. “With no further rate increases in motor and medical insurance anticipated in 2017, the market is likely to see a period of stagnation as pressures persists on property and engineering business lines,” states Best.

The report adds that while market discipline has improved, the market is expected to remain fiercely competitive. “Furthermore, efforts by the Kingdom to diversify its economy away from oil dependence could allow insureds to write new and different lines of business. While this is unlikely to result in short-term gains, it does present opportunities for long-term growth and diversification,” concludes Best.