Insurance Mergers Accelerate in Saudi Arabia, Redrawing the Competitive Landscape

28/08/2025 04:31 AST

Saudi Arabia's insurance sector is witnessing a surge in mergers and restructuring, driven by rising operating costs, capital adequacy challenges, and intensifying competition in a rapidly expanding market fueled by large-scale government projects and the expansion of mandatory coverage.

Following the announcement of a binding merger agreement between Enaya Cooperative Insurance and Saudi Salama, Malath revealed it has extended a memorandum of understanding to study a potential merger with Liva Insurance, underscoring the widening scope of consolidation in the industry.

Enaya-Salama Merger
On August 14, 2025, Enaya and Salama signed a binding merger agreement under which Enaya will be absorbed into Salama. The deal involves transferring all Enaya's assets, rights, and obligations to Salama in exchange for issuing 18.89 million new ordinary shares with a nominal value of SAR10 each to Enaya's shareholders.

Upon completion, Enaya shares will be delisted, with its shareholders receiving 0.8215 Salama shares for each Enaya share. Enaya's stock was valued at SAR6.62, reflecting a 9.53% drop in its pre-deal closing price. The companies noted that a detailed timeline and cost estimates will be disclosed once regulatory approvals are secured. The agreement follows a non-binding memorandum signed in February and clearance from the General Authority for Competition in June.

Malath-Liva in Talks
Separately, Malath announced a six-month extension of its memorandum of understanding with Liva, signed late last year, to evaluate a potential merger under which Liva would be folded into Malath. The move comes as the Saudi insurance regulator canceled licenses of 28 companies in May 2025, part of corrective measures initiated in August 2024 to strengthen the sector's stability and protect policyholders.

Growth Opportunities and Risks
According to S&P Global Ratings, Saudi Arabia's insurance market offers significant growth prospects. The market has doubled in size since 2020, driven by mega-projects and population growth. Five large players currently control 70-75% of revenues. Mergers and capital raising are expected to bolster solvency, while life and savings insurance - currently only 5% of premiums - present untapped opportunities.

Survival Strategies
Mohammed Al-Faraj, Senior Asset Management Executive at Arbah Capital, noted that the sector's aggregate profits dropped 46.5% year-on-year in the second quarter of 2025, exposing financial and operational weaknesses among smaller firms.

He stressed that consolidation is essential for survival, while larger players like Bupa Arabia, Tawuniya, and Al Rajhi Takaful are positioned to lead through acquisitions and partnerships.

Al-Faraj added that future growth will depend not only on health and motor insurance but also on emerging areas such as cyber insurance, innovative health products, surety bonds linked to government projects, and long-term savings.

Asharq Al Awsat