Why insurance is crucial to the success of Saudi Vision 2030

Over the past eight years, Saudi Arabia’s ambitious Vision 2030 has served as a transformative blueprint for its future. Focusing on three pillars – a vibrant society, a thriving economy, and an ambitious nation – the national strategy has spurred significant structural reforms in the Kingdom. 

In line with Vision 2030's goal of establishing Saudi Arabia as a global business hub, the Kingdom's increasingly diversified economy and growing population present a compelling opportunity for the insurance sector. According to Vision 2030’s Financial Sector Development Programme (FSDP), insurance is one of the most important financial service sectors that supports all other economic activities and maintains their stability. FSDP aims to increase life insurance spending per capita to SAR 45 by 2025, up from SAR 33 in 2019, and raise the sector's overall contribution to non-oil GDP from 1.9% to 2.4% in the same timeframe. This growth is further supported by the Saudi Insurance Authority (IA), which began operations in November 2023, providing dedicated regulatory oversight and promoting stability.

The link between insurance and economic growth

A robust and sophisticated insurance sector is integral to socioeconomic progress in any modern nation. Countries with higher insurance penetration rates are found to have smaller infrastructure investment gaps – both being correlated with GDP levels. 

In recent years, Saudi Arabia has supercharged its insurance sector in alignment with Vision 2030. From mandatory motor and health insurance to stronger welfare systems and leveraging InsurTech – the Kingdom has prioritised the development of a robust insurance ecosystem.

The FSDP also prioritises key areas like FinTech, healthcare, and improving the overall quality of life, all of which intersect with the insurance industry. For example, the programme aims to increase the share of medical insurance to 45% by 2025, reflecting the importance of accessible healthcare within Vision 2030. Similarly, increasing motor insurance penetration to 77% underscores the focus on safety and regulation within a rapidly growing automotive market. These targets demonstrate the government's commitment to leveraging insurance as a tool for societal and economic progress.

What is notable is that the Kingdom is not just setting targets but also creating a supportive regulatory environment. Initiatives such as health and motor insurance mandates have increased insurers’ ability to introduce new products, adopt digital technologies, and ultimately feel more confident to ‘take risk’. Meanwhile, the formal adoption of IFRS 17 and IFRS 9 standards has brought more transparency to financial performances.  The reinsurance sector is also seeing the benefits of new mandates requiring insurers to allocate at least 30% of their cessions to domestic reinsurers. This decision not only strengthens the financial capacity of local reinsurance players but also reinforces risk appetite within the Kingdom, encouraging greater confidence and participation in underwriting complex or large-scale risks. It supports the development of local technical knowledge and actuarial expertise, helping to build a more self-reliant and sophisticated insurance ecosystem. Over time, this is expected to enhance the resilience and competitiveness of Saudi Arabia’s reinsurance market on both regional and international levels.

This growth is already evident. Over the past five years, gross written premiums (GWP) in the Kingdom’s insurance sector have risen by 72.8%, from SAR 37.9 billion in 2019 to SAR 65.5 billion in 2023, driven by health and general insurance. More recently, the IA reported that GWP stood at SAR 58.3 billion in the first nine months of 2024, growing by more than 16% compared to the same period in 2023. This could lay the groundwork for increased consolidation in the sector, with the potential for a rise in mergers and acquisitions (M&A) as stronger, better-capitalised entities look to scale and compete more effectively. This should lead to broader outcomes—beyond just structural change—including enhanced risk retention, a deeper risk appetite, and improved financial resilience across the industry. 

Supporting new growth streams

As Saudi Arabia aims to quadruple annual foreign direct investment (FDI) inflows to SAR 375 billion or USD 100 billion by 2030, maintaining investor confidence is key. Insurance provides the necessary security and confidence for both domestic and foreign investors, mitigating risks associated with large-scale projects and fostering a stable investment environment. The Kingdom’s recent efforts to boost transparency and ease the process of investment is reflected in its rising status on the Kearney Foreign Direct Investment (FDI) Confidence Index. S&P most recently raised the Kingdom’s rating to A+, reiterating improved confidence in the Saudi economy.

Beyond large-scale projects, insurance also supports – and protects – small and medium-sized enterprises (SMEs). These businesses are the engine of economic diversification and job creation, and the Kingdom aims to increase their contribution to GDP from 20% to 35%. However, SMEs often face challenges in accessing adequate insurance coverage, struggling with issues such as affordability, a lack of understanding of their specific needs, and the absence of tailored products that address their unique risks. They may also find insurance proposal forms and application processes complex and often lack access to expert guidance to help them navigate the requirements.

The recent surge in new business registrations, particularly amongst women and young entrepreneurs, underscores the dynamism of the Saudi SME sector and the growing demand for bespoke insurance solutions. This demand presents a significant opportunity for insurance market players to develop innovative products and services that cater to the specific needs of this vital segment. Tailored insurance solutions can help mitigate operational risks, supply chain disruptions, and market fluctuations, empowering SMEs to thrive and contribute to the Kingdom's economic growth.

Adapting and thriving with changing times

The insurance industry itself is undergoing a period of rapid transformation, driven by rising demand, and technological advancements. Climate change, cyberattacks, pandemics, as well as broader geopolitical and economic shifts, present significant challenges to businesses. Insurance empowers businesses in times of uncertainty by providing financial protection against unexpected losses such as property damage, liability claims, business interruption, or cyberattacks, allowing them to recover more quickly and maintain continuity. It enables companies to take calculated risks, invest in growth, and explore new markets with greater confidence, knowing they have a safety net in place.

InsurTech, the convergence of insurance and technology, has changed the way insurance services are provided. Traditional risk assessment models have shifted to a more agile and innovative approach. While InsurTech solutions in the Kingdom currently largely focus on price aggregation services, there remains room to adopt advanced technologies, such as AI and data analytics, to enhance underwriting, claims settlement and risk management. The Saudi Insurance Authority's proactive regulatory approach is fostering innovation in the sector. Most recently, the Authority launched a legislative sandbox to create a regulated and risk-limited environment to test new solutions and innovations. aiming to create a safe, regulated, and risk-limited environment for entrepreneurs and companies to trial new products, services, and business models related to insurance activities.

From where we stand, it is evident that insurance is a strategic investment in Saudi Arabia's future, essential for realising Vision 2030. Orient Insurance is proud to be part of this transformative journey, bringing our expertise and commitment to innovation to support the growth of the Saudi insurance market and the successful realisation of Vision 2030.