Saudi Arabia: New Compulsory Insurance

L O C K T O N C O M P A N I E S

Market Update August 2014

Following a deadly fuel tank explosion in the capital city of Riyadh in late 2012, local authorities decided to ensure adequate protection was put in place for the general public when major incidents occur. Through the work of the General Directorate of Civil Defense of Saudi Arabia, the authority responsible for the protection of the Saudi Arabian population from events such as fire hazards and natural disasters, and the Saudi Arabian licensing regime, a new law requiring certain businesses to place compulsory third-party liability insurance came into force February 21, 2014.

Although the law was initiated in late February, it has yet to be fully enforced by local authorities. The Civil Defense is currently working with SAMA, the Insurance regulator in Saudi Arabia, to finalize the law. SAMA has already begun consulting with the local marketplace, and further updates are expected within the next three to six months.

A new law requiring certain businesses to place compulsory third-party liability insurance came into force February 21, 2014

Market Update, Saudi Arabia

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Several key features of the law have already been agreed upon:

� The new law will apply to both the private and public sector. It will apply to high-risk plants, factories, and manufacturing operations, as well as businesses exposed to the general public such as shopping malls, restaurants, schools, and hotels.

� The Civil Defense authority will be able to ensure the law is complied with by enforcing the requirements as part of its licensing functions, i.e., businesses that do not comply will not be able to renew their licenses.

� The cover provided will necessarily be written on a cooperative insurance basis and will have to be preapproved by the Saudi Arabian Monetary Agency.

While there are still details that must be finalized, this law should have a substantial impact on the growing insurance market of Saudi Arabia. Some insurance experts are predicting that the initiation of this law could double the size of the insurance market, given that many schools, shopping centers, and restaurants do not currently purchase insurance.