Regulatory approval for Saudi Arabia’s insurance companies to sell insurance cover for Covid-19 to citizens travelling abroad will be a positive step and will help the kingdom's insurance sector to improve their earnings.
“It is certainly a positive thing. Any new line of revenue is good for the insurance sector,” Pritish Devassy, head of equity research at Riyadh-based Al Rajhi Capital said.
Saudi Arabia, the Arab world’s biggest economy, reopened its borders in May after more than 14 months and loosened travel curbs on its own citizens. The kingdom also allowed inbound travellers from 11 countries, including the UAE, from Sunday.
Ahead of the opening of the kingdom's borders on May 17, the Saudi Central Bank and the Council of Cooperative Health Insurance approved the sale of a new travel insurance product to citizens travelling abroad, which provides cover for Covid-19 infections, too.
The aim is to provide Saudi citizens access to "appropriate health care" if they are infected with the coronavirus during their travel, the Central Bank said in a May 5 statement.
It also includes "coverage for life-threatening medical cases in various countries around the world and travel-related risks including quarantine procedures, cancelling or missing trips, medical expenses and medical evacuation in cases of emergency", the statement said.
There are 12 insurance companies in Saudi Arabia currently providing coverage against Covid-19 infection for travellers coming to the kingdom, Argaam quoted an insurance sector official as saying.
However, it is not known how many companies in the kingdom are providing or plan to provide Covid-19 cover for outbound travel by citizens.
“Both products [Covid-cover for inbound and outbound travellers] are available in Saudi Arabia,” Mr Devassy said.
Tawuniya, the Riyadh-listed insurance company, is currently selling Covid cover to citizens for 357 Saudi riyals ($100), which remains valid for 30 days from the date of travel.
It provides a maximum of 650,000 riyals of medical cover and 14 days of quarantine at 450 riyals per day up to 14 days, according to the company’s website.
However, the overall impact of both types of products sold to customers is expected to be small in terms of the industry's gross written premiums (GWP). About 30 insurers operate in Saudi Arabia's crowded market, which recorded GWP of more than $10 billion last year, according to S&P data.
“In 2019 there were around 20 million international inbound travellers to KSA, and in 2021 even if we assume 3 million this year, revenue from this line would be much lower than the full potential possible,” Mr Devassy said.
The profitability of Saudi insurers after the approval to sell Covid cover in the coming quarters will “depend on the premiums charged, loss ratios and the number of travellers buying the product as [the] travel industry globally is still facing uncertainty”.
Insurers having an international presence may have an advantage as they have “the global know-how in terms of what is the premium that should be charged and costs to expect”, Mr Devassy said.
