RIYADH: Total gross written premiums of the insurance sector increased 28.8 percent to SR12.2 billion ($3.3 billion) in the second quarter from SR9.5 billion in the same period last year, reported Saudi Central Bank, also known as SAMA.
“GWPs are a good indicator of the overall development of the sector,” Jarmo Kotilaine, an economist and strategist focusing on the Gulf region, told Arab News.
The health sector’s GWP, which makes up 54.6 percent of the Kingdom’s total GWPs, rose by 31.8 percent, amounting to SR6.8 billion in the second quarter.
Other general insurance GWP rose by 24.3 percent, reaching SR2.6 billion in the second quarter compared to the corresponding period of 2021. It makes up 22.2 percent of the country’s GWPs.
Motor insurance GWP, which constitutes 18.6 percent of total GWP, saw a 23.7 percent growth totaling SR2.2 billion, showed the SAMA report.
Protection and savings insurance GWP amounted to 4.6 percent of the aggregate and saw a 35.1 percent rise reaching SR589 million last quarter.
Kotilaine clarified that the increase in the Kingdom’s GWPs “is not necessarily linked to the financial performance of individual companies.”
He pointed out that it faces the challenge of sector fragmentation.
“Especially after health insurance became mandatory, many businesses entered the sector. As a result, there has been margin erosion, slowing down the sector,” said Kotilaine.
Moreover, the report highlighted that three major key insurance indicators saw a year-on-year drop in the second quarter of 2022: operating income, net income and net investment income.
Insurance operating income, the revenue of an insurance company after the expenses of operation and depreciation are deducted, dropped by a staggering 118.1 percent in the second quarter, reaching a loss of SR10 million.
The sector’s net income fell by 29.7 percent year on year to SR262 million in the second quarter, showed the SAMA data.
Moreover, the net investment income between April and May dropped 13.8 percent to SR273 million from SR317 million in the corresponding period last year.
When asked about the future of Saudi Arabia’s insurance sector, Kotilaine projected a positive outlook.
“The population is growing, the economy is becoming increasingly diverse, and gross domestic product growth dynamics look solid.”
“A key challenge for the sector,” he continued, “is to develop its product offering and insurance awareness to drive growth beyond the mandatory policies.”