London: Standard & Poor’s Ratings Services said it believes that the insurance price war that raged in Saudi Arabia during 2012-13 has now largely ended, although competition to win large, prestigious corporate accounts remains intense.
“Anecdotal evidence suggests that market tariffs for the sector’s principal lines of group medical and motor insurance have risen by an average of some 20% so far in 2014, and several companies have told us that policyholders have accepted price hikes of up to 40% on persistently loss-making accounts.
“Despite ongoing competitive pressures between the local 34 insurers in the sector, we expect insurers to maintain today’s stronger pricing into 2015 and beyond, because the insurance regulator, Saudi Arabian Monetary Agency (SAMA), has taken a number of steps to encourage the maintenance of reasonable pricing and prudential reserving.”
“After various more modest initiatives failed to turn the decline in tariffs around in 2013, SAMA ultimately dealt the price war a fatal blow by openly reminding the Kingdom’s licensed consulting actuaries of their duty to ensure prudent reserving at the companies with which they work. This had an immediate effect as all Saudi Arabian insurers are obliged to have their reserves signed off by a consulting actuary, and external auditors cannot contest the actuaries’ calculations.”
“As a result, the 2013 year-end accounts at most Saudi Arabia-based insurers
and reinsurers saw very significant reserve strengthening both in respect of
incurred liabilities and the unexpired risk of insurance policies that were still in force, many of which are now regarded as severely underpriced. SAMA
has also recently implemented a requirement that new clients provide insurers with their claims history.”