Saudi Arabia’s five largest insurers now account for about 80 per cent of the sector’s total profits, up from 68 per cent a year earlier, as smaller players face mounting pressure in an increasingly competitive market, according to an S&P Global Ratings report.
The analysis showed that 18 out of 26 insurance companies reported declining profits in the third quarter of 2024 compared to the same period last year, highlighting growing market concentration in the kingdom’s insurance sector.
Bupa Arabia and Tawuniya, the two largest insurers, together control more than 50 per cent of the market’s insurance revenue, while the top five companies generate almost three-quarters of the sector’s total revenue.
The report forecasts that top-line growth in Saudi Arabia’s insurance sector will moderate to about 10-15 per cent in 2025, following a 17 per cent increase in insurance revenue in the third quarter of 2024 compared to the previous year.
Stiff competition for insurers
Medical and motor insurance dominate the market, accounting for more than 80 per cent of total insurance revenue. However, the medical segment showed signs of strain, with all but three companies – Bupa, Tawuniya, and Malath – seeing their insurance service results deteriorate in the third quarter.
Motor insurance, despite improved operating performance for most insurers, saw premiums decline by 2.5 per cent in the third quarter amid intensifying price competition.
Investment returns have become increasingly crucial for insurers’ profitability, comprising nearly two-thirds of net profits in both the third quarters of 2023 and 2024, S&P said.
“Due to increasing regulatory requirements and some insurers’ inability to meet their minimum capital requirements, we expect M&A activity will continue in 2025,” the rating agency said, noting that eight players are currently engaged in merger discussions.
The life insurance segment, while showing strong growth, remains modest in size, accounting for just 2 per cent of the market’s insurance revenue in the third quarter of 2024.
The report maintains a stable outlook for rated Saudi insurers in 2025, but warns that stiffer competition, particularly in motor third-party liability, and potential declines in interest rates could pressure earnings and capital adequacy.
S&P’s analysis revealed that 2023 was an exceptional year when all insurers reported profits, with the 21 smaller companies accounting for one-third of total profits. However, this dynamic shifted significantly in 2024, with the five largest firms increasing their market dominance.
The agency noted that despite geopolitical tensions, its base-case scenario assumes the Israel-Hamas war will remain contained and not significantly impact the sector.
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