Saudi general insurance primed for double-digit growth in 2023

Three main factors for the boom highlighted

Saudi general insurance primed for double-digit growth in 2023

Insurance News

By Kenneth Araullo

The Saudi Arabian general insurance sector is set to achieve a 10.4% growth in 2023, driven by the robust performance of the national economy, increased vehicle sales, and a thriving construction industry.

In a recent study, data analytics firm GlobalData forecasts that Saudi Arabia's general insurance industry is on track to experience substantial growth, with a projected compound annual growth rate (CAGR) of 6.2%. This growth is expected to see the industry's gross written premiums (GWP) rise from SAR56.8 billion ($15.2 billion) in 2023 to SAR72.4 billion ($19.3 billion) by 2027.

Earlier this year, the Saudi Cabinet gave its approval for the establishment of the Insurance Authority (IA), a unified and independent regulator for the insurance sector. This move is expected to encourage new entrants into the insurance market, intensifying competition and fostering growth. It will also fortify the market for regional and global insurers operating within the country.

“The Saudi Arabian general insurance industry grew by 27.7% in 2022, recording its highest year-on-year (YoY) growth over the last 13 years. Mandatory private health insurance for expats, an increase in vehicle sales, and the rising demand for natural catastrophic insurance policies due to extreme weather events have supported the growth of general insurance,” GlobalData insurance analyst Anurag Baliarsingh said.

Leading lines of businesses

Personal accident and health (PA&H) insurance represents the dominant line of business, constituting a substantial 62.6% share of the GWP in 2023. Rising health awareness post-pandemic, coupled with increasing healthcare costs due to high medical inflation, has spurred demand for private health insurance, which is projected to grow by 11.8% in 2023.

“The popularity of private health insurance has increased in Saudi Arabia over the years due to rising costs of treatment, limited coverage, and longer waiting times associated with public health insurance. As of July 2023, private health insurers cater to more than 30% of the country’s population, as compared to a 10% share in 2013, the Council of Cooperative Health Insurance (CCHI). PA&H insurance is expected to grow at a CAGR of 6.3% over 2023-27,” Baliarsingh said.

Motor insurance holds the second-largest position, representing a 19.1% share of the general insurance GWP in 2023. It is anticipated to achieve a 5.2% growth in 2023, fuelled by increasing vehicle sales.

“The growth in motor insurance will also be supported by the rise in premium rates. A higher number of road accidents and an inflation-led rise in the cost of repairs have led to an increase in premiums. As a result, motor insurance premiums increased by 26.7% in 2022 as compared to 2021, and a similar trend is expected to continue in 2023. Motor insurance is expected to grow at a CAGR of 2.4% during 2023-27,” Baliarsingh said.

Property insurance claims the third-largest share of the business, constituting 11% of the general insurance GWP in 2023. The construction industry's value in Saudi Arabia, as reported by the General Authority of Statistics (GaStat), has seen notable increases in both Q1 and Q2 of 2023, thereby fostering the growth of property insurance. Moreover, Saudi Arabia's susceptibility to various natural disasters, including floods, droughts, and sandstorms, is anticipated to drive the demand for fire and other nat-cat insurance policies.

Liability and marine, aviation and transit (MAT) insurance will collectively account for the remaining 7.3% of the GWP share in 2023.

“After experiencing massive growth in 2022, Saudi Arabia’s general insurance industry growth is expected to normalise gradually in 2023 and 2024. Sustained economic growth, favourable regulatory developments, and rising automobile sales will drive growth in Saudi Arabia’s general insurance industry over the next five years,” Baliarsingh said.

In another recent report, GlobalData said that the Asia Pacific property insurance industry is expected to grow to $141.8 billion in 2027 from $92.3 billion in 2023, at a compound annual growth rate of 11.3% in terms of written premiums.

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