Including one million riyals capital… 6 requirements for subscription activity in the Saudi market

The Authority explained that the introduction of licensing requirements for underwriting activity aims to enhance specialization and experience in this vital activity, and improve pricing accuracy by relying on broader data and deeper analysis of risks, which reflects positively on the quality of insurance services, and also contributes to expanding the insurance market and attracting foreign companies with advanced experience in the field of underwriting.

Licensing.

Licensing Regular

According to the requirements presented, applications for a license to practice underwriting activity are submitted to the Insurance Authority, and the activity may not be practiced except after obtaining the regulatory license, with the requirement that the headquarters and management of the licensed entity be within the Kingdom of Saudi Arabia.

The Authority stipulated for granting the license that the company’s capital should not be less than one million Saudi riyals, with the necessity of obtaining an insurance policy that covers the risks of professional liability resulting from negligence, negligence or error, provided that the insurance cover is not less than three million riyals.

The Authority stressed the need for holders of underwriting positions to have sufficient professional qualifications and practical experience to perform their duties, including holding relevant professional certificates, in addition to the requirement that one-third of the members of the Board of Directors or the Board of Directors be holders of professional certificates or have practical experience in underwriting activity.

Conditions and requirements for granting a license

The Authority indicated that it is evaluating the extent to which the applicant fulfills all licensing conditions, provided that the license application includes a number of basic documents, including The articles of incorporation and bylaws, the organizational structure, and the economic feasibility study, in addition to a three-year business plan.

The business plan must include details of the insurance branches in which the applicant intends to engage in activity, the expected costs for starting the activity, sources of funding, expected growth rates, the number of employees, and plans for qualifying and employing Saudis, as well as the expected annual expenses, estimated financial statements, and plans for opening branches.

The Authority required that any agreements with other parties be attached, in addition to Submitting an irrevocable bank guarantee equivalent to the required capital, issued in favor of the Authority from a local bank, and automatically renewed until the capital is paid in full.

Licensing Procedures

With regard to licensing procedures, the Authority explained that it notifies the applicant within thirty working days from the date of submitting the application whether it is complete or not, indicating the deficiencies, if any, provided that the applicant is given thirty working days to complete the requirements, otherwise his application will be subject to cancellation.

The Authority confirmed that it will decide on the application. Licensing within ninety working days from the date of notifying the applicant of the final completion of his application.

The requirements stipulate that the role of those licensed to practice underwriting activity is limited to accepting risk on behalf of the insurance company without bearing the risk of the company itself, while obliging them to conclude a contract that explains the contracting mechanism and the limits of the risks allowed to be underwritten.

Conditions for practicing support services

The Authority permitted licensees to practice support services provided that they obtain a prior license before starting this work. Emphasizing that it is not permissible to combine the activity of underwriting insurance and underwriting for reinsurance except after obtaining the Authority’s approval.

The requirements obligate licensees to underwrite exclusively for the benefit of the contracted company for each branch of insurance, with the company bearing responsibility for following up on the licensees’ compliance with the terms and conditions of the contract.

The Insurance Authority stressed that failure to adhere to these requirements is a violation of the cooperative insurance companies’ control system and its executive regulations, and the violator will be subject to the statutory penalties stipulated.