Islamic insurers in Saudi Arabia and the UAE are poised for a wave of mergers and acquisitions, driven by regulatory changes and market conditions that favor consolidation. The Saudi Arabian Monetary Authority (SAMA) and the Insurance Authority in the UAE have been pushing for stronger, more competitive insurance entities, particularly in the Takaful (Islamic insurance) sector.
Over the past few years, the insurance markets in both countries have seen significant growth, with Saudi Arabia’s market expanding by 27% in 2022. However, the market remains fragmented, with a few dominant players and several smaller companies struggling with weak solvency and accumulated losses. These challenges are leading regulators to encourage mergers, aiming to create more robust entities that can better serve the evolving needs of the market.
In Saudi Arabia, the establishment of the new Insurance Authority is expected to accelerate this trend. The authority aims to enhance the financial stability of the sector by promoting mergers among smaller companies. This consolidation is seen as a necessary step to build entities capable of handling the increasing demand for health and life insurance products, particularly as the Kingdom’s Vision 2030 initiatives continue to privatize and expand the healthcare sector.
Similarly, in the UAE, the Insurance Authority has been advocating for consolidation within the Takaful sector. The market here is also highly fragmented, with numerous small players that are unable to compete effectively with larger, more established companies. By encouraging mergers, the regulator hopes to create stronger companies that can offer more competitive products and better customer service.
These consolidation efforts are also being driven by the need for compliance with new regulatory frameworks that demand higher capital reserves and more stringent risk management practices. Smaller companies often struggle to meet these requirements, making mergers a more viable option for survival.
Experts predict that this trend will continue over the next few years, with more mergers and acquisitions likely to reshape the Islamic insurance landscape in both Saudi Arabia and the UAE. The goal is to create fewer, but stronger, insurance companies that can offer a wider range of products and services, ultimately benefiting consumers by providing more stability and better coverage options in these markets.
