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S&P Global: Saudi Arabia’s Insurance Market Is a Major Driver of Revenue Growth in Gulf Region

 Traffic jam on a street in Riyadh (Asharq Al-Awsat)
 Traffic jam on a street in Riyadh (Asharq Al-Awsat)
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S&P Global: Saudi Arabia’s Insurance Market Is a Major Driver of Revenue Growth in Gulf Region

 Traffic jam on a street in Riyadh (Asharq Al-Awsat)
 Traffic jam on a street in Riyadh (Asharq Al-Awsat)

Islamic and Takaful insurance companies in the Gulf Cooperation Council region continue to benefit from favorable growth prospects, mainly driven by high demand for insurance in Saudi Arabia, the largest Islamic insurance market in the region, according to a report by Standard & Poor’s Global credit ratings agency.
Credit Analyst at S&P Global, Emir Mujkic, said: “While we expect overall credit conditions for Islamic insurers will remain stable over the next 6-12 months, consolidation will likely remain a hot topic among smaller and midsize players. About one-fifth of Islamic insurers in Saudi Arabia and about one-third in the United Arab Emirates (UAE) merged in recent years.”
He added that competition is expected to pick up in some markets, with anticipated interest rate cuts starting from September and potentially more volatile capital markets that could lead to “a sharp decline in earnings in 2025 if Islamic insurers fail to maintain their underwriting discipline.”
S&P Global estimated the Islamic insurance sector in the GCC region to expand by about 15 to 20 percent in 2024, with revenues exceeding USD 20 billion.
It also expected the Saudi market to remain the main driver of revenue growth in the GCC region.
“We expect the Saudi market, similar to the past two years, will be the main driver of topline growth in the GCC region. This is because Saudi Arabia, the GCC region’s largest Islamic insurance market, continues to benefit from higher economic growth. At the same time, authorities proceed with reducing the number of uninsured vehicles and have introduced new mandatory medical covers, leading to additional insurance demand and premium income,” the agency said in its report.

The Islamic insurance sector in the GCC region has expanded significantly over the past five years. Revenue growth was particularly strong during 2022-2023, when the sector increased by about 20 to 25 percent annually. This was mainly driven by the market in Saudi Arabia, which expanded by about 27 percent in 2022 and another 23 percent in 2023, the report stated.

 

 

 

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Saudi Arabia Opens Door for Foreign Investors to Explore Emerging Opportunities

The Line project in NEOM (SPA)
The Line project in NEOM (SPA)
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Saudi Arabia Opens Door for Foreign Investors to Explore Emerging Opportunities

The Line project in NEOM (SPA)
The Line project in NEOM (SPA)

The Saudi Cabinet approved on Sunday an updated investment law, with the aim of attracting foreign investors, develop the competitiveness of its investment environment and contribute to supporting economic diversification.

The new system, which will enter into force in early 2025, includes many advantages, most notably enhancing investors’ rights through fair treatment, protecting intellectual property and freedom to manage investments and transfer funds smoothly, promoting transparency and clarity in procedures in line with leading practices, and contributing to creating a reliable investment environment.

Economic and academic analyst at King Faisal University Dr. Mohammad bin Dalim Al-Qahtani told Asharq Al-Awsat that the updated investment system comes after more than 800 economic reforms and intensive workshops over the past six years.

He added that the system would constitute a model to be followed in the coming years by many countries, as it takes into account challenges facing foreign investments and the means to diversify processes and methods of attracting investments.

Al-Qahtani said the updated system includes protection for all intellectual, material and moral property, as required by the Kingdom’s regulations, in addition to removing obstacles facing investors.

The economic analyst stressed that Saudi Arabia offers many investment opportunities in the field of agriculture, industry, financial services, human capital, innovation, and environmental services, in addition to exploration in the fields of energy such as gold.

The Kingdom also seeks to attract investments that transform the country’s rich resources and energy into national industries, he remarked.

According to Al-Qahtani, the Saudi investment map features valuable opportunities estimated at USD3.3 trillion, equivalent to more than SAR 12trillion, distributed among 15 sectors.

He expected the opportunities, presented by the Saudi Ministry of Investment, to have an impact on the gross domestic product of more than USD7.5 trillion by the end of the current decade. It will also contribute to creating more than 3 million direct and qualitative job opportunities, in addition to about two million indirect job opportunities until 2030, he stated.

The economic analyst added that when the target of current investment opportunities is achieved, more than USD5 trillion in new openings will be generated during 2040.