Aug. 29, 2016

 Ammar Halawani

Saudi Arabia

Ammar Halawani

Acting General Manager, Arabia Insurance Cooperative Company (AICC),

TBY talks to Ammar Halawani, Acting General Manager of Arabia Insurance Cooperative Company (AICC), on the state of the Saudi insurance sector, challenges to growth, and the outlook for the future.


Ammar Halawani has been with the company since 2007, initially as a Deputy General Manager of Finance and now as Acting General Manager. Prior to joining Arabia Insurance, he worked with Deloitte & Touche in New York and the Middle East for 10 years. He has an MBA from Canisius College in New York and both a CPA and a CFA.

How advanced is the insurance sector in Saudi Arabia in comparison to other countries in the GCC?

The market is still in the early stages of development. Other countries in the GCC might have had a head start in terms of the presence of insurance as a major contributor to the economy. However, Saudi Arabia has undergone numerous changes in the development of this sector. The regulator here has done a tremendous job, whereby regulation is in fact more advanced than in other GCC countries in terms of the structure of the industry and where the regulator wants to drive it. There is great potential in the Saudi market with penetration rates being low. If you look at the breakdown of insurance premiums in Saudi Arabia, 75-80% is represented in compulsory lines, such as motor and medical insurance. Soon, people here will start buying insurance in addition to the compulsory medical, motor, and small business insurance policies. They will start insuring their properties and their liabilities. For the foreseeable future you will still see that compulsory lines represent the bulk of the insurance market, but despite the short-term pains of the economy, in the future I believe that great opportunities exist.

What would you say are the main challenges that could limit the sector's potential growth?

There is no denying that the sector faces many difficulties at this moment. There are 34 players and many of them are facing financial difficulties. There are various challenges that are being faced by the industry as a whole and I think the regulator realizes that and is trying to address it. There is severe competition in the market and it is price driven. And for many companies and many clients this is a pure commodity; if I can buy it cheaper elsewhere, I will. On the limitations of finding and retaining qualified talent, the focus is on attracting and retaining qualified Saudi talent because obviously we have Saudization requirements and a duty to society. The fact that economies of scale are not present for SMEs versus the bigger companies presents a challenge in pricing standard products, which is actuarially driven. If you are a big company you obviously have an advantage in terms of the loading structure and a lower expense average, and accordingly a more competitive price on standard products. That being said, companies will be forced to consolidate in the medium to long term to create economies of scale and efficiency and consolidate talent. Until the industry overcomes this rough period, you will still see challenges affecting the financial results of a number of companies here.

Where do you see the company five years from now?

In 2015, we recapitalized by increasing capital by SAR200 million, which parallels our theory of strengthening solvency, our balance sheet, and our situation in the market. What we are doing now is refocusing the company to return it to profitability by cleaning up the portfolio and trying to adapt to market conditions whereby we focus on a certain niche rather than just compete on price. We expect that we will be able to succeed in becoming a more niche, service-based company. We expect to continue to grow and consolidate. We expect that our solvency position will continue to improve and our bottom line will be enhanced through a strategy of better risk selection rather than merely obtaining volume. We will be a major service provider in the insurance industry, and we expect to play a big role in the growth of the industry. As for 2016, we are consolidating and restructuring at present. We are focusing on two things, namely better risk selection and enhancing operational efficiency through of expenses and streamlining services in areas ranging from underwriting to claims and operations. These will be optimized and inefficiencies will be contained.