The clarification became necessary after a change of heart by the government last year. Initially, foreign insurance providers wanting to do business in the kingdom were required to form locally incorporated joint stock companies or halt operations. However, subsequently plans were changed to give existing providers a three-year stay of execution and to allow foreign providers to open branches – apparently lessening the incentive for them to incorporate locally.
The consultation paper proposes setting the minimum capital requirement for foreign branches at SR 100 million ($26.7 million) for insurers and for reinsurers at SR 200 million ($53.3 million). In addition, foreign insurance companies will be required to meet all the capital and solvency requirements that would apply if the company were based in the kingdom.
‘Those who got licences were understandably concerned at the government’s backtracking,’ says a Riyadh-based analyst. ‘Now they are being reassured that there will be no preferential treatment for the branches and that they will be forced to put up the same levels of cash.’