We are pleased to present the first volume of our quarterly report on the Saudi insurance sector with industry insights, market analysis and the Q2, 2020 financial performance.
Looking back the first half of 2020, while most of the industries have shown slowdown in growth and declining profits amid Covid-19 pandemic, the insurance industry in Saudi Arabia sustained its performance, in fact reported a marginal growth. This was possible for a healthcare and motor heavy insurance sector, where government stepped in at a very early stage of the pandemic to relieve the insurers of their obligations and itself paid for the treatment of all Covid-19 patients including citizens, residents and even the violators of residency laws. Moreover, an extended lockdown in major cities had restricted the mobility of most citizens and residents, resulting in a sharp decline in the motor claims during the second quarter of the financial period. Consequently, insurers have seen an overall growth of 5.3% in gross premiums in first six months of 2020 compared to the same period in 2019 with a drop (improvement) of 11.7% in loss ratios being reflected in the net income, despite a regulatory extension of two months in motor policies endowed by SAMA.
Looking ahead, the Saudi insurance market is consistent with the global industry and pursuing the journey of regulatory and accounting change, product innovation, enhanced distribution channels and efficiencies in the conduct of business. IFRS 17’s implementation is at the core of harmonizing the accounting rules where the effective date has recently been pushed out by a year to 1 January 2023. This delay has been largely welcomed by market players as it gives an opportunity to clarify and implement the rules without a haste and business interruption. It also allows the insurance companies to refine their systems and educate investors on the expected changes in the financial results.
With the foregoing themes in perspective, we wish you an insightful read of the first edition of our Insurance Pulse and we look forward to receiving your feedback.