GROWTH in the Saudi insurance market has slowed to around 5 per cent a year after rapid increases in the early 1990s. Total premiums written stood at SR 2,852 million ($761 million) in 1997, according to the state- owned National Company for Co-operative Insurance (NCCI). This remains far below the potential size of the domestic insurance market, which NCCI estimates at SR 10,000 million ($2,667 million).

Future growth in the market is, in part, constrained by a failure to raise public awareness of the need for, or benefits of, insurance. There is also a lack of clarity in Saudi Arabia as to the compatibility of insurance with Islam. NCCI is the only registered Saudi insurance company, although a substantial number of foreign companies also have a presence in the market. The Commerce Ministry will not register foreign insurance providers, ostensibly for religious reasons, but they are permitted to operate through local agents or joint ventures registered as trading and contracting or import and export businesses. Foreign insurance companies commonly obtain commercial registration in Bahrain or Dubai and open branch offices in Saudi Arabia. Insurance policies may not originate in Saudi Arabia.

As there is no proper licensing or registration of foreign insurance companies, the market is effectively unregulated. From the buyer's perspective, premiums are generally low but there is no guarantee of the insurer's solvency. Sellers raise doubts about the fairness of competition. This also acts as a constraint on market development, analysts say.

The main areas of growth are in the motor and medical sectors. The value of motor insurance premiums has risen steadily throughout the 1990s and leapt by 20 per cent in 1997. This was largely due to the introduction of compulsory insurance for taxis and hire cars. Medical premiums have grown rapidly in the last decade from a very low base. They increased by 25 per cent in 1997, reflecting government moves to end free medical care for all in the public system. Further austerity measures, along with a high rate of population growth, will ensure that demand for medical insurance continues to increase.

A draft proposal requiring all expatriates to have private medical insurance has been before the cabinet for several years. If and when the proposal passes into law, the total value of annual health premiums would rise to more than $1,000 million from $150 million now, industry sources say. The legislation would also be likely to introduce regulation of the industry. Future moves may extend compulsory medical insurance to certain categories of Saudi nationals.