The Saudi Arabian Monetary Authority plans to raise the minimum capital requirements for insurers, encouraging them to consolidate, Reuters reported, citing "two people with direct knowledge of the matter" and industry analysts.
SAMA could force companies to hold significantly more capital than the current minimum requirement of 100 million Saudi Arabian riyals for insurers and 200 million riyals for reinsurers, the sources said, requesting anonymity.
Health insurers in the country have suffered as expatriates have left, and the economy has gone into recession. The authorities want weaker firms to tie up with stronger ones, one source said.
The changes, which would also impose greater internal risk controls, were discussed at a meeting between SAMA officials and senior insurance executives in the week of Oct. 9, the sources said. According to one, central bank officials said half of the companies that are here today would disappear.
However, one source warned that "if you put two bad apples together, you may just end up with one even bigger bad apple." The sources also said the central bank is reluctant to let firms fail because the market is not used to liquidations.
As of Oct. 11, US$1 was equivalent to 3.75 Saudi Arabian riyals.