.Estimates of financial losses of up to 50% of its capital
successive losses of insurance companies operating in Saudi Arabia, which reached according to specialists to nearly 50 per cent of its capital for many companies, pressing on the insurance sector policy, to get out of the financial crises that pursuing these companies and so raise the value of the policy in the sectors of vehicles and health to nearly 25 per percent, or reject individual insurance applications in the new year 2015, while insurance companies raised their prices in the medical sector with the renewal of contracts ending in the current year.
The report issued by the Saudi Arabian Monetary Agency, pointed out that the insurance companies operating in the Kingdom faced in 2013 a series of challenges that threatens its career in the local market, including low financial margin suitability of a number of companies, so a lot of companies tried to strengthen the technical reserves, required from monetary Foundation, to comply with the oversight regulations and instructions, since the size of these reserves is associated with the company's size and risks that secured them, to ensure the adequacy of these reserves to cover future obligations, and strengthened if inadequate, for the purpose of protecting policyholders and to ensure that there are sufficient financial resources for the settlement of potential insurance claims.
These actions, according to specialists, will pay all insurance companies to reconsider the pricing policy provided to the beneficiary, which said by Abdul-Karim al-Tamimi, a specialist in the insurance industry, that the size of the losses was very big on working in this sector, and this losses that reached to the reserve companies will oblige them to take more precise steps in the coming years based on raising prices to more than 25 per cent of what it is now.
Abdul-Karim al-Tamimi said, that in the past there was a fatal error in the method of calculating insurance premiums on vehicles, especially in comprehensive insurance, as it was done by calculating a percentage of the vehicle value does not exceed 4 per cent, and if the vehicle is not equal to 50 thousand riyals , means that Real premium value is 2000 riyals, which is very little value compared with what borne by the company of costs in the event of an accident to the vehicle, pointing out that the majority of companies in the coming period will resort to lift the vehicle, and will not provide service for individual cases, whatever the price of the policy, because it believes that the size of the losses will be greater than the value of the service. This trend confirms what the latest statistics issued from Monetary Agency showed, for the marked high in the number of claims settled by insurance companies, which reached at the end of 2013 nearly 15.9 billion riyals, an increase of 5 billion riyals from what the situation was in 2012, which amounted to 10.9 billion riyals, a rise of 45.8 per cent compared with a rise of
30.3 percent from 2011 to 2012.
Tamimi confirmed that there are no other options for companies only raise insurance rates, there will be no way out for companies from the local market if they were quick to correct the situation, as the health insurance companies did although it is a temporary solution.
From his point of view, Marwan al-Sharif, an economist believes, that some companies are still suffering due to non-application of appropriate pricing, in the past years and which will reflect on them, as the price of the saled documents was not based on a technical and economic criteria in addition to the standard actuarial, and that is why large financial losses occurred by the end of 2013, so it is expected that these companies are working to avoid these prices with the renewal processes of the service.
Al Sharif said that there are companies that asked by Monetary Agency to overcome this situation after they reached 75 per cent, which is the big red line to correct their position or to stop completely, or raise the company's capital to get out of the danger zone, a measure that allows the continuation of such companies without risk in the coming period.