Saudi insurance market mergers to accelerate as new regulations tighten capital requirements and intensify competition. Fitch Ratings expects faster consolidation across the sector.
The Saudi Insurance Authority introduced tougher rules after taking over from two regulators in November 2023. These changes aim to stabilize and modernize controls.
As a result, smaller insurers face pressure increasing drastically. Many now struggle to meet capital demands or maintain profitability, prompting strategic consolidation moves.
Already, several small companies engage in talks with larger peers. They seek to strengthen capital bases, reduce compliance costs, and improve long-term viability.
Fitch states that Saudi insurance market mergers to accelerate will benefit the sector long term. However, insurers must cope with higher costs during rule implementation.
Health insurance, countries’ largest segment, now accounts for 60 percent of market premiums. Still, rising medical inflation and price competition pressure margins sharply.
To support this transition, the government is also encouraging digital transformation and advanced analytics adoption across insurers, aiming to enhance risk assessment, pricing accuracy, and overall service quality.
Meanwhile, motor insurance also faces tight margins. Vehicle coverage growth drives competition, making it difficult for insurers to maintain profitability.
Nonetheless, sector revenue rose over 16 percent by Q3 2024. Growth came from health, motor, property, and project-linked insurance lines.
Despite revenue growth, only six of ten major insurers reported underwriting profits in Q1 2025. Four suffered losses, underscoring ongoing market strain.
Moreover, a new January rule requires 30 percent of reinsurance to go to local firms. The measure supports homegrown reinsurers and local capacity development.
Still, it may bring short-term risks since local reinsurers may lack strong capital buffers. Authorities expect resilience to build over time.
Fitch concludes that Saudi insurance market mergers to accelerate will foster a more robust and competitive sector. This outcome aligns with Saudi Vision 2030 goals.
