Saudi Islamic insurance firm SABB Takaful said on Saturday it signed an agreement with the kingdom's flagship carrier Saudi Arabian Airlines to provide its passengers with travel insurance products.

The agreement will cover both Saudi Arabian Airlines' domestic and international flights, SABB Takaful said in a statement posted on the bourse's website.

The products will be compliant with Islamic sharia, SABB added. Saudi Arabian Airlines carried 18 million passengers in 2007.

SABB bank owns 32.5 percent of SABB Takaful and another 32.5 percent is owned by subsidiaries of HSBC. Under Islamic insurance, members contribute to a pool of funds which is used to indemnify participants who suffer a loss.

Saudi Arabia, potentially one of the most lucrative markets in the world, has licensed about 30 insurance firms in the past three years and is considering applications by 10 others to try to open up the insurance sector in the world's top oil exporter.

The largest Gulf Arab economy is one of the world's most under-insured areas, partly due to a belief among some Muslims that insurance could indicate a lack of religious faith.

Saudi Arabia plans to make health insurance compulsory for both the indigenous population and expatriate workers.-Reuters