A Chapter From - Regional Practical Guidance - Insurance - KSA
Transport & Insurance Focus
The insurance and reinsurance business and its operations including takaful insurance in KSA is regulated and supervised by the Insurance Authority (“IA”), a unified and independent regulator for the insurance sector.
Law Update: Issue 376 – Transport & Insurance
Anand SinghSenior Counsel, Transport & Insurance
Melody HuangAssociate,Transport & Insurance, China Group
This article forms part of a regional regulatory guide for the insurance sector and outlines sample questions and responses relevant to the Kingdom of Saudi Arabia (KSA). It provides a comprehensive overview of the country’s evolving insurance regulatory framework, following the establishment of the Insurance Authority (IA) in late 2023. The IA now serves as the unified and independent regulator for the insurance, reinsurance, and takaful sectors, having taken over responsibilities previously shared between the Saudi Central Bank (SAMA) and the Council of Health Insurance (CHI).
This guide explores key aspects of insurance regulation in KSA, including licensing, capital requirements, intermediary regulation, reinsurance restrictions, outsourcing rules, foreign branch operations, and dispute resolution procedures. It is designed to support stakeholders looking to understand and navigate the regulatory environment in one of the region’s most dynamic insurance markets.
What is the name of the main regulator(s) governing insurance in this jurisdiction? The insurance and reinsurance business and its operations including takaful insurance in KSA is regulated and supervised by the Insurance Authority (“IA”), a unified and independent regulator for the insurance sector. The IA became operational in November 2023. Prior to this, the insurance sector in the Kingdom was under the supervision of the Saudi Central Bank (“SAMA”) and the Council of Health Insurance (“CHI”). The insurance-related competencies of SAMA and CHI are now fully transferred to the IA.
What are the main areas which they regulate?The IA has assumed all the competencies and responsibilities related to the insurance sector, contained in the Cooperative Health Insurance Law, issued by Royal Decree No. (M/10) dated 1/5/1420 AH, and the Cooperative Insurance Companies Control Law, issued by Royal Decree No. (M/32) dated 2/6/1424 AH (“Insurance Law”). The IA’s particular mandates include but not limited to:
Develop the national strategy as well as public policies, plans, and programs for the insurance sector.
Propose draft regulations related to the authority’s competencies.
Encourage investment in the insurance sector in coordination with the relevant authorities.
Develop procedures for collecting, archiving, and using insurance data.
Conduct studies, research and analysis of data and information related to the insurance sector.
Set requirements for licenses to practice insurance business, receive applications for incorporation and grant licenses to practice such business, and set the requirements for practicing each type of insurance.
Prepare and publish bulletins and statistical reports for the insurance sector.
Prepare and implement programs and training courses in the field of insurance.
Does KSA have any other independent jurisdiction that function separate from the onshore jurisdiction? The concepts of onshore and freezone do not exist in KSA.
Are there any restrictions on the way reinsurance operates in this jurisdiction?Reinsurance is primarily regulated by the relevant provisions under the Implementing Regulations of the Cooperative Insurance Companies Control Law, Ministerial Decree No (1/596) dated 1/3/1425 H (“Implementing Regulations”) and the detailed provisions under the Regulation of Reinsurance Activities 2010 (“Reinsurance Regulation”).
Article 40 of the Implementing Regulations requires licensed insurance and reinsurance companies in KSA to reinsure 30% of its total premium in KSA. The IA’s written approval is required if it’s difficult to comply with this percentage or it wishes to retain a lesser percentage.
The IA announced in a circular dated 26 October 2022 the implementation of a new mechanism for reinsurance cession to the local reinsurance market. This new mechanism requires insurance companies to gradually cede a share of all their reinsurance treaties (proportional and non-proportional), either directly or through reinsurance brokers, to the local reinsurance market with effect from 1 January 2023. It sets out a course for gradual cession of at least 20% in 2023, 25% in 2024 and 30% in 2025.
Article 42 of the Implementing Regulations further requires insurance and reinsurance companies wishing to engage in reinsurance treaties outside KSA to ensure that the foreign reinsurer is licensed and authorized to transact the kinds of insurance proposed in KSA in its country of domicile, the insurance supervisor of the foreign reinsurer must authorise the exchange of relevant information with the IA, compliance with rating requirement and so on.
Are there limits or requirements for outsourcing operations to third-party vendors, particularly for critical functions?SAMA regulates outsourcing arrangements under Outsourcing Regulation for Insurance and Reinsurance Companies and Insurance Service Providers issued on 17 November 2012 (“Outsourcing Regulation”). “Outsourcing” is defined as “an Arrangement under which a Third Party (Service Provider) undertakes to provide a service to Insurance Companies and Service Providers previously carried out by itself or a new service to be offered by it.”
How are foreign branches regulated in KSA?Foreign branches are regulated by the Rules for Licensing and Supervision of Branches of Foreign Insurance and/or Reinsurance Companies in Saudi Arabia published on 17 December 2018 which sets out the specific regulatory requirements of entity setup and licensing of foreign branches in KSA.
What are capital requirements in KSA? Article 3(3) of the Insurance Law requires the paid-up capital of an insurance company shall not be less than SR 100,000,000 and the paid-up capital of a reinsurance company or an insurance company carrying out reinsurance activities simultaneously shall not be less than SR 200,000,000.
The Implementing Regulations set out the minimum capital requirement for other insurance and reinsurance services which are as follows:
SR 3,000,000 for Insurance Brokerage.
SR 3,000,000 for Insurance Claims Settlement Specialist (Third Party Administrator).
SR 500,000 for Insurance Agency.
SR 500,000 for Loss Assessor and Loss Adjuster.
SR 150,000 for Insurance Advisor.
SR 150,000 for Actuary.
Is there a statute of limitations on insurance claims? If so, what is it? Article11 of Working Rules and Procedures of the Insurance Disputes and Violations Settlement Committees provides that unless there is an excuse acceptable to the Committees, lawsuits of insurance disputes shall not be heard after the lapse of a period of five years from the claimed amount’s due date.
For matters pertaining to marine insurance, the IA’s Marine Insurance Coverage Instructions which was issued in October 2023 confirm that any claims arising from a marine insurance contract shall not be heard after the lapsed of two years.
What mechanism do insurance policies usually provide for resolution of coverage disputes?The Code of Conduct requires the companies to put in place a fair, transparent and accessible complaints handling process and controls and inform the policyholders of the complaints filing procedures. Specifically, it requires the insurance company upon receiving a complaint to address the complaints in a prompt and fair manner within ten working days and explain the dispute filing process to escalate the complaint or the claim to the IDC. These provisions are typically outlined in the policy document itself. Often, in the event of failure for an amicable resolution between the policyholder and the insurance company, the insurance company also makes provisions under the policy for arbitration as an alternative dispute resolution option to the IDC.
The recent establishment of the Insurance Authority marks a significant regulatory milestone for Saudi Arabia’s insurance sector. By consolidating regulatory oversight under one independent body, the Kingdom is aiming to streamline governance, increase transparency, and promote investment within the market. However, the regulatory landscape remains nuanced—particularly in areas such as local reinsurance cession, outsourcing controls, and foreign branch licensing—making it essential for insurers and intermediaries to seek knowledgeable legal guidance.
Our insurance lawyers in Saudi Arabia regularly advise clients on regulatory compliance, market entry, corporate structuring, licensing, and complex claims and disputes. Whether you are looking to launch, expand, or restructure your insurance operations in KSA, our team is well-equipped to help you navigate the regulatory framework with confidence. Please feel free to contact us for tailored legal support on any insurance-related matters in the Kingdom.
For further information,please contact Anand Singh andMelody Huang.
Published in April 2025
