Strategic Direction

Our vision is “To evolve into a large and diversified reinsurer contributing to the growth of our economy aiming to be ranked among the top 50 global reinsurers” which is anchored at the core of our activities. Saudi Re has developed Strategy Towards 2028; a strategic blueprint that will enable the Company to play an anchor role as a National Reinsurer strengthening domestic retention and drive innovation to better capture new and emerging risks in local and international markets.

The strategic plan was formulated with careful consideration of a range of market trends, including economic, geopolitical, social, technical, and technological factors. The strategy continues to center around the following five pillars:

 

Growing economies of scale is a crucial aspect of our strategy, as it enables us to reduce volatility and absorb large losses more easily. By attaining economies of scale, we can make larger investments in developing our capabilities and enhancing our operational efficiency. Furthermore, our scale benefits enable us to earn investment income from premium floats, thereby boosting our investment performance. To support our expansion efforts, we will continue to explore opportunities in high-growth markets in the Middle East and Asia. The strength of Saudi Re brand and our cooperative model provide further advantages in these markets.

Diversification is a crucial element of our strategic approach, enabling us to minimize correlated risks, concentration risks, and accumulation risks: ensuring a more balanced reinsurance portfolio is maintained with reduced volatility. Our efforts to diversify globally have resulted in a sound portfolio that consists of over 40 markets in the Middle East, Asia, and Africa. At present, our international business accounts for 41% of our portfolio.

Saudi Re also continually strives to build strong capabilities that span the entire gamut of operations in the reinsurance industry. Our underwriting team possesses strong professional skills and an in-depth understanding of the regional risk profile, guided by clearly defined risk appetite parameters. Actuarial and analytical teams work closely with the underwriters to judiciously better manage our underwriting portfolios, while our streamlined claims management, supported by technical accounting, ensures efficient operations. Saudi Re actively utilizes retrocession to manage risk exposure and mitigate the impact of volatility. Furthermore, our growth and decision-making processes are supported by our advanced capital modeling capabilities, allowing us to make informed and effective decisions.

At Saudi Re, we pride ourselves on our comprehensive operational capabilities. Our team possesses advanced technological, decision-making, and human resources skills. Our client servicing is well supported by advanced technological, analytical, and communication infrastructure, which enables us to be highly responsive to client needs. Our lean and cost-efficient infrastructure allows for efficient operations. We take a holistic approach to risk management, implementing prudent policies and programmes and closely monitoring the risk management process through the Risk, Technical, and Audit Committees of the Board.

Looking to the future, we are committed to leveraging our competitive advantage in the Saudi market by not only retaining our market share but also capitalizing on the growth opportunities presented by the expanding Saudi economy. Saudi Re is also determined to utilize its expertise and experience in the reinsurance industry to achieve sustainable long-term growth in inherent defects insurance and other classes.

Our strategy involves building and strengthening long-term relationships with clients and brokers, which is managed prudently by our skilled underwriting teams. We seek to establish strong links with high-value counterparties, and our markets in Asia are served by the branch in Kuala Lumpur. Brokers are also integral to our business process. Through leveraging the strong links, we have established with retrocession insurers, we are able to increase our capacity by reducing risk

To maintain the financial health of the Company, financial soundness is continuously monitored using indicators for all criteria, including:

• Capital adequacy and solvency – measured by relevant ratios and internal capital model
• Asset quality – includes quality of investment portfolio and asset liability matching
• Retro and actuarial provisions – strong reserving and a high-quality retrocession programme is in place
• Management strength – effective enterprise risk management programme
• Earnings and profitability – measured by relevant ratios
• Liquidity – a highly liquid investment portfolio is maintained
• Sensitivity to market risk – limited exposure to equity markets

7.1 Overview of New Developments in 2024

The company has successfully completed two significant transactions, reinforcing its capital base and enhancing its ability to seize new opportunities in both local and international markets.

Capital increase

On 15 January 2025, Saudi Re and Public Investment Fund (PIF) have announced the completion of the capital increase transaction through a direct offering, where PIF acquires 23.08% stake in Saudi Re by way of a capital increase and subscription to new shares.

This strategic investment aims to enhance the company’s financial capacity, bolster its credit rating, and strengthen its position as the National Reinsurer. By increasing domestic reinsurance capacity, the investment supports the growth of the Saudi insurance sector, allowing more premiums to remain within the country and improving risk management for local insurers. This move is expected to contribute to the overall financial resilience of Saudi Arabia’s economy.

Probitas divestment

On July 2024, Saudi Re have announced the completion of the sale of its 49.9% stake in Probitas Holdings (Bermuda) Limited to Aviva Insurance for GBP 123 million; six-fold return on the initial investment enhancing our financial position and redirecting the proceeds to support our underwriting capacity for local and international growth initiatives.

This investment enabled Saudi Re to develop experience in international investment and strong understanding of Lloyds market dynamics. Investment in Probitas supported the growth and profitability for Saudi Re for the last six years and reached its potential.

7.2 Progressing On Local Cession Regulation

Local cession was mandated by article 40 of the Implementing Regulations of the Cooperative Insurance Companies Control Law by the Insurance authority. Insurance and reinsurance companies operating in Saudi Arabia are required to maintain a minimum of 30% of reinsure premium at least with a local provider, unless granted approval by the regulatory authority.

In October 2022, The Insurance authority introduced a new mechanism aiming at improving the enforcement of local retention of reinsurance premiums within the Kingdom and increasing the insurance sector’s contribution to the local content. This new mechanism requires insurance companies to cede a share of all their reinsurance treaties, proportional and non-proportional, to the local resonance market with effect from 1 January 2023.

The cession share of treaty contract, under new mechanism, started at 20% in 2023, increased to 25% in 2024 and will reach 30% in 2025.

In November 2024, Insurance Authority extended the 30% application of local cession to cover Facultative contracts stating from 1 January 2025.

This new mechanism is expected to strengthen the domestic reinsurance ecosystem and enable the national reinsurance market to play an active role. The increased retention of reinsurance premiums within the Kingdom is expected to have a positive economic impact and contribute to the financial stability of the sector. Being the only specialized local reinsurer, Saudi Re is well-positioned to support the implementation the new mechanism and benefit from potential growth of its home market.

7.3 Inherent Defects Insurance (IDI) Program

In August 2020, Saudi Re announced the signing of an exclusive reinsurance contract with Malath Insurance Company on behalf of the Saudi insurance industry’s participants in the Inherent Defects Coinsurance Program. As part of the arrangement, Saudi Re acts as the exclusive reinsurer for the Saudi Arabian Inherent Defects Coinsurance Program for five years.

The IDI became a mandatory requirement for contractors involved in private sector construction projects, following the Council of Ministers Resolution No. 509 issued on 5 June 2018. To support the implementation of the IDI programme, The Insurance authority issued a standard policy wording for the IDI cover.

The IDI policy has a duration of 10 years for the cover; Saudi Re has put in place retrocession protection as a risk management measure to manage this long-tail business. The IDI programme underwent various implementation phases and during the year 2022 the programme witnessed an improved enforcement. In 2024, X 614 million of GWP is booked under IDI class of business which represents 26% of Saudi Re’s GWP. IDI programme is among the key strategic initiatives as the advancement of IDI implementation stimulates growth for Saudi Re and reflects on its financial performance.

7.4 Credit Ratings

The credit rating of an insurance company plays a critical role in the sector, as it indicates the Company’s level of solvency and creditworthiness, its ability to meet its obligations to customers and creditors, and its financial performance. Credit ratings also assist investors in assessing a company’s strategic approach, risk management, and governance.

Saudi Re was assigned an “A-” long-term issuer credit and insurer financial strength rating and a “gcAAA” GCC regional scale rating, with a stable outlook, by S&P Global Ratings in 2023. S&P noted that Saudi Re has continued to strengthen its competitive position through profitable business growth and diversification. The Company’s exposure to catastrophe and other large risks is relatively modest, and capital adequacy remains excellent in S&P’s model. The stable outlook reflects S&P’s expectation that Saudi Re will maintain excellent capital adequacy and continue to profitably expand and diversify its business over the next two years. S&P also views Saudi Re’s governance practices as effective and appropriate, and the consistency in strategy, and management expertise and experience as a benefit to the Company.

Moody’s affirmed Saudi Re’s “A3” Insurance Financial Strength Rating (IFSR), with a positive outlook, in 2024. The rating reflects the Company’s strong brand and market position in Saudi Arabia as the sole reinsurer and its growing presence in the target markets of Asia, Africa, and Lloyd’s. It also reflects Saudi Re’s preferential position in the Saudi market and its strong asset quality evidenced by its conservative investment portfolio. The rating also reflects the Company’s strong capital adequacy, non-existent leverage, and good access to capital markets in Saudi Arabia, given its listing on the Saudi stock market, in addition to a broad investor base. The expanded capital base is expected to provide a platform that helps Saudi Re strengthen its market position in the broader Middle East region while providing additional capacity to support insurance market growth in Saudi Arabia and pursue further international expansion opportunities to diversify its business in line with the Company’s strategic plan.

The two A-level ratings, A- from S&P and A3 from Moody’s, reinforce the confidence of clients, shareholders, regulators, and all stakeholders of Saudi Re and its future. These ratings are critical in ensuring Saudi Re’s financial ability when dealing with reinsurers and in supporting the Company’s growth efforts in the international markets.

7.5 New products and pools

Over the past year, the Company has strategically expanded its product lineup, reinforcing its market presence and responding to industry needs.

In October 2024, the Company announced signing a contract with Al Etihad Cooperative Insurance Company to provide reinsurance support for the Employer’s Default, a reinsurance contract to provide insurance coverage for the financial dues of non-Saudi workers in the event of delinquency by entities of the private sector, in accordance with the agreed terms and conditions.

In December 2024, the Company announced signing a contract with Walaa Cooperative Insurance Company providing a reinsurance support for Surety Insurance Bond pool, a reinsurance contract on Surety Insurance Bonds Coinsurance Programme. The Programme is a financial guarantee solution that aims to ensure contractors meet their contractual obligations on construction projects developed for the PIF Development Companies.