Saudi Arabia issues Implementing Regulations to the Personal Data Protection Law
Establishment of the Insurance Authority in the Kingdom of Saudi Arabia
Legal Development 14 September 2023 14 September 2023
Insurance & Reinsurance
The Kingdom of Saudi Arabia (KSA) announced the establishment of the Insurance Authority (IA) in KSA. In August 2023, the Council of Ministries approved the establishment of the IA, reflecting an important step forward in building a strong, vital and stable insurance sector in the Kingdom. Such step contributes to achieving the goals of the Kingdom's Vision 2030 and the Financial Sector Development Program (FSPD). The FSPD is one of the Kingdom's Vision 2030 programs, and one of its objectives is to develop the Insurance sector. The establishment is expected to enhance the mandated supervision of the insurance sector in KSA and ensure growth and development through unifying the regulators SAMA and CHI.
The IA has been granted several authorities to exercise all competencies and responsibilities related to the insurance sector as stipulated in the Cooperative Health Insurance Law, and the Cooperative Insurance Companies Control Law. The current regulations, rules, and instructions issued on the basis of the Cooperative Insurance Companies Control Law and the Cooperative Health Insurance Law, shall continue to be in effect until the completion of the legal procedures regarding the insurance draft law and its enforcement.
The main goal of the IA is to regulate and develop the insurance sector in the Kingdom, while ensuring the protection of the rights of policyholders and beneficiaries, develop the insurance sector and enhance stability of its financials.
Overview of the Insurance Authority in KSA and its mandate
- IA will report directly to the Prime Minister and will have a public legal personality as well as financial and administrative independence. The IA will be located in Riyadh.
- IA to draft and recommend the National Strategy for the Insurance Sector.
- IA shall review the existing laws, regulations, royal decrees, decisions, and instructions related to the insurance sector, and provide its recommendation taking into account the rules proposed to be governed by the draft Insurance Law.
- IA to encourage investment in the insurance sector in coordination with the relevant government authorities.
- IA will set the licensing requirements for the insurance business, issue the required licenses, and set the rules for conducting insurance activities.
- IA to suggest a mechanism to develop insurance products required in relation to government projects and government investments, including compulsory insurances to such projects and investments.
- IA to prepare and arrange training programs, seminar and conferences, training to the insurance sector specialists, and prepare reviews and statistics on the insurance sector.
The IA will ensure that policyholders and beneficiaries will continue to receive the full protection afforded to them under the relevant regulations. Policyholders and insurers will remain in a contractual relationship subject to the provisions agreed between them and to the statutory provisions related to the relationship. There will be no impact on the existing insurance policies or claims.
The current complaint handling process will remain unchanged. New complaints can be filed through the existing channels of SAMA and CHI until IA commences its work, considering the transition period. Any changes to the current complaint handling process will be communicated through official channels.
The General Secretariat of the Committees for Resolution of Insurance Disputes and Violations shall be reporting directly to the IA.
To ensure the continuous of the insurance sector, SAMA and CHI will continue to function as regulators of the insurance sector according to a transition plan until all competencies are fully transferred.
It is expected that the IA will be taking charge of a legal reform starting from issuing the new Insurance Law followed by implementing regulations.
National Strategy for the Insurance Sector
One of the objectives of the financial sector development program (FSDP) is to enable financial institutions to support the growth of the private sector through the development of the insurance sector to manage financial risks. To achieve this target, it is anticipated that the IA will focus on strengthening the existing regulatory environment to address challenges in the insurance sector and work on applying higher international standards to ensure further development and growth.
The strategy is also likely to focus on increasing companies’ ability to accept risks, in addition to providing innovative technical solutions that contribute to facilitating the experience of beneficiaries and stakeholders.
We anticipate that the IA will draft the National Strategy for the Insurance Sector to be in line with other National Strategies such as National Investment Strategy (NIS), and other programs within the Kingdom's Vision 2030. We also anticipate that one of the Strategy initiatives will be improving the regulatory and investment environment for the insurance sector to attract foreign investments.
The establishment of the IA along with the National Strategy for the Insurance Sector are key milestones to further increase the growth in the insurance market in KSA to become the largest market in the region.
If you would like further information on any of the matters referred to in this article, please contact one of the authors.