The introduction of new legislation on bancassurance will provide new opportunities for insurers to grow their business in Saudi Arabia, a Middle East financial services expert has said.
Tom Bicknell of Pinsent Masons, the law firm behind Out-Law, was commenting after the Saudi Arabia Monetary Authority (SAMA) opened a public consultation on new draft rules governing bancassurance activities in the country earlier this month.
Bancassurance is a term used to describe arrangements that enable insurers to sell insurance products to customers of banks.
Under SAMA's proposals, insurance companies and banks will have to enter into a contract with one another to manage these bancassurance arrangements and an insurer will need to obtain approval from SAMA to offer their products through the banking model.
SAMA said its draft rules aim to "expand the scope of distribution and marketing of insurance products through banks" and will help "facilitate the access of insurance products in obtaining a client's financial needs from one place by regulating the practices of bancassurance in the Kingdom, as well as regulating the relation between the insurance company and the bank".
The regulator's consultation is open until 19 February.
Bicknell said: "In line with the Saudi 2030 vision, we are seeing an exciting number of regulatory changes that will allow for new products and providers to enter the Saudi market. The introduction of bancassurance products will provide customers with more insurance opportunities while providing insurance companies with the opportunity to reach a wider customer base."
The publication of the draft rules on bancassurance is the latest move from SAMA to reform the financial services market in Saudi Arabia. Earlier this year SAMA pressed forward with plans to reform rules relating to payment services in the country.
SAMA's payment services provider regulatory guidelines clarify which activities will be considered payment services in Saudi Arabia and fall subject to regulation outside of the existing framework. Examples include the execution of payment transactions through a payment card or similar physical or digital device, issuing payment instruments, issuing electronic money, the provision of money remittance services, as well as the provision of payment initiation services or account information services.
An electronic wallet company and a payment services firm were recently issued banking licences by SAMA – the first two non-bank financial institutions to be granted such a licence.
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