Gross Premium Written (GPW) in Saudi to grow by approximately 5-10 percent in 2022, according to S&P Global Ratings.
GWP refers to the total premium (direct and assumed) written by an insurer before deductions for reinsurance and ceding commissions.
The GPW growth in the Kingdom in 2022 will likely be driven by more favorable economic conditions, due to higher oil prices and the introduction of additional covers, the agency revealed.
At the same time, S&P anticipated the motor business to remain under pressure due to intense competition and lower rates.
Emir Mujkic, Director, S&P Global Ratings said: “We expect 2022 to be another difficult year and one that will require insurers to reassess their pricing strategy, particularly for motor business. In Saudi Arabia unlike in some other emerging markets, the insurers’ investment risk is relatively low, as most assets are held in fixed deposits or money market instruments at securely rated banks. Higher minimum capital requirements will help to further accelerate merger and acquisition activity this year, particularly among the smaller and loss-making insurers.”
S&P forecasts underwriting performance will remain under pressure with the net combined ratio remaining at 99-104 percent in 2022, compared with 104 percent in 2021. Investment income, on the other hand, is expected to improve and support overall earnings as interest rates continue to rise.
“We believe that primary and reinsurers will need to increase their minimum capital to Saudi riyal 300 million over the next three years. The focus on conduct regulation is growing, and merger and acquisition activity is increasing, plus there is likely to be more consolidation as the minimum capital requirements increase.” Emir Mujkic added.
Despite a challenging operating environment for insurers, S&P Global Ratings do not foresee any material rating actions in 2022.
