Saudi insurance market 2016 profits more than double
AM Best believes the Saudi insurance market has turned the corner following a period of underwriting volatility.
A review of preliminary disclosures by national insurers in Saudi Arabia shows a marked improvement in operating performance in 2016, with the market more than doubling its profits during the year.
Market profit was $671 million, more than double 2015’s profits of $278 million.
AM Best noted a marked turnaround in 2016, with the vast majority of insurers generating positive operating results.
The findings are published in a new report by A.M. Best, titled, “Stability Returns to Saudi Insurers but Growth Prospects Remain Cloudy.” It notes that of the 33 primary insurers in the kingdom, 27 showed an operating profit in 2016, compared with 19 in 2015. Improvements in earnings have largely stemmed from the core insurance operations of companies rather than benefiting from gains from investment activities.
Salman Siddiqui, senior financial analyst, said: “The introduction of actuarial pricing and reserving on motor and medical business lines in 2014, whilst leading to short-term losses, helped to significantly improve discipline and profitability in the market. In the case of motor insurance, rates have more than tripled since the introduction of actuarial input, leading to an abatement of the price wars that had previously wreaked havoc in the Saudi market.”
The report adds that despite the improvements in performance, there remains concern regarding overall market growth. In 2016, the Saudi insurance market grew at a modest 1 percent, primarily from rate increases in motor insurance, with gross premiums increasing by approximately 12 percent.
Mahesh Mistry, senior director of analytics, said: “Whilst market discipline has improved, AM Best expects the Saudi insurance market to remain fiercely competitive. Continued low oil prices are likely to dampen insurance growth prospects in the kingdom in 2017. However, AM Best notes that there are opportunities for insurers to grow their portfolios. The Saudi motor market continues to suffer from chronically high levels of uninsured vehicles – estimated to be as high as 55% – and represent a potentially large untapped market.”
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