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Saudi Arabia poised to ignite Islamic insurance boom in GCC: report

A separate analysis by UK-based consultancy GlobalData projected that Saudi Arabia’s insurance industry will grow at a compound annual rate of 5.2 percent through 2028, reaching $22.3 billion. File
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Updated 14 August 2024
Nirmal Narayanan
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Saudi Arabia poised to ignite Islamic insurance boom in GCC: report

  • Kingdom’s insurance market experienced significant growth of 27% in 2022 and 23% in 2023
  • Saudi authorities are actively working to reduce the number of uninsured vehicles and introduce new mandatory medical cover
Updated 14 August 2024
Nirmal Narayanan

RIYADH: Saudi Arabia is poised to lead the expansion of Islamic insurance in the Gulf Cooperation Council, with revenues expected to exceed $20 billion in 2024, according to S&P Global. The sector is projected to grow by 15 to 20 percent next year, with the Kingdom playing a crucial role.

This follows S&P Global’s report indicating that Saudi Arabia’s insurance market experienced significant growth of 27 percent in 2022 and 23 percent in 2023, enhancing the overall performance of the region.

“We expect the Saudi market, similar to the past two years, will be the main driver of topline growth in the GCC region. This is because Saudi Arabia, the GCC region’s largest Islamic insurance market, continues to benefit from higher economic growth,” said the US-based credit rating agency.  

The report highlights that Saudi authorities are actively working to reduce the number of uninsured vehicles and introduce new mandatory medical cover, which is anticipated to further drive insurance demand and increase premium income.

A separate analysis by UK-based consultancy GlobalData projected that Saudi Arabia’s insurance industry will grow at a compound annual rate of 5.2 percent through 2028, reaching $22.3 billion. This growth, from $18.19 billion in 2024, is largely attributed to the health and motor segments, which are expected to constitute 86 percent of total gross written premiums.

In contrast, S&P Global’s report notes a decline of nearly 3 percent in the Islamic insurance market outside Saudi Arabia in 2023. This decrease was primarily due to a reduction in premium income in the UAE, the region’s second-largest Takaful market, driven by industry consolidation and rate pressures in motor and other lines.

Takaful is a form of Islamic insurance where participants pool their contributions to provide mutual protection against loss or damage, offering coverage for health, life, and general insurance requirements. 

“We expect the Takaful sector in the UAE will expand by 15 percent to 20 percent in 2024 as motor rates increased substantially over the past 12 months, particularly following this year’s major floods in Dubai and other parts of the UAE,” said the US-based agency.  

The report added: “At the same time, we anticipate that Takaful players in Bahrain, Kuwait, Oman, and Qatar will report more moderate growth rates of about five percent to 10 percent.”  

Stable outlook 

S&P Global noted that credit ratings for insurers in the GCC have remained broadly stable over the past 18 months. The report stated: “We do not expect any major rating actions over the next six to 12 months, as most rated insurers are sufficiently capitalized. Total shareholders’ equity in the sector increased to about $7.6 billion in 2023, from $6.6 billion in 2022, thanks to profitable earnings and several capital increases.”

However, the report cautioned that geopolitical tensions in the region and increased competition could negatively impact the prospects for both Islamic and conventional insurance providers. It highlighted that a regional escalation of the Israel-Hamas war would be economically, socially, and politically destabilizing for the entire GCC region and its banking systems.

According to the analysis, a regional escalation combined with slow global economic growth could impair revenue growth and increase investment volatility for GCC Islamic and conventional insurers alike.

“While we expect overall credit conditions for Islamic insurers will remain stable over the next 6-12 months, consolidation will likely remain relevant as many smaller and midsize Islamic insurers continue to report relatively weak earnings,” said the report. It added, “Even though we expect that the effects of the Israel–Hamas war will remain contained to the region, we note that the risk of regional escalation is increasing. Although this is not our base case, a regional escalation could impair business sentiment in the wider Middle East, including the GCC region, reduce growth prospects, and impair GCC insurers’ investment portfolios.”

Mergers and consolidation 

The report highlighted that increased competition and rising regulatory demands have already led to several mergers in the GCC insurance sector, with more expected in the future.

Consolidation is particularly notable among smaller and midsize players in Saudi Arabia and the UAE. Over the past five to six years, the number of listed Saudi insurers has decreased by about 20 percent, from 34 to 27.

S&P Global noted that mergers are likely to continue in Saudi Arabia, the UAE, and Kuwait, as several Islamic insurers still do not meet the required solvency capital standards.

In July, Buruj Cooperative Insurance Co. and Mediterranean and Gulf Insurance and Reinsurance Co., known as MedGulf, signed a memorandum of understanding to explore a potential merger. The companies announced to the Saudi Exchange that the MoU aims to establish a framework for the strategic transaction through a share exchange offer.

The deal will involve increasing MedGulf’s capital and issuing new shares to Buruj shareholders, based on an exchange ratio to be agreed upon by both parties. If the transaction proceeds as planned, MedGulf will be the acquiring company, while Buruj will be the acquired firm.

2024 outlook

The US-based firm noted that results from the first half of 2024 suggest further improvement in net profits, following record results for GCC Islamic insurers in 2023.

The sector’s aggregate net profit in the region rose to approximately $967 million in 2023, up from about $100 million in 2022. 

“This improvement was mainly driven by the Saudi market, whose underwriting results improved and investment income increased to about $690 million in 2023, from about $345 million in 2022, substantially contributing to overall earnings,” noted S&P Global.  

The report further noted that, for the first time, all 25 of Saudi Arabia’s listed insurers reported a net profit in 2023. This follows a challenging 2021 and 2022, when more than half of the Kingdom’s insurers reported a net loss. 

“The five largest of the 25 listed insurers in Saudi Arabia generated about 73 percent of total insurance revenues in 2023, up from 69 percent in 2022. Saudi Arabia’s largest insurers, the Company for Cooperative Insurance and Bupa, had a combined market share of about 55 percent in 2023,” added S&P Global.  

Although the Saudi market reported an increase in net earnings to about $588 million in the first half of 2024, up from approximately $450 million in the same period of 2023, 14 out of 25 listed insurers in the Kingdom experienced a decline in underwriting results and profits by mid-2024. This suggests a rise in competition. 

Topics: Finance Saudi Arabia Gulf Cooperation Council (GCC) Islamic finance

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Saudi Arabia leads MENA startup funding in April with $158.5m  

Updated 05 May 2025
Nour El-Shaeri
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Saudi Arabia leads MENA startup funding in April with $158.5m  

Updated 05 May 2025
Nour El-Shaeri

RIYADH: Saudi Arabia led startup funding across the Middle East and North Africa in April 2025, attracting $158.5 million across eight deals — accounting for more than two-thirds of the region’s total investment for the month. 

The Kingdom’s dominant performance was largely driven by iMENA Group’s $135 million pre-initial public offering round, placing it ahead of the UAE, which followed with $62 million raised across nine startups. 

In total, MENA startups secured $228.4 million in April through 26 deals, marking a 105 percent increase from March and nearly triple the amount raised in April 2024, according to Wamda’s monthly report.  

Notably, the month’s funding activity featured no debt financing.

“Interestingly, the absence of debt-financed deals in April highlights growing investor confidence in equity-based funding — a trend reflecting a healthier capital environment,” the report stated.  

Morocco ranked third regionally, raising $4 million across two startups, while Egypt lagged behind with just $1.5 million secured by four companies. 

Early-stage ventures led in deal volume, bringing in $49 million through 20 transactions. Late-stage activity was concentrated entirely in iMENA’s pre-IPO round. 

By sector, fintech remained the top draw for investors, attracting $44 million across seven transactions. Traveltech also gained momentum, driven by HRA Experience’s deal, while e-commerce startups raised $2.5 million across three deals. 

Software-as-a-service ventures made a comeback after a quiet first quarter, securing $1.8 million from three transactions.  

In terms of business models, business-to-business startups dominated, raising $180 million across 12 deals.  

Business-to-consumer ventures followed with $43 million from seven transactions, while six companies operating both B2B and B2C models accounted for the rest of the disclosed funding. 

Gender disparities in startup funding persisted in April. Female-led startups secured less than $500,000 in total, while male-founded ventures captured 97 percent of all disclosed capital. Startups co-founded by men and women raised an additional $6.5 million. 

Topics: Investment MENA Saudi Arabia

Closing Bell: Saudi main index closes in green at 11,422 

Updated 05 May 2025
Miguel Hadchity
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Closing Bell: Saudi main index closes in green at 11,422 

Updated 05 May 2025
Miguel Hadchity

RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Monday, gaining 11.45 points, or 0.10 percent, to close at 11,422.95. 

The total trading turnover of the benchmark index was SR5.21 billion ($1.39 billion), as 153 stocks advanced, while 84 retreated. 

The Kingdom’s parallel market, Nomu, also rose, gaining 129.67 points, or 0.46 percent, to close at 28,142.99. This comes as 41 of the listed stocks advanced, while 33 retreated. 

The MSCI Tadawul Index increased by 4.27 points, or 0.29 percent, to close at 1,455.44. 

The best-performing stock was Mouwasat Medical Services Co., with its share price surging 9.97 percent to SR78.30. 

Other top performers included Fawaz Abdulaziz Alhokair Co., which saw its share price rise 9.92 percent to SR14.18, and Saudi Reinsurance Co., which posted a 9.71 percent gain to reach SR53.10. 

Umm Al Qura for Development and Construction Co. recorded the day’s steepest decline, with its share price slipping 3.47 percent to SR25.05.   

Sahara International Petrochemical Co. and Saudi Steel Pipe Co. also saw declines, with their shares dropping by 2.82 percent and 2.58 percent to SR17.90 and SR52.90, respectively.   

On the announcements front, Ades Holding Co. reported interim financial results for the first three months of the year, posting a net profit of SR196.6 million — a 6.3 percent decline compared to the previous quarter. It said that the drop in net profit reflects an increased ratio of depreciation and tax costs to revenue in this period.   

The company’s total comprehensive income saw a 45.7 percent quarter-on-quarter decrease in the first quarter of 2025 to reach SR170.8 million.  

Ades Holding Co.’s share price traded 0.94 percent lower on the main market during today’s session to reach SR14.78.   

In another announcement, Makkah Construction and Development Co. reported a 32.7 percent year-on-year increase in net profit for the same period, reaching SR150 million.   

The company credited the growth to higher revenues from the hotel and towers this quarter, driven by the inclusion of the last nine days of Ramadan, increased mall revenues, and gains from financial assets classified at fair value through profit or loss.   

Similarly, the company’s total comprehensive income rose to SR758 during the quarter, up from SR576 last year.   

The MCDC’s share price traded 1.5 percent higher to reach SR108.20. 

Topics: TASI MSCI NOMU stocks

Saudi Arabia posts $15.6bn budget deficit in Q1 with resilient non-oil growth

Updated 05 May 2025
Dayan Abou Tine
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Saudi Arabia posts $15.6bn budget deficit in Q1 with resilient non-oil growth

Updated 05 May 2025
Dayan Abou Tine

RIYADH: Saudi Arabia recorded a deficit of SR58.7 billion ($15.65 billion) in the first quarter of 2025, driven by declining oil revenues and increased spending to support Vision 2030 development initiatives, according to the Finance Ministry.

According to the quarterly budget performance report, total revenues reached SR263.61 billion, marking a 10.16 percent decline compared to the same period last year.

The drop is primarily attributed to reduced oil revenues, which fell 17.65 percent year on year to SR149.81 billion, driven by ongoing OPEC+ production cuts that curbed export volumes despite relatively steady global oil prices.

Oil income accounted for 56 percent of total government revenues, down from 62 percent in Q1 2024.

In contrast, non-oil revenues continued to grow modestly, rising 2.06 percent to SR113.81 billion, underpinned by structural economic reforms and the Kingdom’s diversification agenda under Vision 2030.

Taxation on goods and services remained the largest contributor to non-oil income, generating SR71.56 billion—up 2.37 percent year on year. Other non-oil revenue sources, including fees and investment returns, added SR25.41 billion, making up 22.3 percent of the non-oil total.

Total government expenditures in the quarter rose 5.39 percent year on year to SR322.32 billion. The increase reflects Saudi Arabia’s continued investment in strategic initiatives and priority development projects aligned with Vision 2030 goals.

Compensation for government employees remained the largest expenditure category, totaling SR146.09 billion—an annual increase of 6.24 percent—and accounting for 45.3 percent of total spending.

Expenditures on goods and services amounted to SR64.63 billion, or 20 percent of the quarterly total, while capital spending represented 8.6 percent. Other operational costs comprised 10.6 percent.

The first quarter deficit was entirely financed through debt instruments, pushing Saudi Arabia’s total public debt to SR1.33 trillion—up 19.08 percent from a year earlier.

Of this, 60 percent was sourced domestically, with the remainder attributed to external borrowing, in line with the Kingdom’s debt diversification strategy.

Despite the fiscal shortfall, the ministry noted that the quarterly figures remain consistent with the government’s 2025 budget plan. Revenues in the first quarter represent 22.3 percent of the full-year target, while expenditures account for 25 percent of the planned annual spend.

Looking ahead, Saudi Arabia’s fiscal outlook may receive a boost from higher oil output. OPEC+ recently announced plans to accelerate the unwinding of prior production cuts, including a June increase of 411,000 barrels per day. Combined with earlier boosts in April and May, the group plans to restore a total of 960,000 barrels per day—reversing 44 percent of the 2.2 million bpd reduction agreed upon in December 2024.

Topics: deficit budget Saudi Arabia Oil revenue non-oil income

Saudi Aramco raises June oil prices for Asian markets

Updated 05 May 2025
Arab News
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Saudi Aramco raises June oil prices for Asian markets

Updated 05 May 2025
Arab News

RIYADH: Saudi Aramco has increased its official selling price for crude oil destined for Asia in June, ending a two-month streak of price cuts, the company confirmed in an official statement on Sunday.

The state-owned oil giant raised the price of its benchmark Arab Light crude by $0.20, setting it at $1.40 per barrel above the average of Oman and Dubai crude prices.

The adjustment comes despite persistent downward pressure on global oil markets due to concerns over rising supply and a fragile demand outlook.

The move follows Saturday’s announcement from the OPEC+ alliance, which agreed to boost oil production for a second consecutive month. The group, which includes both OPEC members and key allies like Russia, plans to increase output by 411,000 barrels per day in June.

Market observers are now closely watching the outcome of the next OPEC+ meeting, scheduled for May 5, which will further clarify the group’s production strategy heading into summer.

Saudi Aramco prices its crude oil across five density-based grades: Super Light (greater than 40), Arab Extra Light (36-40), Arab Light (32-36), Arab Medium (29-32), and Arab Heavy (below 29).

The company’s monthly pricing decisions impact the cost of around 9 million barrels per day of crude exported to Asia and serve as a pricing benchmark for other major regional producers, including Iran, Kuwait, and Iraq.

In the North American market, Aramco set the May OSP for Arab Light at $3.40 per barrel above the Argus Sour Crude Index.

Aramco determines its OSPs based on market feedback from refiners and an evaluation of crude oil value changes over the past month, taking into account yields and product prices.

Topics: Aramco OSP

UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

Updated 05 May 2025
Nirmal Narayanan
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UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

Updated 05 May 2025
Nirmal Narayanan

RIYADH: The non-oil private sectors of the UAE, Kuwait, and Qatar continued their expansion in April, supported by strong demand, improving output, and stable employment conditions, according to the latest Purchasing Managers’ Index surveys released by S&P Global.

In the UAE, the headline PMI held steady at 54 for a second consecutive month, reflecting continued momentum in the country’s non-oil economy. While output growth eased to a seven-month low, firms ramped up hiring at the fastest rate in nearly a year to manage capacity pressures. New orders surged, underpinned by the strongest international demand in five months.

This robust performance aligns with a wider regional trend of economic diversification, as Gulf nations—including Saudi Arabia—work to reduce their long-standing reliance on oil revenues.

“The April PMI results signaled a notable uptick in hiring activity across the non-oil private sector,” said David Owen, senior economist at S&P Global Market Intelligence.

“After several months of mild increases in payroll numbers, despite robust sales growth, job creation rose to its highest level in 11 months.”

Owen noted that the hiring push was largely aimed at easing backlogs, which, while still rising, did so at the slowest pace in six months. “That said, employment growth was still modest overall, adding to suggestions that some firms may be struggling to recruit,” he added.

Any PMI reading above 50 indicates expansion in the non-oil private sector, while a figure below 50 denotes contraction.

Business confidence in the UAE climbed to its highest level so far in 2025, as firms cited strong demand pipelines and positive expectations. Input purchases rose again in April, though at a slower pace than March, which had marked a 68-month high.

“Firms are hopeful that elevated demand levels and strong pipelines, as characterized by steeply rising backlogs, should propel activity higher in the coming months,” Owen said.

Despite increased purchasing and faster supplier delivery times, stock levels remained largely unchanged for the second consecutive month. Business optimism also rose for the third straight month in April.

In Dubai, operating conditions in the non-oil private sector improved at a slower pace due to weaker growth in new business inflows. Nonetheless, order books continued to expand sharply, driving strong overall business activity. Employment rebounded in April after a brief dip in March, as companies aimed to boost capacity. However, firms in Dubai expressed subdued confidence about future activity, with sentiment among the lowest on record.

Kuwait sees strongest output

Kuwait's non-oil private sector saw significant gains in April, with the country’s PMI rising to 54.2 from 52.3 in March—marking one of the sharpest expansions on record since the survey began in 2018.

“It was a bumper start to the second quarter of 2025 for non-oil companies in Kuwait, with a further influx of new orders leading companies to expand output at one of the sharpest rates since the survey began,” said Andrew Harker, economics director at S&P Global Market Intelligence.

The expansion was driven by robust new order growth, supported by competitive pricing and strategic marketing efforts. However, firms faced rising input costs that made it harder to maintain price stability.

While employment rose only marginally, the minimal hiring contributed to a further buildup in outstanding work.

“It remains to be seen, however, whether firms will be able to keep restricting selling prices in a scenario where input costs are rising sharply,” Harker noted. “The coming months will illustrate the extent to which companies are happy to see margins come under pressure in order to keep orders flowing in.”

Kuwaiti firms also reported a notable increase in export orders. Optimism about future output remained high, supported by competitive strategies, product development, and marketing.

Qatar growth slows slightly

Qatar’s non-oil sector saw a slight dip in overall momentum in April, with its PMI falling to 50.7 from 52 in March. Despite the decline, the index stayed above the neutral 50 mark for the 16th consecutive month, reflecting continued—if slower—growth.

Output among Qatari non-energy firms rose for the first time in 2025, but the sector faced a drop in new business and a cooling labor market.

“The PMI indicated continuing growth of the non-energy private sector economy at the start of the second quarter, but there was a loss of momentum owing mainly to a renewed reduction in new business and slower employment growth,” said Trevor Balchin, economics director at S&P Global Market Intelligence.

“The latest figure of 50.7 was the lowest in three months and below the long-run trend level of 52.3, as weaker demand offset an increase in total output.”

Growth was led by the manufacturing, services, and wholesale and retail sectors, while construction activity remained weak despite signs of stabilization.

Job creation remained positive across sectors, although April saw the slowest employment growth since August 2024.

“The employment component remained elevated in April, indicating further strong jobs growth. That said, there was evidence that the recent labor market boom was easing, with the rate of job creation down at an eight-month low,” Balchin said.

Wage growth also slowed to a five-month low but remained among the strongest since the survey’s inception in 2017.

Looking ahead, Qatari businesses maintained optimism for the year ahead, citing growth in real estate, infrastructure development, tourism, and a rising expatriate population as key drivers.

Topics: GCC PMI non-oil Growth GDP

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