Insurance law and regulation in Kingdom of Saudi Arabia

The Saudi Central Bank (SAMA) is the regulator of the insurance sector in the Kingdom of Saudi Arabia (KSA). SAMA administers the implementation of the Cooperative Insurance Companies Control Law of 2003, promulgated by Royal Decree (M/32) dated 02/06/1424H, (the Insurance Law) and its Implementing Regulation of 2004 (the Insurance Regulations) as well as other supplemental rules and regulations relating to the insurance sector. SAMA has since then issued several regulatory documents and instructions to regulate insurance businesses.

SAMA issues licenses to and regulates the carrying out of (re)insurance related activities including, brokerage, consultancy and other insurance related businesses. Any insurance products issued by such business are subject to SAMA’s review and scrutiny. In line with the KSA’s Vision 2030 and the digitalisation acceleration, SAMA has been active on the legislation front and has issued several rules and regulations that support the evolution of the market. SAMA also has a sandbox regulatory framework that can host (among other SAMA-regulated areas) insuretech and other insurance-related initiatives.  

The Insurance Regulations requires an insurer to make the customer aware of the terms, conditions and exclusions of the policy before concluding it.  

The Insurance Consumer Protections Principles issued by SAMA (the Principles) require consumers to always provide complete and accurate information when filling out any forms required by the insurer, and prohibits customers from providing any misleading, false or incomplete information or not disclosing relevant material information. For example, the SAMA approved Policy of Inherent Defects Insurance provides that all rights of the insured under the policy are rendered void if the insured provides false information, wrong description or wrong or incomplete data, or does not disclose information with the intent to defraud the insurer.  

In addition, the Principles require the insured to notify the insurer of any changes to personal information, and failure to do so could lead to the insured losing their rights under the respective insurance policy. 

The Insurance Law and Insurance Regulations are generally silent on the effects or remedies that an insurer may consider in the event its insured breaches a warranty. In early 2020, however, the Insurance Disputes Committee (the IDC), the competent judicial authority to resolve insurance disputes in KSA, issued a landmark decision confirming the effects of breaching a warranty. In its decision, the IDC seems to have implemented warranties in a manner similar to their assessment under English law, which has been regarded as a positive step for insurers. 

The Insurance Law and implementing regulations are silent on the consequences of late notification. However, SAMA has published few standardised / unified insurance policies and they provide for a timeline for notification and reporting. Missing such timelines may be deemed a breach or default under these policies. Nonetheless, consequences of late notification vary from one case to another. Generally, the impact of the delay and the reasons of the delay are assessed to determine whether an insured would rights under the respective policy. 

Complaints can be made against insurers to SAMA at SAMACares website (www.samacares.sa). Alternatively, a petition can be filed before the IDC. 

The Insurance Regulations set out the timeline for settlement of claims. Delay in settlement of claims may lead to the imposition of fines and penalties by SAMA as well entitle the claimant to damages and legal costs. For example, SAMA’s approved Unified Compulsory Motor Insurance Policy provides that if the insurer fails to settle the claim within the prescribed period for no legal reason, SAMA will compel the insurer to settle the claim and indemnify the claimant for any expenses incurred as a result of the loss of use of their vehicle due to the insurer’s delay in settling the claim.

The Rules and Procedures of the IDC of 2014 (IDC Rules) provide that the limitation period for insurance claims is five years from the date of entitlement to the claim. 

Generally, the occurrence of an insured event as specified in the policy and a beneficiary’s claim represents a trigger with respect to third-party liability insurance.

The IDC Rules allow awarding legal costs incurred in bringing a claim. In practice, however, decisions do not generally provide for full recovery of fees. 

SAMA has provided for a definition of an “insurable interest” in one of its FAQs. All insurance policies and products are first submitted to SAMA for approval. When reviewing the proposed insurance product, SAMA would consider the terms including the insurable interest. Insurers in the Saudi market offer various products that cover penalties and fines, such as professional indemnity insurance, D&O and other products that are known to the international insurance markets.