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6.2.2. The Legal and Regulatory Framework
It is important to note that the Saudi Arabian insurance industry and its legal framework has
relatively a long history which is backdated to the twentieth century with the entrance of the
international oil companies to explore oil where they have insured their equipment, labours,
and their oil tankers. After the establishment of the Saudi Arabian Oil Company (Aramco), the
insurance activities spurred in different sectors.
The first regulation of the industry was the Royal decree no. (M/32) issued on 12/6/1931 to
regulate the court of trade which allocated a full chapter for marine insurance that was called
Sukurtat. The latter was followed by resolutions from the Council of Ministers to regulate the
industry. However, the first real initiative to regulate the sector was the establishment of the
Office of Coordination between the Insurance Companies in 1984 which has established the
Saudi Technical Committee for Insurance Companies to prepare a study on the insurance
industry in Saudi Arabia and give recommendations. The committee’s work resulted in a
proposal for regulating the insurance industry in Saudi Arabia.
In 1985, the first public insurance company the National Cooperative Insurance Company) was
established (under Royal Decree No. (M/5) dated 17/4/1405H - 9/1/1985. Before that, all the
insurance companies in Saudi Arabia were international companies operating through agents
and branches. Among the notable initiatives in the development was the issuance of the Royal
decree no. (M/10) on the enforcement of the Health insurance on the expatriates and regulating
it on 12/8/1999 which was followed by similar resolution for the local people from the Council
of Ministers no. (206) on 21/10/2002. By the end of 2003, the Law on Supervision of
Cooperative Insurance Companies, circulated by Royal Decree (M/32) dated 31/7/2003, was
enacted, followed shortly by the Implementing Regulation of the Cooperative Insurance
Companies Control Law, early in 2004. The purpose of the law and its implementing regulation
was to regulate the insurance sector in Saudi Arabia (Alhumoudi, 2013).
The key regulatory initiatives in Saudi Arabia include the Insurance Corporate Governance
Regulations, the Audit Committee’s regulations on insurance and/or reinsurance companies,
and the Surplus Distribution Policy. The list of the relevant laws, regulations and circulars is
presented in the tables below:
TABLE 12: INSURANCE LAWS DEVELOPMENT IN SAUDI ARABIA
Insurance Laws Date
Anti-Money Laundering Law 25/10/2017
Cooperative Insurance Companies 17/08/2005
Source: SAMA (2019b)