Saudi Arabia's insurance industry will be competitive, properly controlled and fully accountable for the first time following the recent approval of a new insurance law. Modernization is expected to benefit not only those buying insurance but also to have a positive impact through the whole economy.
Until now, there has been only one approved local insurance company, the National Company for Co-operative Insurance (NCCI), which was set up by royal decree and has until now been regulated by the commerce ministry. Competition came from 80 to 100 companies, operating offshore from Bahrain and technically outside the authority of Saudi regulators. Bankers say it was not always possible to enforce the settlement of claims.
The aim of the new law is to create the conditions in which local institutions, including banks - possibly working with overseas partners - can establish insurance companies. The range of local choice should remove any need for companies and individuals to use the offshore market.
The key elements of the new law are the appointment of the central bank, the Saudi Arabian Monetary Agency (Sama) as regulator, the requirement on new participants to put up at least SR100 million ($26 million) in capital and a much more efficient system for resolving disputes.