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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:

T

ABLE

12:

I

NSURANCE

L

AWS

D

EVELOPMENT IN

S

AUDI

A

RABIA

Insurance Laws

Date

Anti-Money Laundering Law

25/10/2017

Cooperative Insurance Companies

17/08/2005

Source: SAMA (2019b)