Saudi insurance sector to extend gains in next 2 years: S&P Global

S&P Global Ratings expects the Saudi insurance market to continue its profitability trajectory over the next two years, despite the gap projected to persist between small and large-cap insurance firms.

Following a weak market cycle in the motor insurance sector in 2025, the sector's profits declined, the agency said in a report.

However, the sector's performance will likely rebound in 2026, driven by the premium increases implemented since September 2025 and expected to continue throughout this year.

S&P Global also expects the conflict in the Middle East to slow growth in insurance revenues in Saudi Arabia's property and casualty (P&C) insurance sector this year.

Standard war-risk exclusions, together with the high levels of protection provided by reinsurance agreements, may offset the impact of the conflict on the net profits of Saudi insurers.

The agency also noted that its base-case scenario assumes that disruptions in the Strait of Hormuz will ease during the second half of the year, although intermittent disruptions and a slower and less complete recovery in flows are considered likely compared with its previous expectations.

However, if disruptions persist for an extended period due to the effective closure of the Strait of Hormuz, claims costs could increase, said S&P. In addition, it expects investment income from Saudi insurers' large fixed-income portfolios to continue supporting return on equity.

Moreover, the government's continued efforts to reduce economic volatility, increase the non-oil sector's contribution to GDP, maintain substantial spending on infrastructure projects such as Expo 2030 and the FIFA World Cup 2034, together with rising consumption and labor market development, will continue to support the non-oil economy. This is expected to be reflected in revenue growth for the P&C insurance sector, the report said.

S&P Global stated that the Insurance Authority's (IA) announcement of a new risk-based capital framework, which will be implemented in January 2027, aligns with the strategy of the Saudi insurance sector and will strengthen the sector's resilience. It expects these regulations to have only a limited impact on the solvency ratios of most insurance companies.

Additionally, some sector players may be affected more severely because they are already facing solvency issues under the current framework. Of the 25 listed companies, seven have reported accumulated losses exceeding 20% of their capital, while three have accumulated losses exceeding 50%. Accordingly, the new regulations may encourage mergers and acquisitions in the P&C insurance sector, S&P Global added.