Fitch expects M&A activity to accelerate in Saudi insurance sector

Fitch Ratings expects insurance market consolidation in Saudi Arabia to accelerate in the next two years, driven by tighter capital rules and weak underwriting profitability due to intense price competition.

Some smaller insurers may struggle to meet new requirements or stay profitable, leading to mergers and acquisitions (M&As).

Regulatory oversight has increased since the Insurance Authority (IA) took over the sector’s supervision from the Saudi Central Bank (SAMA) and Council of Health Insurance in 2023.

The IA plans to introduce a risk-based capital regime in 2027 to strengthen insurers’ balance sheets. It is also pushing for improving underwriting discipline and better regulatory reporting.

Overall, these measures will be credit positive for the sector in the long term, Fitch said. However, they will increase insurers’ regulatory compliance costs, particularly during implementation, which will add to pressure on profitability in the short term.

“We expect smaller insurers to be more affected by the increased capital demands and compliance costs given their lower economies of scale,” the rating agency said.

The Company for Cooperative Insurance (Tawuniya) and Bupa Arabia for Cooperative Insurance Co. led the market with a combined 52% share in 2024.