The Saudi Arabian Monetary Authority (SAMA) is making rules tougher for insurance companies, part of the central bank’s strategy to create a smaller market with stronger players, Reuters reported, citing sources familiar with the matter.
SAMA will introduce a new supervisory framework in coming months that will force insurers to substantially boost capital and improve internal risk controls, the sources said.
The new rules aim to increase industry consolidation, forcing weaker firms to merge with stronger ones, it was reported.
The proposed changes were discussed during a meeting between SAMA officials and senior insurance executives this week, the people said.
Current rules requiring companies to have at least SAR 100 million of capital for insurance activities, or SAR 200 million for reinsurance activities, are likely to be significantly increased.
Saudi Arabia’s insurance industry has been facing a period of consolidation through mergers and acquisitions, after years of fierce competition and price wars that resulted in accumulated losses and solvency issues.
The sector has also come under pressure as the Kingdom’s economy slipped into recession this year.
Health insurance in particular has been affected as many expatriates left the country and hospital costs have increased, sources told Reuters.
In March this year, Malath Cooperative Insurance & Reinsurance Company (Malath) and Allied Cooperative Insurance Group (ACIG) announced a preliminary understanding to initiate the necessary due diligence in preparation for a merger.
The same month, Gulf Union Cooperative Insurance and Al Ahlia for Cooperative Insurance also announced their intention to conduct due diligence necessary for a merger.
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