Shares in the Company for Co-operative Insurance, based in Saudi Arabia and also known as Tawuniya, could be about to run out of steam.
The company was downgraded to "neutral" from "overweight" by TAIB Securities in Bahrain, with a target price of 110.67 Saudi riyals. Shares in the company closed down 0.45 per cent to 110 riyals yesterday.
The stock is up 52 per cent this year and its net profits doubled for the first nine months of the year compared with the same period last year.
Insurance penetration levels in the kingdom have almost doubled in recent years, to 1.02 per cent last year from 0.53 per cent in 2006. Some believe that trend will accelerate if the Saudi government follows through on proposed regulations opening companies up to foreign participation.
But the UAE's experience shows that is not a sure thing.
There are almost 30 insurance companies listed on the Dubai and Abu Dhabi exchanges, more than any other sector, yet they contribute less than 10 per cent to total market capitalisation.
Foreign money in insurance companies is important to reviving liquidity in the sector, said Mohammed Ali Yasin, the chief financial officer at CAPM Investments.
"If you want to attract new investors, you must open [investment] to foreign shareholders," he said.
"Many [insurance companies in the UAE] have not opened their doors to foreigners. Although the law allows 49 per cent of investment from foreigners, some have decided to cap this at 20 per cent, some at 15 per cent, and some not at all," Mr Yasin said.
This is despite many of the country's insurance companies boasting favourable ratings from agencies.
Yesterday, Dubai Islamic Insurance and Reinsurance Company, or Aman, was assigned a "BBB" rating from Standard & Poor's.
Newer companies such as Green Crescent Insurance, which floated on the Abu Dhabi Securities Exchange two years ago, are benefiting from more liquidity but the lack of foreign investment remains a stumbling block for expansion and further increases in liquidity.
"Companies do not want to give control to foreigners but without that there is no liquidity," said Alfred Fayek, the head of MENA equity sales at EFG-Hermes.