The net income for the Saudi Arabian insurance sector fell by 55 per cent to about SR1.1 billion ($299 million) in 2017 when compared to SR2.5 billion the previous year, according to S&P Global Ratings.

In addition, the sector posted a modest decline in gross premiums written (GPW) and a slim increase in overall shareholders’ equity, stated the agency in its report.

While overall credit conditions in the market remained supportive in 2017, S&P said its recent rating actions on Mediterranean & Gulf Cooperative Insurance and Reinsurance Company (MedGulf KSA) and Tawuniya/The Company for Cooperative Insurance reflected some company-specific issues.

The decline in the net income follows an increase in earning by 140 per cent in 2016, where risk-based actuarial pricing was more consistently applied, said the ratings agency.

Overall, net earning in 2017 decline mainly due to the materially weaker results of Tawuniya and Medgulf, the largest and fourth-largest insurers in the market, respectively.

While Tawuniya generated a net loss of SR147 million in 2017 due to additional reserving requirements, compared with a net profit of SR801 million in 2016, Medgulf reported a loss of SR388 million due to bad debt provisioning against a a profit of SR68 million in 2016, said the ratings agency.

S&P said it expected the Saudi insurance sector to remain profitable this year. However, it cautioned that pressure to reduce motor rates – combined with the risk of pricing additional medical benefits without historic date -could lead to lower earnings, it added.-TradeArabia News Service