Saudi Arabia, one of the largest Takaful markets in the world, has finalized rules governing insurance technology as part of the Kingdom’s efforts to bolster its insurance sector.
The rules, issued by the Saudi Central Bank (SAMA), defines the regulatory and supervisory framework and concepts of practicing insurtech activities, outlines consumer protection measures and aims to spur competition between insurtech companies in a fair and sustainable manner.
“Insurtech Rules intend to enable insurtechs to perform flexibly in an innovative-based regulatory framework, which includes basic pillars such as practitioners’ obligation, clients’ information accuracy and codes of conduct preserving clients’ rights, compliance and control,” SAMA explained.
The central bank requires insurtech company to report to the regulator every quarter on technical and security environment developments, transaction volumes, number of clients as well as number of complaints, according to the rules as viewed by IFN Fintech. Licensed insurtech companies also need to secure approval on outsourcing any insurtech activities.
The rules are relatively general. Rather than providing specific definitions for insurtech activities or providers such as insurance comparison sites, digital insurance providers and insurance policy aggregators, SAMA has defined an insurtech company as “a legal person licensed by SAMA to practice any insurtech activities”.
Meanwhile, insurtech activities are defined as “any solutions or services fully provided or designed by the use of technology within the scope of the insurance activities”.
The new rules do not specify minimum capital requirements for insurtech companies. Neither does the Cooperative Insurance Companies Control Law and its implementing regulation. In 2020, SAMA released rules for insurance aggregation activities and in 2011 its online insurance activities regulation.
Saudi Arabia has 29 insurance operators. The Kingdom practices cooperative insurance, which is largely considered Shariah compliant, making Saudi Arabia one of the largest Islamic insurance markets globally. Cooperative insurance provides the insured with protection against potential risks through mutual cooperation among a group of insureds.
As at the end of 2022, total written premium grew 26.9% to SAR53 billion (US$14.1 billion), according to the 2022 annual report released by SAMA. Last September, it was reported that Finance Minister Mohammed Al-Jadaan announced that the Kingdom will establish a new unified regulator for the insurance sector.