«التأمين»: الانتقال لرأس المال المبني على المخاطر لقياس ملاءة الشركات

The Insurance Authority announced the transition to the mandatory application of the risk-based capital (RBC) framework starting January 1, 2027, to be the approved framework for measuring the financial solvency of insurance and reinsurance companies, replacing the currently applicable framework.

The Authority clarified, according to what was reported by the Saudi Press Agency, that it has taken several regulatory steps accompanying the transition, the most notable of which is the implementation of four simulation experiments over the past years to test the standard formula for calculating the required capital, in addition to conducting a fifth simulation experiment based on 2025 data to test the standard formula and assess the expected impact of this transition on the financial solvency level of the sector. The efforts also included extensive consultations with the sector, which contributed to enhancing the comprehensiveness of the framework and raising its technical level.

The Authority stated that this transition reflects the maturity of the local insurance market and its readiness to adopt advanced regulatory frameworks that support financial stability and sustainable economic growth.

It added that it will contribute to enhancing the regulatory framework and preparing the necessary enablers to support the objectives of the national strategy for the insurance sector, one of its most important promises being to increase the available capital to bear risks in the insurance sector from 25 billion riyals to 50 billion riyals by 2030, in line with the expected growth in the sector's business.

Parallel Application

The Authority indicated that the parallel application phase will commence during 2026, where insurance companies will be required to calculate financial solvency according to the new framework alongside the current framework, based on the guidance document issued by the Authority.

The Authority has provided companies with the option to apply the approved standard formula or develop a fully or partially internal model, provided they obtain prior approval from the Authority.

It confirmed that the risk-based capital framework is in line with global practices for capital requirements in the insurance sector, such as the "Solvency II" system adopted in Europe, with adaptations to suit the nature and characteristics of the Saudi insurance sector.

Strategic Direction

The Authority emphasized the importance of informing the boards of directors of insurance companies and all stakeholders about these changes and their strategic implications, expecting appointed actuaries to play an active role in this phase by organizing internal workshops in coordination with risk, finance, and underwriting departments to contribute to analyzing the financial, operational, and strategic impact of the new framework, ensuring an organized and effective transition.

It indicated that this is an important step to enhance the robustness of the Saudi insurance sector and fulfill the promises of the national strategy for the insurance sector, as part of the national strategy's direction towards enhancing the efficiency and sustainability of the sector in the Kingdom, thereby strengthening the role of the insurance sector in achieving the objectives of Vision 2030.

It reported that the transition to the risk-based capital framework will enable insurance companies to make more flexible decisions while bearing the responsibility of maintaining capital levels commensurate with the nature and size of the risks they face, which enhances confidence in the sector through the ability of insurance companies to manage risks effectively and bear financial responsibility towards their investors and policyholders.

It explained that the flexibility provided by this framework contributes to enhancing the diversification of insurance companies' investments, which also supports economic activity in the financial sector.

Investor Participation

The Authority stated that the new framework allows for enhancing capital through the issuance of subordinated debt instruments, providing insurance companies with additional options to meet capital requirements in line with the growth of their business, and also contributes to enhancing investor participation in the insurance sector.

It pointed out that the framework establishes an advanced culture of risk management within insurance companies, whether at the level of strategic decisions or daily operational processes, benefiting all stakeholders, from policyholders and shareholders to board members, executives, and employees.

The Insurance Authority will continue to issue relevant guidelines and updates, along with continuing its cooperation with insurance companies and all stakeholders, to support the success of this transition and enhance its sustainability.