Saudi Arabia’s insurance industry: Driving economic diversification under Vision 2030

Saudi Arabia's insurance industry stands as a pivotal pillar of the Kingdom's financial sector, evolving into one of the GCC’s largest insurance markets. Propelled by Vision 2030, the sector is undergoing transformative growth fueled by regulatory reforms, technological advancements, and a diversifying economy. KPMG’s latest Saudi Arabia insurance review: Shaping transformation and diversification, provides an in-depth analysis of the industry's current achievements, challenges, and its trajectory.

"Saudi Arabia's insurance industry is at the forefront of the Kingdom's economic transformation, aligning with Vision 2030's ambition to diversify the economy," said Ovais Shahab, Partner, Head of Financial Services at KPMG in Saudi Arabia. "The sector’s impressive growth, driven by regulatory reforms, technological innovation, and expanding market demand, underscores its critical role in shaping a resilient and diversified financial landscape."

The sector's expansion is closely tied to Vision 2030’s initiatives, including mandatory motor insurance and bolstered social welfare systems, which have significantly increased the demand for insurance products. InsurTechinnovations are modernizing the industry, enhancing customer experience and accessibility. Infrastructure projects under Vision 2030 further create opportunities in health, life, and property insurance. In Q3 2024, revenue surged by 16.9% year-on-year, with medical insurance leading at a 13.6% growth due to mandatory coverage. Motor insurance revenues grew 22.7%, driven by new vehicle registrations, while property and casualty insurance recorded a 20.4% increase, reflecting a vibrant industrial sector.

"The remarkable rise of Saudi Arabia’s insurance industry reflects its adaptability and innovation, from leveraging InsurTech to developing new products," said Salman Chaudhry, Partner, Insurance Lead at KPMG Professional Services. "As insurers embrace digital transformation and sustainability, they are not only enhancing customer experience but also addressing emerging risks, positioning the industry for long-term success in a rapidly evolving market."

Despite its impressive growth, the sector also faces usual challenges such as price competition, regulatory compliance, and geopolitical uncertainties. However, technological advancements are reshaping the landscape. Digital brokers like Tameeni and BCare simplify policy access, while AI-driven innovations optimize claims processing and fraud detection. Usage-based insurance powered by telematics is gaining traction, signaling a shift toward personalized policies.

Regulatory shift post establishment of Insurance Authority is already paving the way for more deeper and relevant reforms, including enhancements in governance, products innovation and reinsurance space.,. The recent implementation of IFRS 17 and IFRS 9 standards has also brought more transparency and comparability to insurers’ financial performance, as evidenced by a strong Q3 2024 combined ratio of 93.69% and a 25.9% year-on-year increase in net profit before zakat and tax, reaching SAR 3.90 billion. The sector's total assets rose 20% to SAR 84.91 billion.

The reinsurance sector is thriving under new mandates,requiring insurers to cede 30% of business to local reinsurers by 2025. Saudi Reinsurance Company, for example, reported a 77% revenue increase in the first nine months of 2024. These policies ensure local reinsurers' active participation in managing risks linked to large-scale infrastructure projects and emerging market demands. Health and life insurance are also expanding due to a growing population and increased wellness awareness.

Following a global KPMG survey among CEOs in the insurance industry, they expressed to remain optimistic, with 74% confident in their growth prospects despite talent gaps and geopolitical complexities. Investments in generative AI, cited by 81% of CEOs, aim to enhance operational efficiency and customer engagement. Workforce expansion is on the horizon, with 93% planning to grow their teams in the next three years.

“As Saudi Arabia’s insurance sector continues to evolve, it is well-positioned to play a pivotal role in the Kingdom’s economic transformation. Supported by regulatory foresight, innovation, and Vision 2030’s framework, the industry is set to further its contributions to Saudi Arabia's diversification and growth,” concluded Shahab.