DUBAI: London has some very definite advantages in the contest to stage any global element of the forthcoming initial public offering of Saudi Aramco, but whether Saudi Arabian policymakers will be convinced that the UK capital is the place for the flagship share sale — potentially the biggest IPO in history — remains to be seen.
So strong is the claim of the London Stock Exchange (LSE) that for a while it looked like a straight two-horse race between it and the much bigger New York Stock Exchange for the prestigious and money-spinning offering.
That has been complicated over the past few months by the fact that other alternatives have emerged to a big global IPO: An “exclusive” offering on the Tadawul in Riyadh; the emergence of rival venues like Hong Kong and the other New York exchange Nasdaq; and the possibility of a private sale of shares to Chinese or Russian investors; or several combinations of these options.
But London is still in the race, and the official visit by Saudi policymakers this week could be a final opportunity to “kick the tires” of the LSE as a suitable venue for arguably the most important single transaction in the Kingdom’s history. LSE officials can advance several plausible arguments why it should stage the Aramco IPO.
David Hodson, veteran oil executive and financier and managing director of Dubai-based Blue Pearl Management, said: “The big thing London has going for it is that it is not New York. It is a less aggressive investment venue in all respects.”
This was echoed by a senior American investment banker, speaking on condition of anonymity, who said: “New York presents a range of problems, with Sarbanes-Oxley (US investor protection laws), as well as JASTA (anti-terrorism financing legislation) and the whole system of class actions.”
It has become almost accepted wisdom that Aramco would find itself enmired in litigation if it were to list on Wall Street. Although there are some who do not think this is necessarily the case — pointing to the hundreds of billions of dollars of Saudi assets in the US so far left untouched by the hungry lawyers of Manhattan — there is a general feeling, shared by some of Aramco’s advisory team, that listing there would just be asking for trouble.
“The London legal system is different in many respects,” said the banker. There is no British equivalent of the JASTA laws, disclosure and regulatory requirements are looser (especially for oil companies) and, while there is a system of ‘no win, no fee’ litigation, it is not as well-organized or aggressive as in the US, with its armies of class action lawyers.
The gentler legal and regulatory rules in the UK reinforce another advantage London has: It badly wants, even needs, to stage the IPO. Certainly, listing Aramco would talk to the post-Brexit narrative, which sees the world outside the EU as a gigantic opportunity for Britain.
Anti-Brexit campaigners would maintain that this is delusional, but if LSE won Aramco it would certainly allow the British government to claim that there is indeed life after the EU, and advance its cause to continue to be regarded as the capital of the European financial scene.
City veteran Martin Gilbert, co-chief executive of Standard Life Aberdeen, said: “It would obviously be a big and welcome coup if the UK was successful given the competition.”
London has other attractions too. It is not as big as New York — the two exchanges there has a combined market capitalization more than six times that of LSE — but it has a reputation as a truly global exchange, especially reflecting the commodity and energy sector. For example, two of the big members of Aramco’s peer group — BP and Shell — are listed on LSE.
David Ramm, the corporate partner at the London office of global law firm Morgan Lewis, believes London has an advantage in its international appeal. “The LSE reaches a broader and more diverse global network of potential investors than any other exchange, including New York,” he said.
“I suspect that there may also be a view at Aramco that the LSE and its investors may currently be more receptive to foreign listings, especially from the Middle East, than more domestically or the US focused exchanges,” Ramm added.
The London market authorities have gone out of their way to make the LSE more receptive. Last year the regulators proposed to introduce a new category of listing on the market, dubbed the “sovereign IPO,” as a way of allowing governments and other state-linked investors to issue and trade shares on international exchanges without adhering to stricter IPO rules on related party transactions and governance.
While these proposals met with some criticism from a portion of the London investment community and politicians — on the grounds that London was lowering its governance standards to accommodate the Saudis — the British government, the regulators and most financial professionals would welcome the changes if they were to attract the biggest IPO in history.
The changes required for the “sovereign IPO” regime have not yet been finally agreed, but any hint that Aramco was seriously leaning toward London would likely hurry them through without too much delay.
Ellen Wald, Middle East expert and author of upcoming book “Saudi Inc”, said: “The flexibility the LSE has shown will likely appeal to Aramco. The LSE would make sense as one of the exchanges for an Aramco listing because it is a big, stable and prestigious exchange with access to a large number of global investors and capital.
London has presented a persuasive investment case for why Aramco should chose it rather than any other global venue. But in the end, other factors — like geopolitical and foreign policy considerations, as well as personal relations between top policymakers — are just as like to decide the venue for the Aramco.
Hodson summed it up: “The final decision on where to list will be as much a political and strategic call as a financial one.”
London’s best argument for staging Aramco IPO: It is not New York
London’s best argument for staging Aramco IPO: It is not New York
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Dollar, stocks muted as investors watch progress in US-China trade talks
- US Commerce Secretary Howard Lutnick said talks in London going well, Trump puts a positive spin on discussions
- World stocks, as reflected by MSCI All-Country World index traded near record highs, dollar steadied against range of currencies
BOSTON/LONDON: Global stocks and the dollar held steady on Tuesday as trade talks between the United States and China continued into a second day, giving investors some reason to believe tensions between the world's two largest economies may be easing.
US Commerce Secretary Howard Lutnick said discussions between the two sides in London were going well, while President Donald Trump on Monday put a positive spin on the talks.
Any progress in the negotiations is likely to provide relief to markets given that Trump's often-shifting tariff announcements and swings in Sino-US ties have undermined the two economies, disrupted supply chains and threatened to hobble global growth.
On Wall Street, the Dow Jones Industrial Average rose 0.06%, to 42,788, the S&P 500 added 0.16%, to 6,015, and the Nasdaq Composite advanced 0.12%, to 19,616.
World stocks, as reflected by the MSCI All-Country World index traded near record highs, while the dollar steadied against a range of currencies.
"While market participants are clearly taking a glass half-full view of the outlook, both on trade policy and more broadly, we don’t think that should be interpreted as a view that tariffs will be fully unwound," said Jonas Goltermann, deputy chief markets economist at Capital Economics.
Goltermann anticipates US duties on Chinese goods to settle at around 40%, while most analysts have said that the universal 10% levy on imports into the United States is here to stay.
In Europe, the STOXX 600 edged higher, constrained by UBS, whose shares dropped 5.5% as investors worried about the impact of new government proposals to force the Swiss bank to hold $26 billion in extra capital.
Meanwhile, in Tokyo, Finance Minister Katsunobu Kato said policymakers were looking at measures to promote domestic ownership of Japanese government bonds, a day after Reuters reported that Japan is considering buying back some super-long government bonds issued in the past at low interest rates.
Japanese government 30-year yields were virtually flat at 2.92%, having retreated from late May's record high of 3.18%.
OPEC plus oil output is rising as members unwind their cuts.
The yen strengthened throughout the day, leaving the dollar roughly unchanged on the day around 144.5 yen, while the euro also turned positive, up 0.2% at $1.144. The pound dropped 0.2% to $1.35 after weak UK employment data.
QUALITY NOT SIZE
Trump's fluid trade policies and worries over Washington's growing debt pile have dented investor confidence in US assets, in turn undermining the dollar, which has already fallen more than 8% this year.
"It's not that the Americans are blowing up their fiscal situation because the deficit is going to remain more or less stable. But the quality of the deficit has degenerated," Samy Chaar, an economist at Lombard Odier, said.
"If you invest, and spend on productive investments, you'll get macro payoffs, because you're going to develop an industry, you're going to strengthen your economy, you're going to create jobs, you have a payoff. If you spend by basically reducing revenues because you cut taxes on people who don't need the money, they won't be consuming more, or investing more, so the macro payoff is more limited," he said.
US Treasuries were yielding around 4.44%, down 4 basis points on the day.
Data on US consumer inflation for May due out on Wednesday could show the impact of tariffs on goods prices.
The producer price index report will be released a day later.
"May's US CPI and PPI data will be scrutinized for signs of lingering inflationary pressures," said Convera's FX and macro strategist Kevin Ford.
"If core CPI remains elevated, expectations for rate cuts could be pushed beyond the June 18 FOMC meeting."
Traders expect the Federal Reserve to leave rates unchanged at its policy meeting next week. Just 44 bps worth of easing have been priced in by December.
In commodity markets, oil prices rose on the back of optimism that the US-China talks could ease trade tensions and improve demand for energy, pushing Brent crude up 0.4% to $67.30 a barrel. Spot gold rose 0.5% to $3,344 an ounce.
World Bank slashes global growth forecast as trade tensions bite
- Advanced economies' growth forecast lowered, poor countries face prolonged recovery
- Global inflation expected to reach 2.9% in 2025, above pre-COVID levels
WASHINGTON: The World Bank on Tuesday slashed its global growth forecast for 2025 by 0.4 percentage point to 2.3 percent, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.
In its twice-yearly Global Economic Prospects report, the bank lowered its forecasts for nearly 70 percent of all economies — including the United States, China and Europe, as well as six emerging market regions — from the levels it projected just six months ago before US President Donald Trump took office.
Trump has upended global trade with a series of on-again, off-again tariff hikes that have increased the effective US tariff rate from below 3 percent to the mid-teens — its highest level in almost a century — and triggered retaliation by China and other countries.
The World Bank is the latest body to cut its growth forecast as a result of Trump’s erratic trade policies, although US officials insist the negative consequences will be offset by a surge in investment and still-to-be approved tax cuts.
The bank stopped short of forecasting a recession, but said global economic growth this year would be its weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5 percent, the slowest pace of any decade since the 1960s.
The report forecast that global trade would grow by 1.8 percent in 2025, down from 3.4 percent in 2024 and roughly a third of its 5.9 percent level in the 2000s. The forecast is based on tariffs in effect as of late May, including a 10 percent US tariff on imports from most countries. It excludes increases announced by Trump in April and then postponed until July 9 to allow for negotiations.
The bank said global inflation was expected to reach 2.9 percent in 2025, remaining above pre-COVID levels, given tariff increases and tight labor markets.
“Risks to the global outlook remain tilted decidedly to the downside,” the bank wrote. It said its models showed that a further 10-percentage point increase in average US tariffs, on top of the 10 percent rate already implemented, and proportional retaliation by other countries, could shave another 0.5 percentage point off the outlook for 2025.
Such an escalation in trade barriers would result “in global trade seizing up in the second half of this year ... accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets,” the report said.
Nonetheless, it said the risk of a global recession was less than 10 percent.
’FOG ON A RUNWAY’
Top officials from the United States and China are meeting in London this week to try to defuse a trade dispute that has widened from tariffs to restrictions over rare earth minerals, threatening a global supply chain shock and slower growth.
“Uncertainty remains a powerful drag, like fog on a runway. It slows investment and clouds the outlook,” World Bank Deputy Chief Economist Ayhan Kose told Reuters in an interview.
But he said there were signs of increased dialogue on trade that could help dispel uncertainty, and supply chains were adapting to a new global trade map, not collapsing. Global trade growth could see a modest rebound in 2026 to 2.4 percent, and developments in artificial intelligence could also boost growth, he said.
“We think that eventually the uncertainty will decline,” he said. “Once the type of fog we have lifts, the trade engine may start running again, but at a slower pace.”
Kose said while things could get worse, trade was continuing and China, India and others were still delivering robust growth. Many countries were also discussing new trade partnerships that could pay dividends later, he said.
US GROWTH FORECAST CUT SHARPLY
The World Bank said the global outlook had “deteriorated substantially” since January, mainly due to advanced economies, now seen growing by just 1.2 percent, down half a point, after expanding 1.7 percent in 2024.
The US forecast was slashed by 0.9 percentage point from its January forecast to 1.4 percent, and the 2026 outlook was lowered by 0.4 percentage point to 1.6 percent. Rising trade barriers, “record-high uncertainty” and a spike in financial market volatility were expected to weigh on private consumption, trade and investment, it said.
Growth estimates in the euro area were cut by 0.3 percentage point to 0.7 percent and in Japan by 0.5 percentage point to 0.7 percent.
It said emerging markets and developing economies were expected to grow by 3.8 percent in 2025 versus 4.1 percent in January’s forecast.
Poor countries would suffer the most, the report said. By 2027 developing economies’ per capita GDP would be 6 percent below pre-pandemic levels, and it could take these countries — minus China — two decades to recoup the economic losses of the 2020s.
Mexico, heavily dependent on trade with the US, saw its growth forecast cut by 1.3 percentage points to 0.2 percent in 2025.
The World Bank left its forecast for China unchanged at 4.5 percent from January, saying Beijing still had monetary and fiscal space to support its economy and stimulate growth.
Qatar’s Islamic finance sector grows to $187bn, report shows
- Islamic banking assets grew by 3.9% to 585.5 billion riyals
- Deposits rose by 8.2% to 339.1 billion riyals, with private sector deposits accounting for 57%
RIYADH: Qatar’s Islamic finance sector continued its upward trajectory in 2024, with total assets rising 4.1 percent year on year to 683 billion Qatari riyals ($187.5 billion), a new analysis showed.
According to a report from Qatar-based Bait Al Mashura Finance Consultations, Islamic banks held the largest share, with 87.4 percent of total Islamic finance assets.
This was followed by Shariah-compliant sukuk at 11.2 percent, takaful insurance at 0.7 percent, and the rest split between investment funds and other Islamic finance institutions.
Qatar’s performance comes as the global Islamic finance industry entered 2025 on a solid footing, with 10.6 percent growth in 2024, driven by strong banking assets and a 29 percent growth in foreign currency sukuk issuances, according to S&P Global Ratings.
While key markets like Saudi Arabia, the UAE, and Malaysia continue to dominate — with the Kingdom alone accounting for two-thirds of Gulf Cooperation Council Islamic banking growth — the outlook remains cautious amid potential headwinds, including oil price volatility and evolving regulatory frameworks.
Khalid Al-Sulaiti, vice chairman of Bait Al Mashura’s board of directors, said: “In the past year, the Islamic finance sector experienced significant transformations and qualitative advancements in performance, expansion, and supporting technologies.”
He underscored the need to analyze data and trends to provide a comprehensive and accurate outlook for the future — balancing Shariah compliance, developmental goals, and economic and social sustainability.
The report showed that Qatar’s Islamic banking assets grew by 3.9 percent to 585.5 billion riyals, while deposits surged by 8.2 percent to 339.1 billion riyals, with private sector deposits accounting for 57 percent.
Financing increased by 4.9 percent to 401.5 billion riyals, primarily directed toward real estate, government, and personal financing. Revenues rose by 12.6 percent to 29.5 billion riyals, with profits reaching 8.7 billion riyals, marking a 6 percent growth.
In the takaful sector, assets grew by 7.1 percent to 5.1 billion riyals, while policyholders’ funds increased by 6.3 percent to 2.6 billion riyals. Insurance subscriptions rose by 18.6 percent, exceeding 1.9 billion riyals, though results varied between surplus and deficit.
Islamic finance companies saw marginal growth of 0.8 percent in assets, reaching 2.53 billion riyals, while financing rose by 5.7 percent to 1.9 billion riyals. Revenues jumped 14.7 percent to 277.2 million riyals, with financing and investment activities contributing 84 percent.
Performance varied, with aggregate profits surpassing 178.5 million riyals against losses of 12 million riyals.
Islamic investment firms recorded a 5.2 percent increase in assets to 549.5 million riyals, with revenues surging 44.1 percent to 59.7 million riyals. Profits reached 17.5 million riyals, though some firms reported losses.
The sukuk market expanded significantly, with issuances rising by 161 percent. Islamic banks issued 9.5 billion riyals in sukuk, up 300 percent, while the Qatar Central Bank issued 16.9 billion riyals.
Shariah-compliant investment funds grew by 1 percent to 944.6 million riyals, though performance was mixed. On the Qatar Stock Exchange, the Al Rayan Islamic Index closing price increased by 2.23 percent. The share performance of listed Islamic finance companies was mixed, with increases reaching up to 2.3 percent and decreases as much as 19.6 percent.
Qatar’s Shariah-compliant finance industry now represents 27 percent of the country’s overall financial system, placing it among the top Islamic finance hubs globally alongside Saudi Arabia and the UAE, according to the Qatar Financial Center.
The country is home to two of the region’s largest Islamic banks — Qatar Islamic Bank and Masraf Al Rayan — ranked among the top 10 globally by asset size.
Earlier this year, Fitch Ratings affirmed strong credit profiles for Qatari Islamic banks due to high oil prices, solid profitability, and stable funding structures. The sector’s growth is further bolstered by active sukuk issuances and strong retail deposit bases.
While the industry faces challenges, including potential fragmentation from regulatory shifts and macroeconomic risks, its long-term outlook remains positive, supported by economic diversification efforts and increasing demand for Shariah-compliant financial products.
AWPT’s vision for sustainable water leadership: growth, green goals, and global expansion
- AWPT is supporting Uzbekistan’s Sustainable Development Vision
- It is offering support across the country’s entire water infrastructure lifecycle
TASHKENT: As the Middle East embraces transformation under the banner of sustainability and economic diversification, water security stands as one of the most critical obstacles and opportunities of our time.
At the helm of addressing this challenge in Saudi Arabia is Alkhorayef Water & Power Technologies, also known as AWPT. This company has not only solidified its market leadership but is now actively expanding its international footprint.
In an exclusive interview with Arab News, Rami Moussilli — CEO of AWPT since 2014 — shared key insights into the company’s strong performance in 2024, its alignment with Vision 2030, and its ambitions beyond Saudi Arabia.
Speaking at the Tashkent International Investment Forum, Moussilli told Arab News that AWPT is supporting Uzbekistan’s Sustainable Development Vision.
Uzbekistan is a key international focus for AWPT as the country undergoes significant transformation through infrastructure modernization and sustainable development.
Moussilli noted that AWPT has held high-level discussions with multiple ministries, which culminated in a meeting with the president of Uzbekistan.
“There is strong alignment between our core strengths and Uzbekistan’s national development priorities,” said Moussilli.
As Uzbekistan ramps up investment in urban expansion and essential services, AWPT is offering support across the entire water infrastructure lifecycle— from system rehabilitation and advanced wastewater treatment to non-revenue water reduction and energy-efficient technologies.
AWPT’s approach in Uzbekistan is built on three foundational pillars: strengthening public-private partnership frameworks, delivering engineering excellence, and promoting environmental and economic sustainability
With a focus on knowledge transfer and local capacity building, AWPT is not just exporting services; it is building lasting partnerships.
Speaking at the opening of the investment forum, Uzbekistan’s President Shavkat Mirziyoyev pledged his country’s commitment to developing green energy to ensure stable energy resources for the economy.
“Over the past short period, nearly $6 billion worth of foreign direct investment has been attracted to this sector. Electricity production has increased from 59 billion to 82 billion kilowatt-hours,” he said. “In the next five years, this figure will exceed 120 billion kilowatt-hours, and the share of green energy in the energy mix will reach 54 percent.”
He added that efforts are underway to draw $4 billion to upgrade the power grids, and by next year around 9 grids will be transferred to private partnership.
“In addition, we have launched the sale of green certificates and carbon units for the first time. This year, we will join global carbon markets and create a “Green Uzbekistan” climate investment platform,” Mirziyoyev said.
A model for the future of water
AWPT sets itself apart from others in the sector with its integrated delivery model.
By operating across all stages of the water asset lifecycle — from design and construction to operation and rehabilitation — AWPT achieves efficiencies that traditional players often miss.
This holistic approach allows the company to offer clients and investors a unique value proposition: resilient profitability and proven risk management.
AWPT closed 2024 with what Moussilli described as “a year of exceptional performance and strategic progress.”
The financial numbers support this assertion. Net income surged by an impressive 64 percent over the previous year, while revenues rose by 16 percent, underscoring both strong demand and operational excellence.
Profit margins also improved significantly, growing from 8.2 percent to 12 percent, and earnings per share followed suit with over 64 percent growth.
The company’s shareholder equity expanded by 44 percent, further bolstered by a return on equity of 38 percent and a return on assets of 35 percent, clear indicators of efficient capital and resource management. Notably, AWPT ended the year with a 300 percent increase in free cash flow, a critical marker of financial health in a capital-intensive sector.
Powering Vision 2030 through water privatization
At the heart of AWPT’s strategy lies a firm alignment with the Saudi National Water Strategy 2030, which outlines the privatization of key infrastructure sectors, including water treatment, wastewater management, and the reuse of treated effluents.
Moussilli emphasizes the instrumental role water infrastructure plays in national development, saying: “Water is no longer just a utility — it is a strategic pillar for economic resilience and public health.”
AWPT’s integrated services span the entire water and wastewater value chain — from engineering, procurement, and construction to operation and maintenance, public-private partnerships, and city management contracts.
This depth of capability positions the company to benefit from the estimated $200 billion in upcoming water infrastructure investments under Vision 2030.
Sustainability at the core
With increasing global attention to environmental conservation, AWPT has integrated sustainability into its operational DNA. Serving over 26 million people across the Kingdom, the company advocates resource optimization, water quality, and long-term resilience.
“Our sustainable water practices are rooted in prevention, remediation, and efficiency,” said Moussilli. This includes proactive leak detection and repair of water lines, maintenance of sewage lines to prevent environmental contamination, and advanced treatment of sludge to enable its reuse in agriculture or other sectors.
“Every drop we save is a step toward decarbonizing our sector,” he added, noting that AWPT’s treatment of wastewater not only protects the environment but also allows for the reuse of treated effluent for irrigation, reducing reliance on freshwater sources.
Strategic objectives: local strength, global reach
With its commanding position in the Saudi market, AWPT is setting its sights on international expansion.
Moussilli outlined a three-pillar strategy for the future, including a focus on sustaining market leadership in Saudi Arabia by capturing new value pools across water and wastewater infrastructure.
Expanding into global markets and leveraging AWPT’s superior operating capabilities and integrated model as competitive advantages is another part of the vision, with diversifying into new environmental services and creating synergies around its water-centric core competencies the final pillar.
This strategy is underpinned by AWPT’s unique ability to grow both top-line and bottom-line performance simultaneously while preserving a strong balance sheet, enabling resilience even amid inflation and rising interest rates.
Saudi insurance market mergers to accelerate amid regulatory push: Fitch
- Agency expects mergers and acquisitions to accelerate
- Several smaller insurers are already in talks with larger rivals
RIYADH: Saudi Arabia’s insurance sector is headed for a wave of consolidation as tougher capital rules and fierce price competition squeeze smaller players, Fitch Ratings said in a new report.
The agency expects mergers and acquisitions to accelerate as many insurers struggle to meet new capital requirements or remain profitable amid intense competition and rising costs.
The shakeout comes as the newly established Saudi Insurance Authority, which took over from the Saudi Central Bank and the Council of Health Insurance in November 2023, steps up efforts to stabilize and modernize the market in line with Vision 2030.
Several smaller insurers are already in talks with larger rivals as they look for ways to shore up their capital positions and ensure long-term survival.
“These measures will be credit positive for the sector in the long term,” Fitch said. “However, they will increase insurers’ regulatory compliance costs, particularly during implementation, adding to pressure on profitability in the short term.”
Growth, but thin margins
The findings come amid a period of rapid change in the Kingdom’s insurance sector. Even with tighter regulations and competitive pressures, the industry remains a vital pillar of the Saudi economy, covering everything from health and motor to property and mega-project risks.
Despite these challenges, the insurance sector is still growing. According to KPMG’s “Saudi Arabia Insurance Overview 2025,” total revenue rose 16.9 percent year on year in the third quarter of 2024, driven by a boom in compulsory medical cover, increased motor vehicle activity, and the Kingdom’s property development surge.
Health insurance, which accounts for roughly 60 percent of the market, saw revenue climb 13.6 percent in the third quarter alone, thanks to mandatory employee cover.
Motor insurance premiums also rose over 20 percent amid a robust auto market, while property and casualty insurance posted 20 percent growth driven by large-scale construction projects.
Profitability remains a sticking point, however. Health insurance margins have been hurt by medical inflation — the rising costs of medical goods and services — which has pushed up claims payouts even as price competition remains fierce.
Arab News has previously reported on how medical inflation, fueled by technological advances, labor costs, and changing health needs, makes it difficult for insurers to improve their combined ratios.
Fitch noted that of the 10 largest insurers, six made an underwriting profit in the first quarter of 2025, but several did so only marginally. Four of the top 10 reported underwriting losses, showing just how challenging the environment remains for even the biggest players
While property, casualty and life insurance offerings remain generally profitable, medical coverage has weaker margins except at the largest insurers, according to Fitch. Motor insurance, the second-largest segment, continues to face aggressive pricing challenges, particularly for compulsory third-party coverage.
A significant regulatory shift is also underway. Starting from January, insurers must now cede 30 percent of their reinsurance to local firms. This move is designed to bolster domestic reinsurance capacity, but it may temporarily raise counterparty risks for insurers since local reinsurers typically have thinner capital bases.
Over time, however, the quota might help local reinsurers build scale and improve risk management, supporting a more resilient market that keeps premium income and jobs within the Kingdom.
Fitch sees consolidation as inevitable — and ultimately healthy — for the sector. As competition intensifies and regulators raise the bar, many smaller players will likely seek mergers or alliances to survive.
This, the agency says, should create a more stable and competitive insurance industry capable of supporting Saudi Arabia’s Vision 2030 transformation.
