Under Saudi law, private companies are responsible for the healthcare of employees and their direct dependants. In the past, that has largely been irrelevant because of the free healthcare offered by the government. 'The social contract is being rewritten,' says a Riyadh-based lawyer. 'Government hospitals are overworked and their use will be reserved for Saudi nationals who can't afford healthcare.'

The premiums are to be paid by private employers at a rate set by the medical council, made up of officials from the health and insurance sectors in the kingdom. Mandatory expatriate health insurance will be introduced next September for companies with 500 or more employees. It will gradually be introduced for smaller companies over an 18-month period. For Saudi citizens, it is to be introduced two-three years after expatriates, suggesting it will be in place in 2005. The exact time period will be decided by the medical insurance committee.

However, until the issuance of the new insurance law, expected by the end of the year, it will be impossible to implement any mandatory insurance services. 'I don't know whether we will even be in a position to implement health insurance for expatriates by next September, because NCCI does not want to be the only provider of insurance at that time,' says NCCI's Al-Roubaian. 'It's difficult to see how it can be implemented without letting some existing companies in the market register as insurers.'

The new law will break NCCI's official monopoly on insurance services and make it harder for smaller companies to sell the pseudo-insurance products now on offer. Companies are expected to need a paid-in capital of at least SR 100 million ($26.7 million) to offer basic insurance services.

The lawyer says that many companies are already switching to insurance-based healthcare for expatriate and Saudi employees alike. 'Under the labour laws, employees can theoretically demand to be treated privately at the expense of their employers,' he says. 'Taking out insurance, perhaps with the employee paying 20 per cent of the premium, employers can run down their capital-loss risk and employees know they have good-quality health cover.'