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Insurance Sector

Insurance (Draft)

Laws and Regulations

Implementing Regulations of the Cooperative Insurance Companies Control Law

Definitions

Article One

The following words and statements mentioned in this implementing regulations, wherever they occur unless otherwise provided in the text, shall have the meanings indicated below:

1.	Law: Law on Supervision of Cooperative Insurance Companies promulgated by Royal Decree No. (M/32) dated 2.6.1424 H, corresponding to 31.7.2003.
2.	Implementing Regulations: Implementing regulations provisions of the Law on Supervision of Cooperative Insurance Companies.
3.	Governor: The Governor of the Saudi Arabian Monetary Authority.
4.	SAMA: The Saudi Arabian Monetary Authority.
5.	Person: A natural person or a juristic entity.
6.	Insurance Supervisor: A government agency or public institution responsible for the supervision and control of the insurance sector.
7.	Insurance: Mechanism of contractually shifting burdens of pure risks by pooling them.
8.	Reinsurance: Transfer of the insured’s risk from the insurer to the reinsurer and to indemnify the insurer by the reinsurer for any payments made to the insured against damages or loss.
9.	Facultative Reinsurance: An optional case-by-case method of reinsurance. The reinsurer has the option to accept or neglect the offered risks.
10.	Treaty Reinsurance: Occurs when the primary insurers cede insurance of certain risks within certain amounts & percentages to the reinsurer and the reinsurer has agreed to accept reinsurance of the assigned risks.
11.	Quota-Share Reinsurance: A proportional type of reinsurance treaty, whereby the insurer is required to cede certain risks within agreed percentages to the reinsurer and the reinsurer has agreed to accept the business.
12.	Excess of Loss Reinsurance: A nonproportional type of reinsurance treaty whereby the insured is required to cede certain risks within specified amounts in excess of the loss amount, which the insurer has agreed to accept. The reinsurer undertakes to accept the insurance on the assigned risks.
13.	Company: A public joint stock company conducting insurance and/or reinsurance activities.
14.	Insurer: An insurance company that accept insurance contracts directly from insured(s).
15.	Reinsurer: an insurance or reinsurance company that accept insurance contracts from another insurer.
16.	Insured: A natural person or juristic entity, which has entered into an insurance contract.
17.	Insurance Policy: Legal document/contract issued to the insured by the insurer setting out the terms of the contract to indemnify the insured for loss and damages covered by the policy against a premium paid by the insured.
18.	Contribution (Premium): Amount offered by the insured to the insurer in exchange for the insurer’s acceptance to indemnify the insured for loss / damages resulting directly from a covered risk.
19.	Beneficiary: A natural person or juristic entity to whom the benefit(s) under the insurance policy is assigned as a result of a covered loss.
20.	Insurance Services: Professional activities related to the insurance and reinsurance sector.
21.	Insurance and Reinsurance Services Provider: A natural person or juristic entity that is licensed to engage in the insurance and reinsurance services or activities, excluding underwriting, permitted in the Saudi Arabia.
22.	Person Providing Insurance and reinsurance Services: A natural person that is licensed to engage in the insurance and reinsurance services or activities permitted in Saudi Arabia who is employed by an insurance services provider.
23.	Insurance Agency: A juristic entity that for compensation represents the Company to solicit, procures and negotiates insurance contracts.
24.	Insurance Brokerage: A juristic entity that for compensation represents insureds or prospective insureds to solicit, procure and negotiate insurance contracts.
25.	Insurance Advisor: A natural person or juristic entity who provides insurance consultative services
26.	Loss Assessor and loss Adjuster: A juristic entity that examines and inspects the insurance risk before it is insured, inspects the damages after they occur to determine the reasons for the loss, assesses the value thereof, and assigns liabilities.
27.	Insurance Claims Settlement Specialist (Third Party Administrator): A juristic entity that investigates and assesses losses, and negotiates settlements on behalf of the insurance company.
28.	Actuary: Person who conduct various statistical and probability theories whereby services are priced; liabilities are assessed and provisions calculated.
29.	Underwriting: The process of evaluating and accepting of insurance risk.
30.	Retention: The amount of risk kept by an insurance company in its own books, in comparison with insurance risks ceded to a reinsurance company.
31.	Solvency Margin: Minimum standard of financial health for an insurance or reinsurance company, where assets exceed liabilities.
32.	Technical Provisions (Reserves): Insurance liabilities, i.e. the value set aside to cover expected losses arising on a book of insurance policies and its financial obligations.
33.	Statutory Reserves: Percentage of profit that a company must set aside as provided under Article (15) of the Law.
34.	Surplus Distribution: Method by which profit of insurance and reinsurance companies is distributed among shareholders and policyholders.
35.	Reciprocal Exchange: Unincorporated association with each insured insuring the other insureds within the association. Each participant in this pool is both an insurer and an insured. An attorney in-fact administers the exchange, to include paying losses, investing premium, recruiting new members, underwriting new and renewal business, receiving premium, and exchanging reinsurance contracts. Members share profits and losses in the same proportion
36.	Self-Insurance: Retention of any risk by structured means, i.e. the company that is retaining the risk has set up a fund against a future event that is fortuitous and outside the control of the company.
37.	Financial Derivatives: A contract whose value is based on the performance of an underlying financial assets, indexes, or other investments.
38.	Risk: Situation involving the chance of loss or no loss, but no chance of gain.
39.	Compliance Officer: A natural person that is concerned with regulatory work to ensure compliance with all rules and regulations.

Objectives of the Law and the Implementing Regulations

Article Two

Objectives of the Law and its Implementing Regulation:

1.	Protection of policyholders and shareholders.
2.	Encouraging fair and effective competition.
3.	Enhancing the stability of the insurance market.
4.	Enhancing the insurance sector in the Kingdom, and provide training and employment opportunities to Saudi nationals.

Classes of Insurance

Article Three
Insurance is divided into insurance and reinsurance business activities, and it covers the following insurance classes:

First: General Insurance

1.	Accident and liability insurance including the following:
	a.	Personal Accident Insurance.
	b.	Work Related Insurance.
	c.	Employer’s Liability Insurance.
	d.	Third Party Liability Insurance.
	e.	General Liability Insurance.
	f.	Product Liability Insurance.
	g.	Medical liability Insurance.
	h.	Professional Liability Insurance.
	i.	Theft and Burglary Insurance.
	j.	Fidelity Insurance.
	k.	Safe Burglary Insurance inside the premises and in transit.
	l.	Any other Liability Insurance
2.	Motor Insurance: Provides coverage against losses and liability related to motor vehicles, excluding transport insurance.
3.	Property Insurance: Provides coverage against fire, theft, explosions, natural phenomena, civil disturbances, and any other insurance included under this class of insurance.
4.	Marine Insurance: Provides coverage for goods in transit and the vehicles of transportation on waterways, and any other insurance included under this class of insurance.
5.	Aviation Insurance: Provides coverage for airline hulls and liability against passengers and third parties, freight transport by air, and any other insurance included under this class of insurance.
6.	Energy Insurance: Provides coverage for oil, petrochemical, other energy installations, and any other insurance included under this class of insurance.
7.	Engineering Insurance: Provides coverage for builder’s risks, construction, mechanical, electrical, electronic, and machinery breakdown, and any other insurance included under this class of insurance.
8.	Other Classes: includes all recognized classes of general insurance not mentioned above.

Second: Health Insurance
Health insurance provides individual or group coverage for medical costs, medicines, medical and medications requirements as well as management of medical programmes.

Third: Protection and Savings Insurance

1.	Protection Insurance: Provides individual or group coverage for death related consequences, and permanent and partial disability.
2.	Protection and Savings Insurance: Provides individual or group coverage for death related consequences, and permanent and partial disability with a saving / retirement plan for an additional premium paid by the insured.
3.	Other Protection and Savings Insurance: It includes other classes of insurance in the protection and savings insurance not mentioned above.

Licensing Requirements

Article Four

First: Insurance and/or Reinsurance Companies:

A license application including the following shall be submitted to SAMA:

1.	Completed licensing application.
2.	Memorandum of Association.
3.	Articles of Association
4.	Organizational structure
5.	Feasibility study.
6.	Five-years business plan that shall include as a minimum, the following:
	a.	Classes of insurance that will be undertaken by the Company.
	b.	Ability to cede or accept reinsurance treaties for the classes the company intend to reinsure.
	c.	Marketing plan.
	d.	Projected costs and financing to start the Company’s operation.
	e.	Projected underwriting growth taking into consideration solvency margin requirements.
	f.	Expected number of employees and a saudization plan for training and employment.
	g.	Annual cost based on projected growth rate.
	h.	Projected financial statements related to the growth rate.
	i.	Technical Provisions statement for the proposed growth of the insurance operation certified by a qualified Actuary.
	j.	Branching distribution plan in the Kingdom.
7.	Any agreements with outside parties.
8.	An Irrevocable bank guarantee issued by one of the local banks for the capital required, such guarantee must be renewed until the capital is paid up.

Second: Insurance and Reinsurance Services Provider:

A license application including the following shall be submitted to SAMA:

1.	Completed licensing application.
2.	Memorandum of association.
3.	Articles of Association.
4.	Organizational structure
5.	Feasibility study.
6.	Three-years business plan that shall include as a minimum, the following:
	a.	Classes of insurance that will be undertaken by the insurance and reinsurance services provider.
	b.	Projected costs and financing to start the operation.
	c.	Projected growth of the business.
	d.	Expected number of employees and a saudization plan for training and employment.
	e.	Annual cost based on projected growth rate.
	f.	Projected financial statements related to the growth rate.
	g.	Branching distribution Plan in the Kingdom.
7.	Any agreements with outside parties.
8.	An Irrevocable bank guarantee issued by one of the local banks for the capital required, such guarantee must be renewed until the capital is paid up.

Third: Individuals Providing Insurance and reinsurance Services:

Any individual who wish to practice any of the insurance professions shall obtain a license from SAMA providing that the following requirements are fulfilled:

1.	A university degree as a minimum, and five years relevant insurance experience, or an insurance professional designation accepted by SAMA.
2.	Pass the examination approved by SAMA to engage in the designated insurance profession, or any other equivalent qualifications acceptable to SAMA.

Article Five
SAMA may apply penalties provided under Article (19) of the insurance law and request application of the penalties stipulated in Article (21) of the insurance law in case of submitting incorrect or false information.

Article Six

1.	SAMA shall notify the applicant within 30 working days confirming that the application is complete. Whereby, the application is incomplete SAMA shall notify the applicant of any further requirements or missing documents.
2.	All incomplete and/or missing documents shall be provided within 30 working days from SAMA’s notification, otherwise the application shall be cancelled and the applicant must re-submit a new application for consideration.
3.	SAMA shall notify the applicant within 90 working days from the receipt of a completed application of its approval, or its rejection by providing reasons.

Article Seven

The applicant shall pay SAMA a non-refundable licensing application processing fee of ten thousand Saudi Riyals (SR 10,000). Upon approval of the application, the applicant shall pay SAMA the following licensing fee:

	■	(SR 100,000) One hundred thousand Saudi Riyals for Insurance Company.
	■	(SR 200,000) Two hundred thousand Saudi Riyals for Re-insurance Company.
	■	(SR 300,000) Three hundred thousand Saudi Riyals for Insurance and Reinsurance Company.
	■	(SR 25,000) Twenty five thousand Saudi Riyals for Insurance and reinsurance Services Providers, except the actuary and the insurance advisor.
	■	(SR 5,000) Five thousand Saudi Riyals for Actuaries and Insurance Advisors.

Article Eight

Insurance and reinsurance Services shall be provided by a Person licensed in the kingdom with a minimum capital requirement of:

	■	(SR 3,000,000) Three million Saudi Riyals for Insurance Brokerage.
	■	(SR 3,000,000) Three million Saudi Riyals for Insurance Claims Settlement Specialist (Third Party Administrator).
	■	(SR 500,000) Five hundred thousand Saudi Riyals for Insurance Agency.
	■	(SR 500,000) Five hundred thousand Saudi Riyals for Loss Assessor and Loss Adjuster.
	■	(SR 150,000) One hundred and fifty thousand Saudi Riyals for Insurance Advisor.
	■	(SR 150,000) One hundred and fifty thousand Saudi Riyals for Actuary.

Article Nine

Insurance and Reinsurance Services Providers shall obtain an insurance policy to cover professional liability risks for negligence, wrongdoing and dereliction of duties with a minimum coverage limit of:

	■	(SR 3,000,000) Three million Saudi Riyals for Insurance Brokerage.
	■	(SR 6,000,000) Six million Saudi Riyals Reinsurance Brokerage.
	■	(SR 1,000,000) One million Saudi Riyals for Insurance Agency.
	■	(SR 3,000,000) Three million Saudi Riyals for Actuary or Loss Assessor and Loss Adjuster.
	■	(SR 1,000,000) One million Saudi Riyals for Insurance Claims Settlement Specialists (Third Party Administrator).
	■	(SR 500,000) Five hundred thousand Saudi Riyals Insurance Advisor.

Article Ten
The founders of the Company, and owners of insurance professions shall be of good conduct and reputation with no convictions by court action affecting their honor and integrity.

Article Eleven
The commercial registration shall be restricted to the licensed insurance activity. SAMA shall be supplied with a copy of such registration and any subsequent renewals thereof. Any other unlicensed activities shall not be practiced.

Regulation of Insurance Operations

Article Twelve
The Company and all Insurance and Reinsurance Services Providers shall conduct their business according to professional and ethical standards.

Article Thirteen
The Company and all Insurance and Reinsurance Services Providers shall comply with all Saudi accounting standards approved by SAMA. In the absence of such standards, the company shall apply international accounting standards.

Article Fourteen
The Company and all Insurance and Reinsurance Services Providers shall obtain prior written approval of SAMA before dealing with Lloyd’s insurance brokers or foreign companies to cover risks that cannot be covered through a licensed Company in the Kingdom.

Article Fifteen

The Company and all Insurance and Reinsurance Services Providers, in accordance with all rules and regulations issued by SAMA to that effect, shall:

1.	Adopt an internal policy and procedures to combat economic crimes including money laundering.
2.	Apply “Know Your Customer” standards.
3.	Notify the Financial Intelligence Unit (FIU) in writing of any suspected transactions, in accordance with the designated form designed by SAMA with a copy submitted to SAMA.

Article Sixteen
The Company and all Insurance and Reinsurance Services Providers shall provide complete and accurate information regarding their insurance products and services to SAMA. Written prior approval by SAMA is required for marketing all insurance products and services.

Article Seventeen
The Company shall comply with all conditions set by SAMA for specialized inter-companies insurance funds. No given Company may subscribe to such funds outside the Kingdom without obtaining SAMS’s written approval.

Article Eighteen
The company shall provide SAMA with copies of reinsurance agreements on an annual basis. SAMA may comment on these agreements and request amendments if deemed necessary.

Article Nineteen

1.	The Company shall not deal with any unlicensed Insurance and Reinsurance Services Providers, and Insurance and Reinsurance Services Providers shall not deal with any unlicensed Person Providing Insurance and reinsurance Services. A signed written agreement outlining the scope and relationship between the Company and Insurance and Reinsurance Services Providers is required.
2.	Insurance and Reinsurance Services Providers and their employees shall not deal with an unlicensed Company, and they shall not prejudice other company’s products when providing insurance services to the consumers.
3.	The Company or an Insurance and Reinsurance Services Providers shall have a valid contract with any Person they are dealing with.

Article Twenty

First: The Company shall appoint an Actuary that holds the designation of a Fellow, or seek the services of an actuary or an actuarial firm after obtaining a written permission from SAMA. The Company’s Actuary shall undertake the following duties:

1.	Obtain all required information and particulars from the previous Actuary.
2.	Examine the Company’s financial position.
3.	Evaluate the Company’s ability to meet its future obligations.
4.	Determine adequate risk retention level.
5.	Price the Company’s insurance product.
6.	Determine and approve the Company’s technical provisions.
7.	Provide advice and recommendations related to the Company’s investment policy.
8.	Any other actuarial recommendations.

Second: The Actuary shall be professionally liable for his/her advice and technical services provided to the Company, and shall upon the Company’s request, furnish the Company’s management with the following particulars and documents:

1.	Sound actuarial information and statements about the company’s present and future financial position.
2.	Annual report, within sixty days from the expiry date of the company’s fiscal year reflecting the adequacy of the Company’s technical provisions.
3.	Annual report, within sixty days from the expiry date of the Company’s fiscal year reflecting the pricing adequacy of the insurance products.
4.	Company’s investment returns analysis.
5.	Insurance portfolio development analysis.
6.	Cost Analysis
7.	Report reflecting the adequacy of matching assets with liabilities.
8.	Positive and adverse underwriting policy development status.

The Company shall ensure compliance with all required actuarial duties and reports. Otherwise, SAMA shall appoint an actuary at the company’s expense to undertake these actuarial duties.

Third: An external auditor shall review actuarial reports that present immediate or future risks facing the Company, and SAMA shall be provided with copies of these reports in a timely manner.

The Company’s Actuary shall, in the presence of immediate or future risks facing the Company, submit a report on an urgent basis directly to the company’s Board of Directors. The Board of Directors shall examine the report and recommend corrective actions, and forward all related information to SAMA within fifteen days from receiving the report.

Article Twenty-One

The Company that underwrites Protection/Savings insurance business class along with other classes of insurance shall comply with the following requirements:

	■	Appoint a qualified risk manager for its Protection/Savings insurance class that is independent from the other classes of insurance business
	■	Appoint a qualified reinsurance manager for its Protection/Savings insurance class that is independent from the other classes of insurance business.
	■	Separate all investments and provisions for its Protection/Savings insurance business from the other classes of insurance business.

Article Twenty-Two
A Person shall not engage in more than one insurance or reinsurance related service without the written permission of SAMA.

Article Twenty-Three
An Insurance and Reinsurance Services Provider shall have a permanent office where all insurance related registers and documents used in their operations are kept, SAMA must be notified within thirty (30) days of any changes in the permanent office location. An exception is made for Actuaries and Advisors residing outside the Kingdom with written permission from SAMA.

Article Twenty-Four
Insurance Brokers and Agents shall provide sound advice to the insured and shall disclose all facts and risks associated with the insurance policy that will be issued by the Company.

Article Twenty-Five

Insurance Brokers and Agents shall provide the insured with adequate information regarding the insurance policy and that there must be no inducement or deception. The information provided must include the following as a minimum:

	a.	Limits of insurance coverages.
	b.	Policy exclusions.
	c.	Contribution or Premium amount (s).
	d.	Inception and expiration dates (policy period) of the policy.
	e.	Policy conditions.
	f.	Name of the Company issuing the insurance policy.

Article Twenty-Six

Insurance and/or Reinsurance Brokerages shall:

1.	Disclose to the insured the commission and/or fees earned for the services provided.
2.	offer to place reinsurance business with local reinsurance Companies’ before placement with a foreign reinsurer.
3.	Not allow an insurance broker to combine insurance and reinsurance business activities to avoid conflict of interest that is harmful to the policyholder. Commissions and fees of insurance and reinsurance business shall be separated.
4.	Serve the insured’s interests by striving to obtain the most appropriate available coverage and price.
5.	Disclose to the insured in advance all benefits under the policy as compared to other similar policies in terms of coverages and prices.

Corporate Governance

Article Twenty-Seven
Fit and proper standards issued by SAMA shall be applied to the Company’s and Insurance and Reinsurance Services Provider’s Chairman, Board Members, Directors, and Senior Managers. Designated forms issued for this purpose shall be completed and approved by SAMA.

Article Twenty-Eight

1.	The Company’s and Insurance and Reinsurance Services Provider’s Chairman, Board Members, and Senior Managers must be trustworthy and experienced in financial and insurance business to unable them to carry out their duties in the best possible way.
2.	A Company’s board members shall not be a member of the board of directors of any other insurance and or reinsurance Company.
3.	SAMA may object to the appointment of any of the Board Members, appointed executive managers of the company and of the Insurance and Reinsurance Services Provider.

Article Twenty-Nine
The Company shall not nominate a member to its board of directors or to a senior management position without the written approval of SAMA in the following circumstances:
1. A Person who had held similar position in a liquidated Company.

2. A Person who had been dismissed from a similar position in another Company.

Regulatory And Supervisory Procedures

Article Thirty
SAMA’s examiners or any person assigned by it shall have the right to conduct office and field examinations of all accounts, records, documents, and transactions related to the insurance affairs of the Company and the Insurance and Reinsurance Services Provider, and their employees shall provide all information, particulars, and documents required by the examiners.

Article Thirty-One

The Company and the Insurance and Reinsurance Services Provider shall cooperate fully with SAMA’s examiners, and particularly in the following:

1.	Enabling SAMA’s inspectors to have access to the company’s registers, accounts, and other documents in order to carry out their examination;
2.	Providing SAMA’s examiners with all available information and clarifications.
3.	Revealing to SAMA’s examiners any irregularities or violations in the Company’s activities upon commencing their assignment;
4.	The Company and the Insurance and Reinsurance Services Provider’s employees are prohibited from concealing or attempting to conceal any information or irregularities, and not replying to any clarifications sought by the examiners.
5.	Carrying out the recommendations and instructions issued to the Company and to the Insurance and Reinsurance Services Provider as a result of the examination.

Article Thirty-Two
The Company and the Insurance and Reinsurance Services Provider shall comply with the working hours specified by SAMA at its head office and branches in the Kingdom.

Article Thirty-Three
The Company shall comply with the minimum and maximum limits as determined by SAMA for each class of insurance as well as insurance contributions and premiums.

Article Thirty-Four

1.	The Company’s Board of Directors shall form an audit committee consisting of at least three and no more than five members. from nonexecutive managers and mostly nonmembers of the Board of Directors.
2.	The Company shall:
	a.	Establish an internal audit department, which shall report directly to the audit committee. The officer in charge of this department must be a holder of a professional certificate in this discipline.
	b.	Establish a regulatory compliance department and appoint a regulatory compliance officer. This office shall verify compliance with all rules, regulations and directives. This office shall be directly affiliated to the audit committee and may contact directly SAMA and provide it with information according to the procedures that it specifies, and report to the internal audit department any indemnity or claim payments which violate the standard technical claim payments.

Article Thirty-Five

No Person shall:

1.	Disclose any information obtained in the course of carrying out any work related to the implementation of any provisions of the Law and this Implementing Regulations except for official purposes.
2.	Seek or obtain personal benefits by taking any action related to the implementation of the Law and this Implementing Regulations.

Article Thirty-six

The Company and the Insurance Brokerage shall pay the costs of inspection and supervision by paying SAMA the following:

1.	The Company shall pay five per thousand (0.5%) of total underwritten premiums in a financial year excluding local market share of the reinsurance business.
2.	The Insurance/Reinsurance Brokerage shall pay an amount representing one percent (1%) from the total commissions and fees earned within an accounting year.

Article Thirty-Seven
The Company and the Insurance and Reinsurance Services Provider shall set and implement written internal control procedures, the effectiveness of which 13 shall be valuated by the internal and external auditors shall issue and implement written internal audit procedures.

Article Thirty-Eight

1.	The Company shall notify SAMA of the percentage of ownership of any Person who owns five percent (5%) or more of the Company through a quarterly report.
2.	Any Person owning five percent (5%) or more of the Company’s shares shall notify SAMA in writing of their percentage ownership and any changes thereof within 5 working days of the date of occurrence of such event.

Article Thirty-Nine

1.	SAMA’s written approval is required for any mergers, acquisitions, transfer of ownership, and opening new branches by any Company or Insurance and Reinsurance Services Provider.
2.	A written notice to SAMA is required for any mergers and acquisitions between Companies. The written notice to SAMA shall provide the following information:
	a.	Initial agreement
	b.	Financial statements.
	c.	Agreed value:
	d.	Mode of payment; and
	e.	Method of valuation.

SAMA may reject the application if it finds that the value or the valuation method is not appropriate or if it deems that, this action is likely to adversely affect policyholders, the insurance sector and the economy in the Kingdom.

Article Forty

The Company shall:

1.	Retain at least thirty percent (30%) of its total insurance premium.
2.	Reinsure thirty percent (30%) of its total premium in the Kingdom.
3.	SAMA’s written approval is required whereby if its difficult for the Company to comply with the above percentages or it wishes to retain a lesser percentage. SAMA may obligate the Company to reinsure or not reinsure part of its direct insurance business transacted in the Kingdom with a domestically or foreign registered reinsurance company in accordance with the insurance market and each Company’s financial position.

Article Forty-One
The Company shall, within one month from the end of each quarter, reconcile policy terms and total coverage issued to the insured with that available from the reinsurer and to take corrective action in case of any differences.

Article Forty-Two

1.	A Company wishing to engage in reinsurance treaties outside the Kingdom shall ensure that the following criterions are met:
	a.	The foreign reinsurer is licensed and authorized to transact the kinds of insurance proposed in the Kingdom in its country of domicile.
	b.	The insurance supervisor of the foreign reinsurer must authorize the exchange of relevant information with SAMA.
	c.	The foreign reinsurer must maintain separate records and financial statements of all Saudi operation and be ready to provide SAMA with any related information upon request.
	d.	The Company shall provide SAMA with the reinsurer’s financial statements related to the most recent financial year.
	e.	The Company must provide SAMA with the latest regulatory or supervisory report issued by the foreign reinsurer’s supervisory authority.
2.	The Company shall select a reinsurer, at a minimum, with an S&P Rating of BBB, or its equivalent rating from a recognized international rating organization. If the Company wishes to do business with a reinsurer that is not rated by any international organization or has a rating less than the minimum requirement mentioned above, the Company should obtain prior written approval of SAMA.

Article Forty Three

The Company shall set up a claims’ department with procedures for accepting policyholder’s claims, claims evaluation and processing. The Company shall maintain records pertaining to policyholder’s claims and classify them into paid, unpaid, and rejected claims. Each record shall include the following:

1.	Insurance application and proposal, if available;
2.	Copy of the insurance policy;
3.	Policyholder’s claim’s information;
4.	Adjusters and assessor’s report and any other documents pertaining to the claim and the direct reason leading to the covered loss;
5.	Proportional indemnity share of any other insurance and reinsurance policies in effect.
6.	Action taken by the Company and the status of the claim.
7.	A power-of-attorney from the Insured to the Company to subrogate it in the following cases:
	a.	Third party Liability for the Loss.
	b.	Defending the insured in repudiate liability or in determining the indemnity amount.
8.	Signed settlement agreement by a Person for a paid claim.

Article Forty-Four
The Company shall settle individual policyholder’s claims in a period not to exceed fifteen (15) days from the date of receiving all requested and necessary documentation related to the claim, another fifteen (15) day period shall be extended with a notification to the regulatory compliance officer with reason(s) of such extension. The Company shall settle commercial entities’ claims in a period not to exceed forty-five (45) days after receipt of all requested and necessary documentation including the report of the loss assessor who must be appointed by the company within one week from the loss notification’s date. If this period is exceeded, the regulatory compliance officer must be notified and provided with reason(s) for such delay.

Article Forty-Five
The Company and the Insurance and Reinsurance Services Provider shall respond to policyholder’s complaints within fifteen days. All complaints shall be entered into a registry that is designated for this purpose. All complaints in the registry must contain all necessary and material information. A semiannual report shall be prepared and forwarded to the Audit committee with all complaints referred or will be referred in the future for litigation purposes.

Article Forty-Six

The Company shall adhere to principles set forth in this article when pricing insurance policies:

1.	Pricing shall be fair, reasonable and adequate;
2.	Pricing shall be set in accordance with the Company’s underwriting guidelines with adequacy and appropriateness to the risks undertaken by the Company, and in accordance with appropriate technical reserves.
3.	Providing SAMA with justifications and basis used in setting prices. These prices shall not be relied upon other Company’s pricing.

Article Forty-Seven
The Company shall evaluate the adequacy of its technical provisions on a quarterly basis. The minimum capital requirement shall be used to cover policyholders’ claims in the case whereby the technical reserves are deficient to meet the Company’s claims obligations. SAMA must be notified if such deficiencies exist.

Article Forty-Eight
The Company’s gross written premium shall not exceed Ten (10) times the paid capital and reserves without SAMA’s written approval.

Article Forty-Nine
No insurance policy shall be issued or renewed to any of the Company’s members of the Board of Directors, Senior and Executive Managers, and their related parties except after the payment of the full premium. Claims submitted for payment on their behalf shall be treated in accordance with procedures and rules set forth by the Company without any exception or preference. The Compliance Officer shall be notified of any related claims payment.

Article Fifty

The Company and the Insurance and Reinsurance Services Provider shall, within forty five (45) days from the end of each year, provide SAMA with the following particulars:

1.	Report identifying the names of members of the Board of Directors, managing directors, general mangers, senior managers in all branches and affiliates and foreign representative offices, including the names and current positions and dates of appointment and the number of years of service in the company.
2.	Report identifying the percentages of Saudi and non-Saudi employees on the Company, Branch, and departments levels including the managerial positions held by Saudis.
3.	Any other particulars requested by SAMA.

Article Fifty-One
The Company shall adhere to minimum coverage issued and/or approved by SAMA for all classes of insurance. The insurance policy must specify all related coverage benefits. The Company must provide the technical and pricing basis for its insurance products. In respect of protection and savings insurance, such technical basis and pricing must be prepared and/or approved by an Actuary.

Article Fifty-two

The Insurance Policy shall be written in a clear way that can be read by the public at large, and shall contain the following:

1.	The policy schedule must specify the following as a minimum:
	a.	Policy number, which must also be provided in all related document to this policy.
	b.	Policyholder’s name and mailing address.
	c.	Coverage period.
	d.	Coverage descriptions and limits.
	e.	Deductibles and Retentions.
	f.	Endorsements, Warranties, and Riders.
	g.	Conditions and Exclusion.
	h.	Insurance rates and premium amounts, basis of premium calculation and the amount of commission paid under the policy.
	i.	Identification of the property or activities to be insured.
2.	The standard text of the policy shall contain the type of coverages, general terms, conditions, and exclusions.
3.	Endorsements and riders shall indicate additional coverages, conditions, and exclusions not mentioned above and which are different from the main agreement.
4.	The Company’s signature and seal shall be on the policy and its attachments.

Article Fifty-Three

1.	The Company shall, before issuing an insurance policy, give the policyholder access to the terms, conditions and exclusions of the policy.
2.	Upon acceptance of the insurance application, the Company shall issue the client a binder/cover note as a temporary insurance document until the policy is issued. The Binder shall reflect all insurance coverages provided by the policy for a period not exceeding thirty (30) days from the commencement of coverage.
3.	An insurance policy shall be amended by virtue of a written request submitted by the policyholder followed by an addendum issued by the Company.

Article Fifty-Four

1.	The Company shall not cancel a valid insurance policy except for conditions stated in the policy cancellation clause. In case of a cancellation of the policy, the company shall refund the premium on a pro-rata basis. The company shall afford the policyholder a minimum period of thirty days (30) before the effective date of cancellation by the company.
2.	The policyholder may cancel the insurance policy and recover part of the paid premium, on a short rate basis, provided there are no unpaid or outstanding claims.

Article Fifty-Five

The basis of the information provided in the policy shall be the application submitted by the policyholder. When completing the insurance application, the following must be taken into consideration:

1.	Insurable interest.
2.	Providing all material facts related to the insurance policy.
3.	Indemnification of the policyholder based on the insurance policy shall be the purpose of the insurance and/or reinsurance policy.
4.	Insurance provided must not violate any rules, regulations, and directives.

Article Fifty-Six
The Company shall provide credible reasons for denying, canceling, and non-renewing insurance policies without discrimination and unfair treatment between policyholders, and shall not rely on decisions of other companies for its actions.

Article Fifty-Seven
The Company shall notify SAMA of all insurance related benefits and incentives schemes provided to its employees.

Statutory Deposit

Article Fifty-Eight
The statutory deposit shall be ten percent (10%) of the paid up capital. SAMA, where the risk profile of the Company’s business warrants it, shall increase this percentage to a maximum of fifteen percent (15%). The Company shall place the statutory deposit amount, within three (3) months period from the date of issuing the license, in a bank designated by SAMA. SAMA shall invest the statutory deposit and shall be entitled to its earnings.

Investment

Article Fifty-Nine

The Company shall:

1.	Formulate a written investment policy, approved by the Board of Directors, which governs its investment operations and the methods of managing its investment portfolios.
2.	The company shall invest 50% of its total invested assets in Saudi Riyals. SAMA’s written approval is required if the Company wishes to reduce this percentage.

Article Sixty

The Company shall have a written investment diversification policy taking into consideration all risks faced by the company and the environment that it operates under. The Company shall take the necessary measures to manage the following risks as a minimum:

1.	Market risk.
2.	Credit risk.
3.	Interest rate risk.
4.	Currency exchange risk.
5.	Liquidity risk.
6.	Operations risk.
7.	Country risk.
8.	Regulatory and legal risk.
9.	Re-insurance risk.
10.	Technology Risk.

Article Sixty-One

1.	The Company shall, when formulating its investment policy, take into consideration that the maturity of its invested assets is in concurrence with its liabilities according to the issued policies. The Company shall provide SAMA with an investment policy inclusive of assets distribution. If such investment policy was not approved by SAMA, the Company shall adhere to the investment standards in Table (1), provided that investments outside the Kingdom shall not exceed 20% of the total investment and in accordance with Article 59 (2).
2.	The Company shall take in consideration the investment concentration risks. Concentration in an investment instrument shall not exceed 50% in one investment instrument mentioned in table (1).

Article Sixty-Two

The Company shall not use financial instruments, such as derivatives and off-balance-sheet items, other than for efficient portfolio management and with SAMA’s written approval. The Company is permitted to invest in such instruments when these conditions are met:

1.	Such derivatives must be listed on a financial exchange, are capable of being readily closed out, are based on underlying admissible assets and have a prescribed pricing basis.
2.	The company has set aside assets that can be used to settle any obligations under these derivatives and set adequate provisions for any adverse changes on the derivatives and their coverage.
3.	The counter party must be reputable and in an acceptable financial condition.

Asset Valuation and Solvency Margin

Article Sixty-Three
Whereby a Company conducts general insurance business and protection and saving insurance business, the assets of each class of insurance must be considered separately.

Article Sixty-Four
The Company shall not consider assets obtained from the issuance of bonds or from obtaining loans in its solvency margin calculations without SAMA’s written approval.

Article Sixty-Five

The Company’s shall value its assets for the purpose of calculating the solvency margin according to Table (2) provided that the following are observed:

1.	Market value shall not be exceeded in the valuation process and all assets linked to the Investment part of the Protection and Savings insurance policy shall be excluded.
2.	Maximum limit of 20% of the total assets value in any one-asset category.

Article Sixty-Six

1.	The Company, in respect to its general and health insurance business, shall maintain a margin of solvency equivalent to the highest of the following three amounts:
	a.	Minimum Capital Requirement.
	b.	Premium Solvency Margin.
	c.	Claims Solvency Margin

As an exception to the preceding, Premium Solvency Margin, method shall be used to calculate the solvency margin for the first three years of the company’s registration.

Solvency Margin calculations:

First: Premium Solvency Margin:

	a.	Dividing gross premiums written into the categories set out in Table (3).
	b.	Deducting the outwards reinsurance relating to the gross premiums determined in (1) above, provided that in all cases the net premiums written is not less than 50% of gross premiums written.
	c.	Multiplying the net premiums written for each category by relevant factors set out in Table 3 and aggregating the result for each category to come out with the appropriate solvency margin.

Second: Claims Solvency Margin:

	a.	Dividing average gross claims incurred over the three most recent financial claims into categories set out in Table 4 of this Article.
	b.	Deducting the outwards reinsurance relating to the gross claims determined in (1) above, provided that in all cases the net claims amount is not less than 50% of gross claims amount.
	c.	Multiplying the net claims by (2) above for each category by the relevant factors set out in Table 4 and aggregating the result for each category to come out with the appropriate solvency margin.

Article Sixty Seven

The solvency margin for the Protection and Saving Insurance business shall be determined by taking the aggregate of the results arrived through the calculation described below:

1.	Four percent (4%) of the technical provisions for the protection and saving direct insurance.
2.	Three per thousand (3/1000) of the Capital at Risk for individual policies after the deduction of reinsurance cessions, provided that the reinsurance amount do not exceed 50% of the total Capital at Risk.
3.	One per thousand (1/1000) of the Capital at Risk For group policies after the deduction of reinsurance cessions, provided that the reinsurance amount do not exceed 50% of the total Capital at Risk.

Article Sixty-Eight

1.	The Company shall complete all forms related to the actual and required solvency margin calculations.
2.	The Company shall maintain a solvency margin according to the standards specified, and implement the following measures when its solvency margin falls below the required margin (s):
	a.	The Company shall restore, in a period not exceeding the next financial quarter, its solvency margin when it falls between the ranges of 75% to 100% of the required solvency margin.
	b.	The Company shall restore its solvency margin when it falls between 50% and 75% of the required margin. The company shall apply measures stated in paragraph (a) of this Article. If the required solvency margin is not restored to its appropriate level for two consecutive financial quarters, the company shall formulate and provide SAMA with a corrective action plan to be taken and the period necessary to restore its solvency.
	c.	The Company shall restore its solvency margin when it falls between 25% and 50% of the required margin. The Company shall apply measures stated in paragraph (b) of this Article. If the required solvency margin is not restored to its appropriate level for two consecutive quarters, the company will be required by SAMA to take all or any of the following measures immediately:
		1.	Increase the Company’s capital.
		2.	Adjust insurance premiums
		3.	Reduce costs;
		4.	Stop underwriting business.
		5.	Assets liquidation.
		6.	Any other measures deemed appropriate by the Company and approved by SAMA.
	d.	SAMA shall appoint an advisor to provide consultation and advice to the company or issue a cease and desist order to the Company and recommend the withdrawal of it license if the solvency margin falls below 25% and/or the Company fails to act appropriately to rectify its financial situation.

Technical Provisions

Article Sixty-Nine

1.	Technical provisions must be calculated in accordance with acceptable accounting standards, and approved by an actuary reflecting the company’s obligations, and shall include the following technical provisions as a minimum:
a)	Unearned Premium Reserves
b)	Unpaid Claim Reserves
c)	Claims Expense Reserves.
d)	Incurred but not reported Claims Reserves.
e)	Unexpired Risk Reserves.
f)	Catastrophe Risk Reserves.
g)	General Expense Reserves.
h)	Reserves related to protection and savings insurance, such as disability, old age, health, death, medical expenses…etc.
2.	Reserves shall be calculated, as a minimum, in the following manner:
	a.	Unearned Premium Reserves shall represent the unearned portion of gross premiums at the time of valuation and shall be calculated according to the following:
		1.	Last three months for marine transport.
		2.	365 days pro rata calculations for all other classes of insurance or 40% of gross premiums.
	b.	Unpaid and Expense Claims Reserves shall be determined as a total value of all outstanding claims and related expenses for each class of insurance business.
	c.	Incurred but not reported Claims Reserves shall be calculated from the total outstanding claims after deducting the reinsurance portion of claims proceeds and according to the following:
		1.	Fifteen percent (15%) of motor insurance, medical insurance, property insurance, engineering, energy and general accident insurance (excluding liability and personal injuries).
		2.	Twenty percent (20%) of liability and other insurance.
		3.	Twenty-five percent (25%) of reinsurance accepted from other insurance companies.

In case of non-compliance, SAMA shall be provided with actuarially justified methods to determine these reserves listed in this article.

	d.	Doubtful debt reserves shall be calculated as follow:
		1.	Ten percent (10%) of the total amounts due from reinsurers exceeding 180 days.
		2.	Fifteen percent (15%) of the total amounts due from the insured exceeding 90 days.
		3.	Twenty-five percent (25%) of the total amounts due from the insured exceeding 180 days.
		4.	Seventy-five percent (75%) of the total amounts of uncollected receivables exceeding 360 days.
		5.	One hundred percent (100%) of any disputed and uncollected receivables.
3.	General reserves specified in view of the company’s experience.

Distribution Of Surplus

Article Seventy

1.	The Company’s financial statements, at a minimum, shall consist of; statements of financial position for insurance operations and shareholders accounts, profit and loss statements for insurance operations, shareholders’ income statements, statement of shareholders’ equity, statements of cash flows for insurance operations and shareholders’ cash flow statement.
2.	The following shall be regarded by the Company upon preparation of the statements of insurance operations:
	a.	Determine earned premiums, and income generated from reinsurance commissions, and other insurance operations revenues.
	b.	Determine the incurred indemnification.
	c.	At the end of each year, the total surplus representing the difference between (a) and (b), less any marketing, administrative expenses, the necessary technical provisions, and other general expenses related to the operation of insurance shall be specified.
	d.	Company’s net surplus shall be determined by adding or subtracting the investment return of the policyholder’s invested funds, and subtracting the general expenses related to the policyholder’s portion of the investment activities.
	e.	10% of the net surplus shall be distributed to the policyholders directly, or in the form of reduction in premiums for the next year. The remaining 90% of the net surplus shall be transferred to the shareholders’ income statement.
	f.	The shareholder’s net income shall be transferred to the statement of shareholders’ equity.
	g.	Twenty percent (20%) of the net shareholders’ income shall be set aside as a statutory reserve until this reserve amounts to 100% of the paid capital, and
3.	SAMA’s written approval must be obtained for policyholders’ net surplus distribution and timing.

Registers

Article Seventy-One

The Company shall maintain separate registers for each class of insurance as follows:

1.	Policy Register: such register shall include the following particulars:
	a.	Policy number and issuance date.
	b.	Policy period (effective and expiration date)
	c.	Insured’s name and address.
	d.	Property or activity to be insured.
	e.	Type of risk.
	f.	Insurance premium.
	g.	Paid premium.
	h.	Endorsements, riders, warranties, and amendments made to the policy.
	i.	Other particulars deemed necessary by the Company.
2.	Claims Register: such register shall include the following particulars:
	a.	Claims number and date reported.
	b.	Policy number and period of insurance.
	c.	Insured’s name.
	d.	Date and place of the loss and the type of claim.
	e.	Technical reserves estimated and any other changes.
	f.	Claims payments date and amount.
	g.	Closed claims and the reasons for such closure.
	h.	Unpaid (outstanding) claims.
	i.	Disputed claims and any action taken in respect thereof.
	j.	Subrogation recoveries, salvage return, or any other recoveries excluding reinsurance.
	k.	Other particulars deemed necessary by the Company.
3.	Reinsurance Register: such register shall include the following particulars:
	a.	Reinsurance treaties and agreements given that; the period for each agreement and the changes made thereto shall be stated separately with the capacity and type of each agreement, the names and ceded percentage or amount for each reinsurer and the company’s retention percentage or amount for each class of insurance, and summary of all reinsurance agreements and other particulars deem necessary by the company.
	b.	Reinsurance ceding statements.
	c.	Claims register for reinsurance paid and outstanding claims.
4.	The Company shall maintain an underwriting register for each class of insurance.
5.	Insurance Professions Register: It shall include names of any Person engaged in insurance activities that the company is dealing with, their commercial registration, period of contacts, and the nature of the agreement and any other particulars deemed necessary by the Company.

Statements And Reports

Article Seventy-Two
The Company and the Insurance and Reinsurance Services Provider shall provide SAMA with all particulars and information in accordance with SAMA’s published guidelines to effectively conduct its supervisory duty.

Article Seventy-Three

1.	The Company and the Insurance and Reinsurance Services Provider shall provide SAMA with financial statements audited by licensed certified public accountant in the Kingdom within 90 days from the end of the financial year of the company including as minimum income statement, financial position and cash flow statement.
2.	The Company and the Insurance and Reinsurance Services Provider shall provide SAMA with the report of the certified public accountant and the financial statements within a maximum period of 60 days from the end of the financial year of the company for approval before publication.
3.	The Company and the Insurance and Reinsurance Services Provider shall direct their auditors to submit to SAMA the management letter before publication of the financial statements.

Article Seventy-Four

Insurance Brokerage and Insurance Agency shall provide SAMA with the following particulars and information:

1.	Semi-annual statement of all underwriting transactions and premium generated through their insurance and reinsurance business.
2.	Detailed semi-annual statement reflecting the Company’s uncollected premium.
3.	Semi-annual statement of earned commissions and fees.

Cease and Desist Orders

Article Seventy-Five

1.	The Company and the Insurance and Reinsurance Services Provider shall submit in writing to SAMA its intentions to cease its insurance activities in any one class or classes of insurance in the Kingdom accompanied the following particulars:
	a.	Reasons for such cessation
	b.	Evidence that they have fully discharged their obligation toward their clients and policyholders, they have set aside adequate reserves to meet their obligations, and they have transferred all policies in force to another Company or Insurance and Reinsurance Services Provider.
	c.	The wording of the cessation notice before publishing in two of the local newspapers that shall state their intention to cease operations in one class or classes of insurance and that policyholder’s and interested parties shall file their objections to SAMA within a period not exceeding three months from the publishing date of the notice.
2.	SAMA’s written approval shall be obtained before cessation of operations.

Article Seventy-Six

1.	SAMA shall request the license withdrawal of the Company or the Insurance and Reinsurance Services Provider in the following cases:
	a.	No business activities for a period of six months from the issuance date of the license.
	b.	None compliance with the Law and this Implementing Regulations.
	c.	Providing SAMA with false information in its licensing application
	d.	Conducting its business and affairs in a manner that threatens to make it insolvent or that it is hazardous to its policyholders, stockholders, or the public.
	e.	Insolvency, or its assets are not sufficient for carrying on its business.
	f.	The business is fraudulently conducted.
	g.	The paid up capital falls below the prescribed minimum limit or failure to fulfill the provisions of Article 68.
	h.	The business or volume of activities falls to a limit that SAMA finds unviable to operate under.
	i.	Refusal or delay of payments due to beneficiaries without just cause.
	j.	Refusal to be examined or to produce its accounts, records, or files for examination by SAMA.
	k.	Failure to pay a final judgment against it related to its insurance operation.
2.	In case of license withdrawal, the Company’s or the Insurance and Reinsurance Services Provider’s responsibility towards its policyholders shall be transferred to another licensed entity chosen by the beneficiaries with the approval of SAMA.
3.	SAMAshall supervise all settlements related to existing insurance policies where a Company’s business activities and status fall under this Article.

Qualification and Training

Article Seventy-Seven
The Company and Insurance and Reinsurance Services Provider shall qualify their employees to undertake duties related to insurance work.

Article Seventy-Eight
SAMA shall set the minimum educational requirements related to the licensing and examination of a Person Providing Insurance and Reinsurance Services.

General Provisions

Article Seventy-Nine
The percentage of Saudi Employees shall not be less than 30% at the end of the first year, and this percentage shall increase annually according to a Saudization plan submitted to SAMA.

Article Eighty
The Company and Insurance and Reinsurance Services Provider’s advertising materials shall not contain any false, deceptive or misleading representations, whether they are related to price or their financial and economical position. They shall not include statements in their advertisement material that would appear to defame and cause prejudice to the interests, products and services of others.

Article Eighty-One
No Person shall introduce a pension plan, or a reciprocal exchange, or a Self-Insurance scheme without the prior written approval of SAMA.

Article Eighty-Two
The Governor shall issue all insurance related regulatory and supervisory instructions and procedures.

Article Eighty-Three
A technical Committee or Committees may be formed to improve the development of the insurance sector by a decision from the Governor.

Article Eighty-Four
This Implementing Regulations shall be effective from its publishing date in the official Gazette. SAMA shall review and recommend amendments thereof every three years or when such amendments are deemed necessary.

Table (1)

Investment Type	Percentage for Protection and Savings Insurance	Percentage for General Insurance
Saudi Authorized Banks (minimum)	10%	20%
Saudi Government Bonds (minimum)	10%	20%
Saudi Riyals Denominated Investment Funds (maximum)	15%	10%
Foreign Currency Denominated Investment Funds (maximum)	10%	10%
Foreign Government’s Bonds (Zone A) (maximum)	5%	5%
Bonds Issued By Domestic Companies (maximum)	5%	5%
Bonds Issued By Foreign Companies (maximum)	5%	5%
Equities (maximum)	15%	15%
Real Estate in Saudi Arabia (maximum)	5%	0%
Loans Secured by Real estate Mortgages (maximum)	5%	0%
Loans Secured by Policies Issued by the Insurer (maximum)	5%	0%
Other Investments (maximum)	15%	15%

Table (2)

Type of Assets	Admissible%
Land and properties as evaluated by a qualified real estate agency by the end of the financial year as it relate to protection and savings insurance only.	5%
Land and properties as evaluated by a qualified real estate agency by the end of the financial year as it relate to general insurance only.	0%
Securities issued by one of the shareholding companies listed on a Saudi Stock Exchange.	5%
Securities issued by one of the shareholding companies not listed on a Saudi Stock Exchange.	1%
Saudi Government Development Bonds. (SGDB)	100%
Government bonds issued by (A) rated countries.	100%
Bonds issued by one financial institution.	5%
Deposits with any one of the financial institutions licensed in the Kingdom.	10%
Loans secured by policies of insurance issued by the insurer.	5%
Rights under derivative contracts.	1%
Reinsurance balances.	100%
All debts due or to become due from individual other than those relating to loans secured by mortgages.	5%
Cash in hand	1%
Accrued interest and rent.	2.5%
Cash in banks.	100%
Other pre-payments and accrued income.	2.5%
Deferred acquisition costs.	100%
Prepaid expenses.	2.5%
Premiums due within 90 days for general insurance companies.	100%
Premiums due for protection and savings insurance companies.	100%
Tangible assets (i.e. office furniture, equipment, vehicles, computers, etc, excluding rare art work).	2.5%
Intangible assets (i.e. good will, incorporation expenses, registered mark, etc).	0%
Personal loans or benefits for employees and managers.	0%
Treasury stock’s.	0%

Table (3)

Description	Factor
Health insurance	16%
Motor insurance	20%
Fire insurance	16%
Transport Insurance (Liability)	30%
Other Insurance Liability (Liability)	30%
Engineering Insurance	30%
Marine Insurance (vessels, goods)	30%
Aviation Insurance	30%
Energy Insurance	30%
Other classes of insurance except protection and savings insurance	16%
Facultative and treaty re-insurance for all other classes of insurance	30%

Table (4)

Description	Factor
Health insurance	24%
Motor insurance	25%
Fire insurance	20%
Transport Insurance (Liability)	35%
Other Insurance Liability (Liability)	35%
Engineering Insurance	30%
Marine Insurance (vessels, goods)	30%
Aviation Insurance	30%
Energy Insurance	30%
Other classes of insurance except protection and savings insurance	30%
Facultative and treaty re-insurance for all other classes of insurance	30%

Regulation of Reinsurance Activities

Part 1: Introduction

Purpose

1.	This Code presents the general principles and standards that should be met by insurance and reinsurance companies, including branches of foreign insurance and reinsurance companies, and insurance related service providers with regard to their reinsurance practices.
2.	The objective of This Code is to promote high standards of reinsurance practices within the insurance industry in accordance with the best international practices.
3.	This Code must be read in conjunction with the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations.

Definitions

4.	The term “Companies” in This Code is intended to include: insurance and reinsurance companies and insurance related service providers including insurance and reinsurance brokerages. The rest of the terms used in This Code shall have the same meaning as per article one (1) of the Implementing Regulations.
5.	The term “Related Company” in this code means: a company (or one of several companies that SAMA may consider to be acting in concert) holding a shareholding of 10% or more of the equity of the licensed insurer, or a company in which the licensed insurer (either alone or with other companies that SAMA may consider to be acting in concert) holds a shareholding of 10% or more.

Scope
6. This Code applies to insurance and reinsurance companies, and insurance related service providers including insurance and reinsurance brokerages.

Compliance Measures

7.	Companies must establish appropriate internal controls and procedures to ensure and monitor compliance with This Code, including the compliance of all contracted parties.
8.	Companies must maintain adequate records to demonstrate compliance with This Code, including but not limited to, reinsurance strategy, reinsurance transaction records, scenario testing reports, and financial implications report.

Part 2: General Requirements

Reinsurance Strategy

9.	The Boards of Directors of insurance and reinsurance companies must supervise the definition of the reinsurance strategy, to be approved, documented and implemented within 3 months of the company’s authorization.
10.	The reinsurance strategy must be submitted to SAMA to obtain SAMA's no objection on it. It must be updated at least annually and submitted to SAMA by April 30th each year.
11.	The company’s reinsurance strategy should include:
	a)	Statement of the per risk retention for each risk type on each product.
	b)	Statement of the per event retention for each risk type on each product .
	c)	Description of the treatment of known accumulations, where relevant, for each risk type on each product.
	d)	Description of the treatment of unknown accumulations, where relevant, for each risk type on each product.
	For each product, a statement of whether the risk exposure will be protected by treaty reinsurance, facultative reinsurance, both, or neither should be made.

Internal Control

12.	The reinsurance strategy must set a well-defined control structure to monitor the company's reinsurance arrangements and report its performance.
	The monitor and review functions must, at minimum, cover the following:
	a)	The identification and recording of polices underwritten, to which reinsurance is attached.
	b)	The identification of dates when an obligation to pay reinsurance premium arises.
	c)	The identification of cases where a company has suffered from a loss under a policy against which a reinsurance recovery can be made.
	d)	The time management of payments to, and collection from, reinsurance counterparties.
	e)	The credit standing and capacity of reinsurance counterparties to meet obligations.
	f)	The concentration of reinsurance programs with reinsurance counterparties, which would create large exposure.
	g)	The impact of adverse trends in estimated insurance liabilities on reinsurance and implications for the capacity of the insurer to meet its current/ future policyholders claims.
	h)	Follow up on the developments in these areas.

Reinsurance Treaties

13.	Reinsurance treaties must be submitted to SAMA to obtain SAMA's no objection as per Article 18 of the Implementing Regulations.
	The submission of copies to SAMA should be made within two month of the renewal date.
	SAMA must be notified within 7 days in case of cancellation or termination of any reinsurance treaty for any reason.

Reinsurance Officer

14.	The company must appoint a reinsurance officer. The reinsurance officer must be notified to the Board of Directors and to SAMA. The role of the reinsurance officer should not conflict or overlap with any other role within the company’s organization.
	The reinsurance officer shall be responsible for:
	a)	The updating of the reinsurance strategy.
	b)	The handling of the reinsurance registers required by the Implementing Regulations.
	c)	All facultative reinsurance ceded records, and submission of a quarterly report to the Board of Directors and to SAMA on the facultative reinsurance ceded.
	d)	Follow up on any developments regarding his role.
	If, in any way the company does not comply with its written reinsurance strategy, the reinsurance officer should report the compliance failure to the compliance officer, who in turn must inform the internal audit and the audit committee. All non-compliance must be notified to the Board of Directors and to SAMA.
	If the company is licensed to write protection and savings insurance, it must appoint a separate reinsurance officer for this business as per Article 21 of the Implementing Regulations.
	Reinsurance officers must possess adequate experience in reinsurance arrangements.

Product Approval

15.

All products approved by SAMA are subject to satisfactory reinsurance arrangements being in place to protect the insurer and its policyholders. If, in the opinion of SAMA, the licensed insurer does not have adequate reinsurance protections in place, then product approvals granted may be withdrawn.

Part 3: Reinsurance Principles

Ratings

16.	All local and foreign reinsurers used by the company must have any of the following minimum ratings:
	a)	A.M. Best Company: B+; or
	b)	Fitch Ratings: BBB; or
	c)	Moody's Investors Service: Baa; or
	d)	Standard & Poor's Corporation: BBB
	Accepted ratings should fall under the following criteria:
	a)	The rating must be based on full information (i.e., ratings based on publicly available information only will not be accepted).
	b)	Written approval from SAMA must be obtained if the reinsurer is located in a country with a sovereign debt rating from Standard & Poor of less than "BBB" or an equivalent rating from one of the above listed rating companies, or a country that is not rated.
	If the rating of an adopted reinsurer falls below the required rating, the insurance company using that reinsurer must notify SAMA immediately and take necessary actions to protect policyholders.

Insurance Policies

17.

Policy terms and conditions on insurance policies provided by the licensed insurance company must be no wider than those on its relevant reinsurance arrangements. Any exclusion on the reinsurance treaties must be taken into account in the policy terms and conditions provided by the company. As per Article 41 of the Implementing Regulations, a report on any discrepancies must be submitted to SAMA within one month of the end of each quarter.

Financial Implications

18.	The financial implications of the components of a reinsurance treaty noted below should be analyzed. A report on the implications should be submitted to the Board of Directors and to SAMA. This report should include:
	a)	Profit sharing mechanism or variable commissions.
	b)	Loss sharing mechanism.
	c)	Any caps on the reinsurers' total exposure under the treaty.
	d)	Any caps on the reinsurers' exposure to single events, incidents or claims causes.
	e)	Any swing rates where reinsurance premium are adjusted based on the results of the reinsurance.
	f)	The possible impacts of reinstatements or annual aggregates on excess of loss treaties.
19.	No forms of finite reinsurance may be carried out.
20.	Reinsurance must be of risk only. No investments held under protection & savings contracts may be reinsured.

Per Risk Retention

21.	Per risk retentions should be set in line with generally accepted insurance principles.
	The per risk retention for each product should be set taking into account:
	a)	The pricing expertise of the company.
	b)	The anticipated premium volumes.
	c)	Correlations with other insurance risks accepted.
	d)	Treatment of known and unknown accumulations.
	e)	Per event exposures.
	The business model adopted by the licensed insurer may also affect the per risk retention selected. For instance, if greater profit sharing with policyholders is put in place, a lower per risk retention may be considered suitable.
	The form of the reinsurance arrangement may affect the level of the retention. For instance, a per risk retention under a quota share arrangement may be higher than that under an excess of loss.
	The expected volatility of the company’s results under its business plan should be taken into account. If the company believes that there is a material chance that its loss ratio will fall outside its range of business plan results, then it should present a report setting out the expected range of results to its shareholders, Board of Directors, and SAMA.

Per Event Retention and Scenario Testing

22.	For each risk on each approved product, the company should consider the impact of multiple claims arising from a single event.
	Per event retentions should be set for each risk type. The annual probability of the per event retention being exceeded should be set at one half of one percent.
	The company must produce an annual scenario testing report for their Board of Directors and SAMA. These scenarios will be standardized and set by SAMA each year. If the company is not sufficiently resilient to the defined scenarios, it will be required to take appropriate actions to mitigate the risks faced.
	If a company has a proportional reinsurance treaty in place that imposes limits on the protection provided in the event of a natural catastrophe, then the amount of risk accepted by the licensed insurer should be strictly limited. The company should make a proposal to SAMA showing how it will limit and control the risks accepted under the treaty. Further restrictions may be imposed by SAMA.
	The scenarios to be tested will include, but will not necessarily be restricted to, the following:
	a)	An earthquake or flood affecting the Red Sea/Arabian Gulf.
	b)	A large scale terrorist attack, or war.
	c)	A widespread epidemic or pandemic.
	d)	A Hurricane in the Red Sea/ Arabian Gulf.
	e)	Large drops in asset values particularly property and equities.
	f)	The impact of any severe unexpected change in currency exchange rates
	g)	Motor accidents involving multiple fatalities.
	h)	Serious Transport accidents.

Placing of Facultative Reinsurance

23.	It is anticipated that most reinsurance will be placed into treaties in line with best international practice.
	Facultative reinsurance may be placed when the size of the risk exceeds the capacity of the company’s treaty, or where no treaty is in place.
	The company should seek SAMA's no objection if it wishes to write a risk that exceeds the capacity of its relevant treaty by more than 3 times.
	The company may use facultative reinsurance subject to the premium charged being fully compliant with Article 46 of the Implementing Regulations if it accepts a risk that cannot be placed in its proportional reinsurance treaty due to the premium rates not being acceptable to its treaty reinsurers. For all policies written in this basis it must then:
	a)	Produce a formal report setting out the pricing basis adopted, and showing that it is compliant with Article 46 of the Implementing Regulations.
	b)	Within one month of the end of each quarter, provide to the Board of Directors and SAMA full copies of all pricing reports for all risks that are not acceptable under the insurer’s proportional treaties.
	A licensed broker may not approach the facultative reinsurance market either inside or outside the Kingdom without written instructions and agreement of commission levels with the primary insurer.
	The insurer may only allow the same broker to be used to place the reinsurance as well as the primary insurance, if full commission disclosure is made to the client of all direct and reinsurance commissions earned. The company must obtain a copy of a statement signed by the client expressing full awareness of all commissions earned by the broker before proceeding to write the insurance.
	If a broker wishes to place facultative reinsurance on a risk where it has placed the direct insurance then it must at minimum:
	a)	Document why it does not believe there is any conflict of interest.
	b)	Provide full commission disclosure to its client.
	c)	Justify the use of facultative reinsurance rather than coinsurance.
	If a Broker wishes to place both Insurance and Reinsurance on the same risk, this introduces some conflict of interest that cannot be entirely avoided. The minimum Professional Indemnity cover required under Article 9 of the Implementing Regulations must be increased to SR 12 million for any broker that wishes to place both insurance and reinsurance on the same risk.

Risk Management and Other Reinsurance Processes

24.	A reinsurance claims register in accordance with Article 71, section 3c) of the Implementing Regulations should be in place to ensure that reinsurance recoveries are identified and appropriately recorded on a timely basis.
	A reinsurance documentation register must be maintained in accordance with Article 71 item 3a) of the Implementing Regulations. This should include reinsurance agreements given the following:
	a)	The period for each agreement and the changes made thereto shall be stated separately with the capacity and type of each agreement.
	b)	The names and ceded percentage or amount for each reinsurers and the company’s retention percentage or amount for each class of insurance.
	c)	Summary of all reinsurance agreements and other particulars deemed necessary by the company.
	A reinsurance accounts register shall be maintained in accordance with Article 71 section 3b) of the Implementing Regulations. It should contain all ceding statements to reinsurers.
	Procedures should be in place to allow management to evaluate and monitor the application (and hence the effect) of the reinsurance program to the gross provision for claims outstanding (including claims incurred but not reported).
	Appropriate systems should be in place to evaluate and monitor the company's credit risk exposure to individual reinsurers.
	Management should update the provision for reinsurance bad and doubtful debts on a regular basis in accordance with Article 69 of the Implementing Regulations.
	Further detailed recommendations on risk management and governance and their interrelationship with reinsurance will be issued in separate regulatory guidance notes.

Accounting for Reinsurance

25.	All proportional reinsurance premiums must be accounted in line with the corresponding direct insurance premiums.
	All fixed proportional reinsurance commissions must be earned in line with the corresponding reinsurance premiums.
	Any variable reinsurance commissions, or other profit sharing mechanisms, on proportional treaties should be accrued during the year taking into account the expected gross results, allowing fully for claims reserves including IBNRs.
	Any reinsurance treaties which include “swing rates”, where the reinsurance premium is adjusted based on the experience under the treaty, should accrue the reinsurance premium based on the expected ultimate results allowing fully for claims reserves including IBNRs.

Acceptance of Reinsurance by a Licensed Reinsurer

26.	A company accepting a facultative reinsurance risk should, at minimum, ensure that:
	a)	It is authorized by SAMA to write inwards reinsurance.
	b)	Where the original product being reinsured is written in Saudi Arabia, that product has been approved by SAMA for sale in Saudi Arabia.
	c)	It is approved to write similar products by SAMA, unless it is licensed to accept reinsurance risks only.
	d)	It is able to place the risk accepted within its own reinsurance treaties if its retention is exceeded.
	e)	Any catastrophe protections on its net retention will cover the risk accepted.
	f)	It has some mechanism in place to protect it from any claims excluded under its treaty if any exclusions on its treaty are not present in the terms and conditions of the original policy that is to be reinsured.
	g)	For any risks from outside Saudi Arabia, where the risk is not written by a related company, the reinsurer must have an explicit no objection from SAMA to accept risks from that country.
	h)	For any risks which are written by a related company, full details of the original insurance and the facultative reinsurance must be referred to SAMA for individual no objection.
27.	Treaty reinsurance could be written if the authorization granted to the company by SAMA includes writing reinsurance only.

Non-Compliance

28.

Non-compliance with the requirements set forth in This Code will be deemed a breach of the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations and licensing conditions and will subject companies to enforcement action.

Insurance Market Code of Conduct Regulation

Part 1: Introduction

Purpose

1.	This Code presents the general principles and minimum standards that should be met by insurance and reinsurance companies, including branches of foreign insurance and reinsurance companies, and insurance related service providers in their dealings with their existing and potential customers.
2.	The objective of This Code is to promote high standards of business conduct within the insurance industry.
3.	This Code must be read in conjunction with the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations, in particular articles 12, 15, 16, 19, 22, 24, 25, 26, 37, 43, 44, 45, 46, 49, 51, 52, 53, 54, 55, 56, 71, 77, 78, and 80.

Definitions

The term “Companies” in This Code is intended to include: insurance companies, and insurance related service providers including insurance brokerages, insurance agencies, insurance claims settlement specialists, loss assessors (loss adjusters), and insurance advisors. The rest of the terms used in This Code shall have the same meaning as per article one (1) of the Implementing Regulations.

Scope and Exemptions

5.	This Code applies to insurance and reinsurance companies, and insurance related service providers including insurance brokerages, insurance agencies, insurance claims settlement specialists, loss assessors (loss adjusters), and insurance advisors.
6.	Reinsurance activities are exempted from the provisions of This Code.

Compliance Measures

7.	Companies must establish appropriate internal controls and procedures to ensure and monitor compliance with This Code, including the compliance of all contracted parties, in particular when there is clear evidence of a breach in the market conduct regulation.
8.	Companies must maintain adequate records to demonstrate compliance with This Code, including but not limited to, reasons for early termination or non-renewal of insurance policies, claims records and complaints records for a minimum period of ten (10) years.

Supervision of Other Contracted Companies

Non-Compliance

Non-compliance with the requirements set forth in This Code will be deemed a breach of the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations and the licensing conditions and may subject the companies to enforcement action.

Structure of This Code

10.	The market conduct requirements are outlined in Parts 2 and 3 of this Code:
	a)	Part 2 – General Requirements, which are principle-based.
	b)	Part 3 – Market Conduct Standards, which stipulate the companies’ minimum conduct requirements across the customer relationship lifecycle, which includes pre-sale, sale, and post-sale conduct guidelines.

Part 2: General Requirements

Integrity

11.

Companies must act in an honest, transparent and fair manner, and fulfill all of their obligations to customers, which they have under the laws, regulations, and SAMA guidelines. Where these obligations have not been fully codified, companies may follow internationally accepted best practices.

Skill, Care, and Diligence

12.

Companies must act within their area of competence in dealing with customers. For this purpose, competence is acquired through training, experience, and working with experts in the field. Also, it is the duty of each company to keep their, and their employees’ skills and knowledge of the insurance business up-to-date and be informed of the products and services offered by the company, or companies, they represent and the intended use of these products and services.

Non-Discrimination

13.

Companies should not unfairly discriminate between customers; treatment should not differ based on customer (exiting or potential) race or gender. Companies must provide credible reasons for denying, canceling, and not renewing insurance policies. Furthermore, these reasons should be detailed in the customer’s file and be made available to SAMA upon request.

Adequate Resources
14. Companies must take reasonable care in maintaining adequate managerial, financial, operational, and human resources to carry out their business and serve their customers.

Disclosure Information to Customers

15.	Companies must communicate all relevant information to customers in a timely manner to enable them to make informed decisions.
16.	Companies must take reasonable measures to ensure the accuracy and clarity of the information provided to customers and make such information available in writing.

Data Protection

17.	Companies must, at all times, ensure that customer personal data is protected. This means that the data:
	a)	Must be obtained and used only for specified and lawful purposes.
	b)	Must be kept by the company in the Kingdom.
	c)	Must be kept secure (e.g., original hard copies or scanned copy of the original hard copies saved in electronic files) and up to date for a period of ten (10) years.
	d)	Must be provided to the customer upon his written request.
	e)	Must not be disclosed to any third party, without prior authorization from SAMA, other than the companies’ auditors, actuaries, reinsurers, and co-insurers.
	When dealing with a third party (e.g., outsourcing), the company must set up data confidentiality agreements with the third party before initiating the business relationship.

Security of Customer’ Assets

18.	Companies must ensure the security of customers’ assets held on their behalf. Any premiums collected by the broker or agent must either be placed in a separate bank account (the premium account) that has been established for that purpose, or passed directly to the insurance company as is required under the contractual arrangement with the insurance company. The only payments that can be deducted from the premium account are:
	a)	Premium payments to an insurance company.
	b)	Commission payments where the insurance company authorizes the broker or agent to make premium payments net of commission.
	The premium account must not be treated as the property of the broker or agent in any sense. In particular, it must not be used as security for any loan, and it must be clearly beyond the reach of the broker or agent’s creditors.

Conflict of Interest

19.

Companies should take reasonable measures to identify and address conflicts of interest to ensure fair treatment to all customers. Where conflicts of interest arise, the companies must disclose such conflicts to the customer and must not unfairly place its interests above those of its customer.

Contracting Service Providers

20.

Companies that use the services of other parties, including other companies, must have a contract in place setting out the terms and conditions for the provision of services, the rights and responsibilities of each party and the extent of the liability that each party has to the other, on a case by case basis.

Part 3: Market Conduct Standards

Section A: Policy Forms and Rates

Policy Wording and Packaging

21.	The wording of the insurance policy application and contract forms must adhere, at a minimum, to the following:
	a)	Written in Arabic and be made available in English upon customer request.
	b)	Use simple language and sentence structure, when possible.
	c)	Printed in clear, readable text, with no fine print.
22.	The printed insurance policy application and contract forms must adhere to requirements set in article 52 of the Implementing Regulations, and include:
	a)	A disclosure statement indicating that the policy contract is the entire contract.
	b)	A description of the insured’s duties after a loss has been incurred.
	c)	A description of the claims handling and dispute handling procedures as well as the documentation required for each.
	d)	Any other written endorsements, supplements, or documents.

Policy Amendments

23.	An insurance policy contract shall be amended only after a written and signed request submitted by the policyholder by mail or fax, and to which the insurance company agrees followed by an endorsement issued by the insurance company to the policyholder.
24.	For spelling mistakes and changes in the regulations, the policy contract can be modified without a written request as long as the customer is notified in writing.

Policy Cancellation

25.	Companies should include cancellation terms that are fair to customers and are reasonable and appropriate with regard to the product. The cancellation conditions must be clearly stated in the policy contract, including:
	a)	Conditions permitting the insurance company to cancel the policy.
	b)	Conditions permitting the policyholder to cancel the policy.
	c)	Cancellation notice requirements, including notice period. In any case, excluding emergency cases such as war, riots, strikes, and terrorist attacks, the policyholder should be afforded a minimum period of thirty (30) days before the effective date of cancellation by the companies (as per article 54 of the Implementing Regulations).
	d)	A description of the refund of premium due to the policyholder on cancellation of the policy and when it would be payable.
	e)	For Protection and Savings insurance, in addition to (d) above, a description and illustration of the cash surrender value, if applicable, for each year of the plan.

“Free Look” Clause (Protection & Savings Insurance Products)

26.	Every policy for protection and savings insurance should provide at least a twenty-one (21) day Free Look period from the date of delivery of the insurance contract for the policyholder to review the contract to assess its suitability and whether it provides the benefits described by the agent or broker. The policy will be deemed to be fully in force and this provision will be deemed to be waived by the policyholder, if the policyholder does not inform the insurance company within the period that the policy will be returned. If the policyholder deems the policy unsuitable, the insurance company must be notified in writing within the Free Look period and a refund of premiums paid to the customer subject only to the following:
	a)	Deduction of the expenses incurred by the insurance company on medical examination of the customer.
	b)	Deduction of a proportionate risk premium for the period of cover.
	c)	In respect of a unit linked plan, the insurance company shall also be entitled to make an appropriate adjustment to take account of changes in the unit price.

Pricing
27. Companies must apply the pricing structure submitted to and approved by SAMA as part of the product approval application.

Section B: Advertising and Promotion

Honest Representation

28.	Companies must not communicate any statements or advertising, directly or indirectly, that are inaccurate, misleading, exaggerated, or deceptive, including but not limited to information on:
	a)	Name of the company issuing the insurance policy.
	b)	Financial status of the insurance company issuing the policy.
	c)	Coverage of the policy.
	d)	Benefits or advantages promised by the policy.
	e)	If the advertising includes the policy pricing, then it should indicate whether the price is inclusive of all fees.

Defamatory Statements
29. Companies should not include in their advertising any false, defamatory, or negative statements on other companies.

Section C: Pre-sale Customer Contact

Information about the Companies’ Offering

30.	Companies must disclose, at a minimum, the following information to each customer prior to accepting an application for an insurance contract:
	a)	Whether they are an insurance company, or are acting on behalf of an insurance company, or acting on behalf of the customer.
	b)	Any financial relationship between a broker and the insurance company other than the normal commission agreements. In particular if there is any cross-ownership, or both parties have owners in common, the customer should be informed.
	c)	The nature and range of products and services they can provide.

Customer Needs Assessment

31.	Companies must seek information from customers as might reasonably be expected to assess their insurance needs in relation to the products and services in which they indicated an interest. Companies are not required to determine customers’ insurance needs beyond the specific products and services in which customers have indicated an interest, except with regard to protection and savings contracts (see article 38 below).
32.	Customers should be informed of their duty to disclose relevant and accurate information at every stage of the business relationship (e.g., applications, renewal, claim requests, etc.).

Advice to Customers

33.	Companies must ensure that the advice given to clients adequately meets their needs.
34.	Companies must provide sufficient information to enable customers to make informed decisions when purchasing insurance products and services, including:
	a)	An explanation of how the proposed advice meets their needs.
	b)	If different options are identified, the difference in the benefits, coverage, and costs of such options.

Avoidance of Churning

35.

Companies should not advise a customer to replace an existing protection and savings policy with a new one, unless it fully justifies the recommendation and makes it clear that a second set of initial charges will be incurred, and the agent or broker will earn initial commissions on the new product.

Quotations to be Obtained from More than One Insurance Company

36.

Insurance brokers must make reasonable efforts to obtain quotations from several insurance companies, and indicate the reasons for recommending any particular insurance company. For contracts other than protection and savings, if the insurance company recommended by the broker has not provided the cheapest quotation, the broker must provide details of the cheapest quotation to the customer, and a full justification for his recommendation. The justification should include a comparison of the terms and conditions, as well as the clarification of the difference in coverage and compensation offered by each insurance company, and if the broker would earn more commission on the recommended contract this must be explained to the customer.

Section D: Sale of Insurance Products and Services

Disclosure to Customers

37.	Prior to accepting an application for an insurance policy, the companies must provide customers, upon their request, with the key terms and conditions of the product and service to be purchased, including but not limited to:
	a)	The name of the insurance company underwriting the policy.
	b)	Benefits, exclusions, and deductibles.
	c)	The coverage period.
	d)	All related costs, including premiums and any other fees.
	e)	The terms of payment covering the periodicity of payment, grace period, implications of discontinuing the premium and any other related details.
	f)	The claims handling procedure.
	g)	The complaints handling procedures.
	h)	The obligations of each party under the insurance policy.
	i)	The cancellation rights and conditions.
	j)	The renewal date and contract clauses to be renegotiated (if any).
	k)	The requirements for carrying out policy alterations.
	l)	Any aspect of the policy where the insurance company has the right to change something once cover has commenced such as benefit charges and policy fees on protection and savings business.
	m)	Any unusual restriction or condition attaching to the customer.
	n)	The postal address, telephone, fax and email contact details of the insurance company.
38.	In addition to the above, companies must provide the following information with regard to protection and savings insurance products:
	a)	Whether the plan is participating, non-participating or an investment linked plan.
	b)	In case of participating, the basis of participation in profits i.e., cash bonus, deferred bonus, reversionary bonus, terminal bonus etc.
	c)	Plan illustration providing the sum insured, surrender value and paid-up value over the term of the plan. The illustration should show these values at the end of each of the first five (5) policy years, five (5) yearly thereafter, and at maturity date if appropriate or up to age eighty-five (85) if not.
	d)	If benefits are not fully guaranteed, the customer should be provided with three illustrations with gross investment return rates of 3%, 5% and 7% p.a.
	e)	The extent of any investment or expense guarantees. It should be clearly stated that values shown are for illustrative purposes only unless the investment and expense charges are fully guaranteed.
	f)	For non-linked plans, where applicable, a breakdown of the premiums and charges by main cover, supplementary cover and any other cover or services provided.
	g)	When presenting information related to past performance, the basis on which the performance was calculated together with a statement that past performance is not indicative of future performance.
	h)	If the policyholders’ funds may be invested in a range of linked investment funds, a description of the investment funds, which should include, at a minimum:
		1.	A description of the asset classes the fund may invest in.
		2.	A risk or volatility rating for each fund.
		3.	If the fund is measured against a benchmark, details of that benchmark.
		4.	Geographical spread of the investments.
		5.	A statement of any concentration of investments into particular types of investments.
		6.	The currency that the fund is priced in.
		7.	The frequency that the fund is priced.
		8.	The name of the fund manager, if the fund is external to the insurance company.
		9.	Past performance of the fund, subject to the same comments as stated in (g) above.
39.	Companies selling protection and savings contracts should complete a client fact find containing sufficient information to fully back-up the product recommendation made. The fact find must be signed by the client, and retained on the clients file. In the event of any dispute over the appropriateness of the contract sold, the contents of the fact find will be taken fully into account. If the fact find is not on the file, or is poorly or partially completed, this is likely to lead to the dispute being resolved in favor of the client.
40.	Insurance service providers arranging the insurance contact must disclose to the customer at the point of sale the full commissions and/or fees earned for the services provided from all sources.
41.	Insurance cover may not be back-dated on any compulsory insurance product.
	No insurance company, or employee of an insurance company may provide evidence of cover on a product unless the customer has committed to taking out a full annual policy that complies with the minimum standards set for that policy.

Customer Obligations

42.

Prior to entering into an insurance contract, the companies must inform customers of their key obligations under the insurance contract to pay premiums in a timely manner and to provide full and honest disclosure of all relevant information needed to determine the insurance needs and underwrite the risk. The customer should only be expected to advise the companies of information that a reasonable person would regard to be relevant.

Confirmation of Coverage

43.	Upon entering into an insurance contract, companies must promptly provide customers with official written confirmation of the insurance coverage. In case the full documentation is not available, the companies must issue temporary evidence of coverage confirmation, which can be legally used as a proof of coverage.
44.	When an application for a compulsory insurance product such as motor or health is taken with a premium payment, a receipt should be provided to the customer indicating that coverage commences at an agreed upon date on or after the application date.
45.	When an application for insurance is taken without a premium payment, a receipt should be provided to the customer indicating that coverage will commence at the date stated in the policy provided the first premium has been paid by that date. If the premium is not paid by the commencement date stated in the policy, then the company must have received a written and binding commitment from either the applicant or the agent or broker to pay the premium, in order for the company to initiate cover.

Documentation
46. Companies must promptly provide the full policy documentation to customers after entering into an insurance contract.

Related Parties

47.

No insurance policy shall be issued or renewed by an insurance company to any of its owners or members of the Board of Directors, Senior and Executive Managers, and their related parties except after the payment of the full premium (as per article 49 of the Implementing Regulations). Related parties shall be taken to mean close family members, wives, husbands, children, parents, brothers, sisters, and any establishment in which any member of the Board of Directors has more than 5% interest.

Premium Collection

48.	Companies must not collect premiums or fees for transactions that are not in the process of being provided or have not yet been provided.
49.	Insurance companies are considered to have received the premiums once the premiums are received by the agents.

Section E: Post-sale Customer Servicing

After-Sale Service

50.	Companies must provide after sales services to customers in a timely and appropriate manner, including responding to their inquiries, administrative requests, and requests for amending the insurance policies. In particular, companies must:
	a)	Provide certificates of coverage when requested by the customer.
	b)	Provide written confirmation of any amendments to the policy and any additional amounts due.
	c)	Issue receipts for any amounts received, unless payment is made by credit card or other form of automated bank transfer when the bank records will suffice.
	d)	Issue refunds or other charges due to customers.
51.	Companies must promptly notify customers of any changes in the disclosures or conditions made to the customers at the time of entering into the insurance contract. This includes changes in the companies’ contact details and changes in the claims filing procedure.

Claims Handling

52.	For companies whose licensed activities includes claims handling, they must:
	a)	Respond to claims filing in a prompt manner.
	b)	Provide claims forms showing all the information or steps required by the customer (including the beneficiary under a protection and savings policy) to file the claim.
	c)	Acknowledge to the insured customer the receipt of the claim and any missing information and documents within seven (7) calendar days from receiving the claim’s application form.
	d)	Provide adequate guidance to the insured customer in filing the claim and information on the claims handling process.
	e)	Inform insured customers of the progress of filed claims, at least every fifteen (15) working days (as per article 44 of the Implementing Regulations).
	f)	Handle claims in a fair manner.
	g)	Appoint a claims or loss adjuster when necessary, and notify the customer of such an appointment within three (3) working days.
	h)	Conduct a reasonable investigation of claims within a time period not exceeding ten (10) days for individual policyholders and thirty (30) days for commercial entities.
	i)	Notify the customer in writing of the claim acceptance or refusal promptly after completing the investigation, stating the following:
		1.	For accepted claims (full or partial acceptance):
			-	Settlement amount.
			-	How the settlement amount was reached.
			-	Justification if reduced settlement is offered or any part of the claim is not accepted.
		2.	For denied claims:
			-	Written reason for denying the claim under question.
			-	Copies of documents or information that were used in reaching the decision, if requested.
	j)	Explain the appeal or complaints process, if the settlement is not accepted by the customer.
	k)	For accepted claims, forward the claims settlement payment without undue delay upon receiving all required information and documentation (as per article 44 of the Implementing Regulations).

Claims Settlement

53.

Insurance companies must settle claims within the time period indicated in article 44 of the Implementing Regulations, and when that is not possible, provide an explanation, with reason(s) for such delay.

Credit Control

54.

Companies may not provide excessive credit to customers. Full payment terms must be agreed in writing at the outset of the policy, and the insurance company is allowed to cancel a policy promptly if payments are not made on time. In all cases, the company should promptly cancel a policy, after appropriate warnings, and thirty (30) days notice, if payments are not made. Premiums must be paid separately from, and may not be offset from, claims payments.

Complaints Handling

55.	Companies must put in place a fair, transparent, and accessible complaints handling process and controls, and inform customers of the complaints filing procedures.
56.	Upon receiving a complaint, companies must carryout the following:
	a)	Acknowledge the receipt of the complaint.
	b)	Provide an estimate of the time to address the complaint.
	c)	Provide the customer with the contact reference to follow up on the filed complaint.
	d)	Inform customers on the progress of the filed complaint.
	e)	Address the complaints in a prompt and fair manner within ten (10) working days of receiving the complaint.
	f)	Notify the customer, in writing, whether the complaint or the claim is accepted or rejected, and the underlying reasons for the decision and, if applicable, any offered compensation.
	g)	Explain the dispute filing process to escalate the complaint or the claim to the committees established by article 20 of the law on supervision of cooperative insurance companies.

Cancellation

57.	Cancellation of policies must conform to the cancellation conditions specified in the policy terms and conditions referred to in article 25. Cancellations by the insurance company must be notified to customers in writing, including a reference to the relevant contractual cancellation condition and explanation of the underlying reasons for the cancellation.
58.	Amounts due to customers as a result of the cancellation of a policy must be paid without undue delay, and must be calculated in accordance with the provisions of article 54 of the Implementing Regulations.

Renewal and Expiry

59.	Companies must inform customers of the policy renewal or expiry date in a timely manner to allow customers to arrange continuing insurance coverage.
60.	For all protection and savings contracts, insurance companies should provide an annual statement to their customers which includes the following information:
	a)	Projected maturity value, or policy value at the age of eighty-five (85).
	b)	Current sum insured on main and supplementary benefits.
	c)	Total premiums paid in the previous year.
	d)	Policies linked to investment funds should show the value of the units in each fund.

Distribution of Surplus

61.

An insurance company must document the mechanism it will put in place to comply with article 70 of the Implementing Regulations, and submit this document to SAMA for approval. This document should then be freely available to customers and members of the public.

ANTI FRAUD REGULATION 18 12 2008
This section is currently available only in Arabic, please click here to read the Arabic version.

Part 1: Introduction

Purpose
1. This Code presents the general principles and minimum standards that should be met by insurance and reinsurance companies, including branches of foreign insurance and reinsurance companies, and insurance related service providers to prevent or at least minimize the occurrence of fraud.
2. The objective of This Code is to promote high standards of fraud detection and prevention.
3. This Code must be read in conjunction with the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations, in particular articles 2, 10, 12, 15, 19, 25, 28, 31, 43, 56, 71, 76 and 77.

Definitions

The term “Companies” in This Code is intended to include: insurance and reinsurance companies, and insurance related service providers including insurance brokerages, insurance agencies, reinsurance brokerages, and reinsurance agencies. The rest of the terms used in This Code shall have the same meaning as per article one (1) of the Implementing Regulations.

Insurance fraud is defined¹ as an act or omission of an act intended to gain dishonest or unlawful advantage for the party committing the fraud or for other parties. This may, for example, be achieved by means of:

a)	Misappropriating assets.
b)	Deliberately misrepresenting, concealing, suppressing or not disclosing one or more material facts relevant to a financial decision, transaction or perception of the insurer's status.
c)	Abusing authority, a position of trust or a fiduciary relationship.

¹ Source: IAIS guidance paper on preventing, detecting and remedying fraud in insurance, October 2006

Scope and Exemptions

This Code applies to insurance and reinsurance companies, and insurance related service providers including insurance brokerages, insurance agencies, reinsurance brokerages, and reinsurance agencies.

Companies can be subjected to multiple forms of fraudulent activities from inside or outside the company. However, most of these activities fall under three overarching categories:

a)	Internal fraud: fraud perpetrated by a company's employee.
b)	Intermediary fraud: fraud by insurance service providers against the companies or policyholders.
c)	Policyholder fraud: fraud committed in the purchase or execution of an insurance product to obtain an illegitimate coverage or payment.

Compliance Measures
1. Companies must establish appropriate internal controls and procedures to monitor and ensure compliance with This Code, including the compliance of all contracted parties, in particular when there is clear evidence of a breach in the regulation.
2. Companies must maintain adequate records to demonstrate compliance with This Code, including but not limited to, fraud detection, measure, mitigation and monitoring procedures.

Non-Compliance
1. Non-compliance with the requirements set forth in This Code will be deemed a breach of the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations and the licensing conditions and may subject the company to enforcement action.

Structure of This Code

11.	The Anti Fraud requirements are outlined in Parts 2 and 3 of This Code:
		a)	Part 2 - General Requirements, which are principle-based
		b)	Part 3 - Anti Fraud Standards, which stipulate the anti fraud requirements companies must adhere to in order to combat:
				i.	Internal fraud.
				ii.	Insurance service provider fraud.
				iii.	Policyholder fraud.

Part 2: General Requirements

Strategy

12.	Companies should have a well defined fraud management strategy aligned with their overall vision, risk profile, business plan and objectives.
13.	Companies fraud management strategies should include:
		a)	A clear definition of the companies' level of fraud tolerance.
		b)	A list detailing internal policies, procedures and controls intended to detect, measure, mitigate and monitor fraud.
		c)	An outline of the renewal, validation and implementation processes of the fraud management strategy.
14.	The fraud management strategy should be approved by the board of directors and updated on a yearly basis to ensure its alignment with companies' evolving business environment.

Organizational Structure

15.	Companies organizational structure should be designed to:
		a)	Facilitate communication between staff, department heads and senior management.
		b)	Provide a suitable environment for the execution and supervision of its fraud management strategy.
16.	The company's board of directors is responsible for the management of fraud risk. Its activities should include:
		a)	The approval of the fraud management strategy.
		b)	The mobilization of required internal resources to enable proper detection, measurement, mitigation and monitoring of fraud risk in all market segments.
		c)	The promotion of the company's anti fraud values and strategy across the organization and to the market.
17.	If deemed necessary by its senior management or by SAMA, the company should consider establishing a fraud management department. This department will report all types of fraud to the senior management except for management fraud which will be reported directly to the board of directors, and will be responsible for the compliance of the company's fraud management strategy.
18.	The company's board of directors and senior management should identify organizational functions and processes that are subject to a high risk of fraud and design and implement preventive measures to counter that risk accordingly.

Policies and Procedures
1. Companies should establish clear policies and procedures to implement the fraud management strategy, such as procedures to detect, measure, mitigate and monitor risks of fraud as well as procedures to report and log fraud incidents.
2. Companies' fraud policies and procedures should be communicated across the organization and to SAMA upon request.

Contingency Plan
1. Companies should design and document a recovery plan to address small and large- scale fraud, and assign a middle-level manager to be in charge of its implementation. In particular, this plan should:
a) Detail the escalation steps of the fraud.
b) Stress the need to preserve evidence.
c)
Require to bring in an external expert if necessary (e.g., auditor, IT specialist, etc.).

Training

22.	Companies should provide anti-fraud training to staff, management and members of the board of directors, and to new recruits as part of their induction programs.
23.	The scope of the training will vary depending on the role and responsibilities of individuals but should include at an introductory level an overview of the company's fraud management strategy and a detailed review of the policies, procedures and internal controls implemented.
24.	Employees holding key positions (e.g. premium collectors, claims settlers, internal auditors, etc.) should be dispensed more comprehensive fraud training, covering in addition to topics stated above:
		a)	Overviews of the relevant laws and regulations.
		b)	Workshops using real fraud cases and examples.
		c)	Reviews of internal and external fraud reporting procedures.

Reporting
1. Companies should have internal procedures to report fraudulent and suspicious activities to designated members within the organization and law enforcement agencies, while guaranteeing anonymity and confidentiality of the denunciations. A reference to these procedures should be made in the contingency plan.
  In addition, these procedures should be communicated to new recruits upon induction and be made readily available to staff (e.g., on the company's intranet).
2. Companies should communicate their reporting policies and procedures internally and externally (e.g., on the company's website).

Information Exchange
1. Companies should share information on incodences of fraud as well as fraudsters with relevant authorities and with SAMA.

Part 3: Anti Fraud Standards

Section A: Internal Fraud

Detection
1. Internal fraud can be committed by the company board members, management, and staff in any of the business activities of the company. Fraud can be detected in overall business practices as well as personal conduct or attitude.
  Typical internal fraud indicators are provided in Table I.

Measure
1. Companies should define clear and well documented policies and procedures to measure internal fraud. The implementation and efficiency of these procedures should be verified by internal auditors yearly and a report regarding fraud occurrence, trends and mitigation efficiency should be submitted to the board of directors.

Mitigation

30.	Companies should define transparent and comprehensive policies when dealing with internal fraud, highlighting in particular:
		a)	The role of the board, management and staff when dealing with internal fraud.
		b)	The enforcement measures to be taken against fraudsters.
		c)	The relevant law enforcement authorities notification procedure.
31.	Companies should restrict the access to cash and electronic transfers by:
		a)	Setting up physical and procedural security measures over the availability and use of cash, assets and information systems.
		b)	Arranging for cash and electronic transfers to be dealt with by more than one person.
32.	Companies should enforce strict information technology rules, including but not limited to:
		a)	Restricting the physical access to computer server rooms.
		b)	Monitoring access rights to networks.
		c)	Limiting and monitoring remote accesses to networks.
		d)	Controlling and renewing network passwords on a regular basis.
		e)	Implementing network security and auditing trail.
33.	Companies should, prior to hiring permanent or temporary personnel, thoroughly screen and perform background checks to ensure the integrity and the proper moral values of potential recruits.
34.	Companies should promote a culture of integrity and accountability within their organizations, e.g., by developing an internal ethical behavior manual that promotes proper conduct and good values.
35.	The organizational structure of companies should be built around the following principles:
		a)	Job descriptions should be defined clearly across the organization, detailing roles and responsibilities of management and staff.
		b)	Functions that might be susceptible to conflict of interest should be separated.
		c)	Vacations and job rotations for management and staff in key sensitive positions should be mandatory.
36.	Companies should maintain comprehensive and complete personnel records for a sufficient amount of time after the personnel's departure. These records can be accessed by SAMA examiners upon request.

Monitoring
1. Companies should enforce thorough management and staff supervision policies, particularly for key positions within the organization.
2. Sensitive activities should be subject to the dual verification principle, i.e., be submitted for verification by another staff member from a different department within the organization.

Section B: Service Provider Fraud

Detection

39.	Since they handle most market-facing activities (e.g., distribution and claims settlement), insurance service providers are at the heart of the relationship with the policyholder. Consequently, insurers should enhance close collaboration with insurance service providers to detect and combat internal and policyholder fraud at their level, while monitoring the insurance service providers themselves for insurance service provider fraud.
40.	Typical insurance service provider fraud includes:
		a)	Withholding premiums collected by policyholders until a claim is reported.
		b)	Insuring fictional policyholders while paying a first premium, collecting the commission and ceasing the insurance.
		c)	Conspiring with policyholders to commit fraud.
Typical insurance service provider fraud indicators are provided in Table II

Measurement

Insurers' internal auditors should assess the fraud risk of all contracted insurance service providers on an annual basis in a report to be submitted to the board of directors. In particular, this report should contain for each insurance service provider:

a)	A review of the business (e.g., volume, nature of transactions, trends, etc.) of the insurance service provider.
b)	An assessment of the risk level, trend, and occurrence of fraud (if any).
c)	An overview of the insurance service provider's key processes which represent the highest risk of fraud.
d)	A profile of staff members handling key market-facing activities, e.g., sales and claims managers.

Mitigation

42.	Insurers should take the necessary fraud risk mitigation measures to select and deal with reputable insurance service providers. These measures include but are not limited to:
		a)	Enforcing a well defined and documented screening procedure for the appointment of new insurance service providers. Such a procedure should require applicants to disclose all relevant information about their business and contain steps to:
				i.	Evaluate the references and reputation of potential new insurance service providers.
				ii.	Assess their financial situation and solvency.
		b)	Setting fraud management agreements with each contracted insurance service provider. Such agreements should:
				i.	Require the insurance service provider to comply with the insurer's anti-fraud policies, procedures and controls.
				ii.	Stress the enforcing sanctions in case of non-compliance.
43.	To minimize the risk of fraud, insurers should:
		a)	Avoid paying a commission before the first premium is collected.
		b)	Avoid paying commissions beyond a certain percentage of premiums paid.
		c)	Keep parts of the commission in a temporary deposit account when dealing with unknown or new insurance service providers.
		d)	Send policies and renewal documents directly to policyholders.
		e)	Request from insurance service providers not to accept cash payments of premiums.

Monitoring
1. Insurers should define appropriate indicators to flag insurance service providers with higher risk of fraud.

Section C: Policyholder Fraud

Detection

45.	Policyholder fraud is committed by policyholders and/or third parties mainly at the policy setup and claims management stages of the client relationship. Consequently, companies should design and implement procedures to combat the main types of policyholder fraud, which include but are not limited to:
		a)	At the policy setup stage: withholding or providing incorrect personal or background information.
		b)	At the claims filing stage:
				i.	Submitting claims for fictitious damage or loss.
				ii.	Misrepresenting facts to include the claim in the coverage.
				iii.	Overstating cost of damage.
Typical policyholder fraud indicators are provided in Table III.

Measurement

46.	Companies should maintain detailed records of occurrence of policyholder fraud. These records should detail at a minimum:
		a)	The type of fraud.
		b)	The technique and/or technology used to commit the fraud.
		c)	The weaknesses in internal control procedures and deficiencies in processes.
		d)	The fraudsters' profiles and backgrounds.
		e)	The amount of the fraud.
These records are to be communicated to SAMA upon request.
47.	Internal auditors (or fraud function officer if existent) should prepare and submit to the board of directors on a yearly basis, comprehensive reports detailing fraud occurrence, description, trends, and an assessment of the efficiency of anti-policyholder fraud measures.

Mitigation
1. Companies should design their policies to minimize the occurrence of fraud. Based on internal auditors' yearly reports and under the supervision of the board of directors, senior managers should implement new anti-fraud measures, procedures and policies and improve existing ones.
2. Companies should clearly define and document client filtering policies and set, for each insurance business class and product, the conditions required to accept new clients. These conditions should be subject to the board of directors' approval, and reviewed on an annual basis.
3. Companies should define for each insurance product clear and comprehensive claims assessment procedures, detailing in particular the steps to verify the claim's facts and validity and to check for fraud indicators (see Table III).
4. Companies should inform policyholders about their anti-fraud policies and the consequences of providing false or inaccurate information. Furthermore, an information section can be included in the text of the policy itself to ensure policyholders read and agree to the measures in place.
5. Since insurance business development and customer relationship requirements can conflict with fraud minimizing requirements, companies should determine the right balance between development targets, customer satisfaction, and fraud detection. Consequently, operational and fraud reduction targets should be combined and approved by the board of directors on an annual basis.

Monitoring
1. Companies must establish, for each business class and product, appropriate policyholder fraud indicators, trigger levels, and responses.

Table I: Typical Internal Fraud Indicators

Table I: Typical Internal Fraud Indicators
Business practices and conditions
Governance and Organizational Structure	◄ Single individual or group of individuals acting together drive operations and/ or financial decisions
	◄ Company’s strategy changes suddenly
	◄ Organizational structure is complex
	◄ Executive directors are numerous
	◄ Directors, managers, members of staff, external businesses and contractors have conflict of interest
	◄ Commission structures are unusual
Operational Management	◄ Training programs are weak
	◄ Transaction time, place, and parties are unusual
	◄ Activities are inconsistent with the insurer’s stated policy
	◄ Management turnover is high
	◄ Staff turnover is high in financial and/ or accounting departments
	◄ Obsoleteness or lack of procedural manuals
	◄ Documentation for transactions, processes or expenses is limited
	◄ Tasks and transactions are complex and require special skills
Accounting and Finance	◄ Assets are restructured without justification
	◄ Accounting procedures are weak
	◄ Financial results and ratios are uncorrelated
	◄ Share value changes without explanation
	◄ Costs rise unjustifiably or are high compared to competitors
	◄ Financial issues emerge
Internal Control	◄ Internal control structure is weak
Internal Audit	◄ Information from prior audits is insufficient
Internal Audit	◄ Internal audits are weak or non-existing
Information Technology	◄ Data and asset security system is weak
Complaints	◄ Number of complaints received from external parties is high
Conduct
Governance and Management Matters	◄ Board of directors emphasizes unduly on meeting earning projections
	◄ Board of directors and management take undue risks
	◄ Board, managers, or members of staff have insufficient levels of income to meet personal debts or financial losses
	◄ Board, managers, or members of staff appear to be living beyond their means
	◄ Board, managers, or members of staff change lifestyles suddenly
	◄ Board, managers, or members of staff display marked personality changes or intense family pressure
	◄ Board, managers, or members of staff have a feeling of unfair treatment
	◄ Board, managers, or members of staff display extreme greed for personal gain
	◄ Board members and managers incur significant increase of expenses
	◄ Board of directors and/ or management provide unsatisfactory answers to the supervisor’s or auditor’s questions
	◄ Directors and/ or management have a poor reputation in the business community
	◄ Board of directors and/ or management display overly aggressive attitude toward financial reporting
	◄ Board of directors and/ or management place undue pressure on the auditors
	◄ Board of directors and/ or management do not comply with laws and regulations
	◄ Board of directors and/ or management display dominant management style, discouraging critical or challenging views from others such as members of staff
Working Environment	◄ Morale is low within the insurer or within certain departments of the insurer
	◄ Relationships at work are inappropriate or acting of individuals is unusual
	◄ Earning ability is lower than that of other comparable insurers
	◄ Company faces adverse legal conditions
	◄ Managers or members of staff work late, are reluctant to take vacations and display signs of stress
Operational Management	◄ Staff recruiting processes contain problems
	◄ Management fails to follow proper policies and procedures in making accounting estimates
	◄ Processing of payments is done at odd times (e.g., late in the day, after business hours, etc.)
	◄ Insiders reduce holdings of insurer’s stock

Table II: Typical Insuarance Service Provider Fraud Indicators

Table II: Typical Insuarance Service Provider Fraud Indicators
Finance	◄ Intermediary is in financial distress
Portfolio	◄ Portfolio is small but has high insured amounts
	◄ Number of insurance policies where the commission is higher than the first premium is high
	◄ Portfolio contains an arrear of premium payments
	◄ Portfolio displays high amount of claims fraud or a disproportionate number of high risk insured individuals, (e.g., elderly people)
Operations	◄ Intermediary operates outside the region of the policyholder
	◄ Intermediary asks for an immediate or in advance payment of commission
	◄ Intermediary asks the policyholder to make payments via the intermediary himself which is an unusual business practice
	◄ Intermediary receives premiums and pays commissions that are above or below the industry norm for the type of policy
	◄ Intermediary has a relatively high claims ratio
	◄ Intermediary has an exceptional increase in production without apparent reason
	◄ Intermediary has a high level of early cancellations
	◄ Intermediary has a high number of unsettled claims
	◄ Intermediary insists on using certain loss adjusters and/ or contractors for repairs
	◄ Intermediary changes control or ownership frequently
Conduct	◄ Intermediary has a personal or a close relationship with the client
	◄ Intermediary changes name and address frequently
	◄ Intermediary has a number of complaints or regulatory inquiries

Table III: Typical Policyholder Fraud Indicators

Table III: Typical Policyholder Fraud Indicators
General Indicators
Claimant’s Behavior
General Conduct	◄ Claimant doesn’t do anything to prevent or limit the damage
	◄ Claimant provides evasive answers and does not cooperate during a reconstruction
	◄ Claimant gives inconsistent statements to the police, experts, and third parties
	◄ Claimant hides details of claim to other people (e.g., family, friends, neighbors, etc.)
	◄ Claimant handles business in person or by phone, while avoiding written communication
	◄ Claimant displays detailed knowledge about insurance terms and claims processes
	◄ Claimant checks the insurance coverage shortly before the claimed event
	◄ Claimant modifies address, bank or telephone details shortly before a claim is made
	◄ Claimant insists on using certain contractors, engineers, or medical practitioners without a convincing reason
	◄ Claimant avoids giving information concerning denial of previous insurance when applying for a new insurance
Coverage	◄ Policyholder possesses several policies with the same insured object and coverage
	◄ Policyholder changes insurers frequently
	◄ Policyholder insists on changing terms and conditions
	◄ Claimant does remarkable filing of the claim (e.g., claimant seeks help of a lawyer or other professional advice in reporting the claim)
Payment	◄ Claimant requests that payment is made in cash
	◄ Claimant requests that payment is made into different accounts
	◄ Claimant requests that payment is made to a third party
	◄ Claimant insists that the payment exceeds the value of the damaged goods
Speed of Settlement	◄ Claimant insists on quick settlement of a claim
	◄ Claimant threatens to bring in a lawyer if the claim is not settled swiftly
	◄ Claimant enquires frequently about the progress of the claim
	◄ Claimant accepts a low payment to settle the claim quickly
Claimant’s Characteristics
Background Information	◄ Claimant provides vague information regarding identity of policyholder and/ or beneficiary
	◄ Claimant uses a post office box or hotel as an address, moves repeatedly, gives false addresses, or has a non-matching telephone number and address
	◄ Claimant refuses the disclosure of claims history with other insurers
Personal and Financial Situation	◄ Claimant has an usual and/ or difficult occupational situation (e.g., unemployed, self-employed, frustrated with job, facing disciplinary action, seasonal worker, or in an industry experiencing downsizing and lay-offs)
	◄ Claimant is experiencing a bad financial situation
	◄ Claimant faces a difficult family situation (e.g., divorce)
	◄ Claimant has a relationship with known fraudsters or criminals
	◄ Claimant has a history in bad claims
	◄ Insurer is experiencing difficulties reaching the claimant
	◄ Claimant lives in a known fraud area
Documents
Forms	◄ Application forms are incomplete and/ or unsigned
	◄ Claim forms are incomplete and/ or unsigned
	◄ Claim forms are modified frequently
	◄ Application form and the inception date of the cover are different
	◄ Application form and claim form are inconsistent
Receipts and Reports	◄ Minor losses are sufficiently documented while major ones are not
	◄ Documents/ receipts are unspecific, modified, or unreadable
	◄ Original documents/ receipts are missing; only copies are provided
	◄ Receipts are new (e.g., not wrinkled, clean) for old events or products
	◄ Receipts contain different handwritings
	◄ Documents display odd dates (e.g., during holidays, after business hours etc.)
	◄ Doubtful receipts are provided, from companies that do not exist, have ceased operations, or are insolvent
	◄ Doubtful receipts are provided, with differing dates but with successive numbering
	◄ Foreign receipts contain unspecified currency
	◄ Reports from medical practitioners or other authorities (e.g., police) are inconsistent
	◄ Documentation from foreign countries is different from the expected format or content (e.g., use of incorrect language)
Claims’ Characteristics
Submission of Claim	◄ Claims are submitted by a third party without proper power of attorney
	◄ High claims are submitted frequently
	◄ Claims submitted display prevailing connections
Timing of Claim	◄ Claim is filed in one of the following cases: - Shortly after coverage becomes effective. - Just before cover ceases. - Shortly after the cover has been increased or the contract provisions are changed.
	◄ Loss occurs just after payment of premiums that were long overdue
	◄ Damage occurs in the period of provisional cover
Size of Claim	◄ Loss is actually far higher than first reported
	◄ Loss claimed is just below the threshold that causes additional checks by the insurer
	◄ Amounts insured and the characteristics (e.g., age, profession) or life style of the policyholder are inconsistent
Indicators Specific to Business Classes
Property claims (including disaster fraud)
General Property Losses and Claims	◄ Losses and the characteristics (e.g., residence, occupation, income, lifestyle, etc.) of the policyholder are inconsistent
	◄ Claimed losses and the findings in the police report are inconsistent
	◄ Damaged items cannot be/ are not examined by loss adjusters
	◄ Destroyed items are in bad shape
	◄ Large amount of cash is stolen
Fire	◄ Fire affects a single property or building without affecting others
	◄ Policyholder, family and pet are absent during a fire
	◄ Items of sentimental value (e.g., photograph albums) or family heirlooms are not lost or damaged during fire
	◄ Absence of physical evidence of the place where heavy items were located (e.g., indentations in the carpet from furniture
	◄ There are multiple sources of fire
	◄ Origin of fire is unknown
	◄ There is no evidence of burglary in case of arson
	◄ Building is unoccupied and without surveillance at the time of fire
	◄ Building is disconnected from public utilities at the time of fire
	◄ Fire is not detected by fire alarm
	◄ Fire alarm is switched off coincidently
	◄ Fire alarm is switched on, but blocked by objects
	◄ Fire is detected shortly after people leave the building
Car Accidents	◄ Car damage and/ or injuries are exaggerated, claims are fabricated or accident is staged
	◄ Circumstances of accident are identical as a previous claim or with the same lawyer
	◄ Blame on the accident is accepted too easily
	◄ Police and/or emergency services are not contacted immediately after an accident with substantial damage
	◄ Claim for recovery damage is not made immediately after an accident with substantial damage
	◄ Relationship exists between the people involved (e.g., between passengers of the different vehicles, between patient and doctor, etc.)
	◄ One of the individuals involved has a rental car
	◄ Driver of the rental car accepts blame easily
	◄ Eye witness is very cooperative
	◄ One of the vehicles involved in the accident is old and the other is new
	◄ Severe damage occurs without a collision (e.g., swerving)
	◄ Both people involved are foreigners from the same country
	◄ Claim involves victims with no own damage insurance and/or one who would be at risk if found at fault
	◄ Testimonies are very similar or strikingly different after an accident
	◄ Reported injuries are remarkably similar
	◄ Damage does not match the injuries (e.g., little physical damage but severe personal injuries)
	◄ Inconsistencies in the damage of the cars involved (e.g., one with minor damages, the other with severe damages)
	◄ Injuries are difficult to observe objectively (e.g., headaches or whiplash)
	◄ Marks at the location of the accident are absent or difficult to find
	◄ Accident occurs in a deserted location
Car Theft	◄ Vehicle has an unusual registration number
	◄ Vehicle has been registered very recently
	◄ Vehicle is stolen just after the end of the “new-value period”
	◄ Registration certificate is inside the vehicle or is lost before the theft
	◄ Vehicle keys are not the original ones
	◄ Vehicle alarm is switched on but does not work
	◄ Stolen vehicle is recovered completely undamaged
	◄ Stolen vehicle is recovered with valuables/ documents
	◄ Age or social position of the insured and the make and model of the vehicle are inconsistent
Claimants Conduct and Employment Information	◄ Losses are described vaguely
	◄ Claim is filed with delay
	◄ Items are over-insured substantially
	◄ Claimant gives very detailed description of the property or a detailed photo report at the preliminary stages of the claim
	◄ Lists of property in the claimant’s and the loss adjuster’s reports are in the same order
	◄ Items insured are new according to the claimant
	◄ Inconsistencies exist in the claimant’s account
	◄ Claimant does not want the claim handler to contact his employer directly
	◄ Claimant’s employment information is suspicious
	◄ Claimant started his employment shortly before the accident occurred
Police Reports	◄ Police report is not provided when expected
Police Reports	◄ Discrepancies exist between the claimed losses and the findings in the police report
Travel
Timing	◄ Loss is reported a long time after the trip
Timing	◄ Mismatch exists between insurance term and holiday period
Life
Policyholder Information and Conduct	◄ Relationship between the policyholder, the insured and the payer of the premiums is unclear
	◄ Policyholder or beneficiary owns several policies with different addresses
	◄ Policyholder accepts unfavorable conditions
	◄ Insured amount and standard of living of the policyholder are inconsistent
Payments and Beneficiaries	◄ Payments are requested to be made to others rather than the policyholder or the beneficiary
	◄ Premium is paid in cash
	◄ Premium is made in foreign currencies or from a foreign bank account
	◄ Payment is made to unrelated third parties
	◄ Policyholder and beneficiary have a significant age difference
	◄ Beneficiaries of policy are frequently changed
	◄ Beneficiary’s name and account number are inconsistent
Cancellation of Policy	◄ Request for cancellation of policy or refund of premiums are made shortly after the cooling off period
Cancellation of Policy	◄ Request for cancellation is not signed or signed by an unauthorized third party
Time and Place of Death or Claim	◄ Claim of suicide or a criminal offence is made shortly after inception of the policy
	◄ Change of policy provisions or beneficiary is made just before death or disability
	◄ Insured is claimed dead while abroad
	◄ Disability claim is made just after a premium default
Missing Death Information	◄ Body of deceased is missing or unidentified
	◄ Original death certificate is unavailable
	◄ Cause of death or disability is suspicious
Transport
Operations	◄ Weighbridge is non-calibrated
	◄ Goods are delivered after theft
	◄ Drivers are paid per trip
	◄ Documents are handled without sufficient supervision (e.g., in hotels, restaurants)
	◄ Goods are transported to a destination that does not have a market or proper processing facilities
	◄ Goods are repacked to larger volume entities
	◄ Goods destined to developing countries are over evaluated
Inconsistencies	◄ Inconsistencies exist between insured volume/weight and the real weight
	◄ Inconsistencies exist between the insured volume/ weight and the type of goods
	◄ Inconsistencies exist between the insured amount and market prices
Related Parties	◄ Parties involved have a bad reputation in the business
Related Parties	◄ Endorser is different from claimant
	◄ Intermediaries are non-cooperative
Healthcare
Conduct of Claimant	◄ Physicians are changed frequently
	◄ Claimant has multiple disability policies
	◄ Claimant claims a disability and is involved in active employment or in a physical sport or hobby
	◄ Claimant develops additional injuries allegedly related to the initial injury or illness when it appears that the claim will be terminated
	◄ Claimant’s illness or injury occurs shortly before an employment problem (e.g., disciplinary action, demotion, layoff, strike, termination, or down sizing)
	◄ Claimant visiting more than two medical providers for the same case
Conduct of Physicians	◄ Emergency services are not contacted
	◄ Prescriptions are cut or altered
	◄ Documents contain misspelling or misusing of medical terminology
	◄ Improper identification numbers are used
	◄ Attending physician is not in the same geographic region as the claimant
	◄ Incorrect or conflicting diagnosis from different medical providers are given
	◄ Treatment provided to the claimant is inconsistent with the report diagnosis
	◄ Treatment is scheduled on holidays or other days when medical facilities are normally closed
	◄ Attending physician’s specialty is not consistent with the diagnosis

Definitions and Scope of Applicability

Licensing Provisions

Licensing Requirements

Licensing Conditions

Licensing Fees

Application Process

Prohibited Activities

Withdrawal of a License

Cyber risk control

Cyber Resilience

Cyber Security Framework
With reference to Circular Number (381000091275) dated 28\08\1438 titled Cyber Security Framework “CSF” in the financial sector, and in pursuit by the Central Bank “SAMA” to enhance cyber security standards for financial institutions within the insurance sector, please be informed that the following financial institutions.
Insurance Brokerage Companies holding SAMA’s approval for electronic sales. Insurance Aggregators. Medical Claims Settlement Companies.
Must adhere to implement the CSF as follows
First: Conduct an in-depth and accurate assessment of the current status of cyber security at the financial institution. This should be compared against the requirements stated within the CSF to identify weaknesses and assess the level of maturity as described within the CSF under the definition of "Maturity Level".
Second: Develop a business plan to meet all requirements of the third maturity level, as mentioned in the CSF, as a minimum.
Third: Present the business plan to the board of directors/managers or general manager, for their review, approval and for seeking any further necessary support.
Fourth: Send the approved business plan to the SAMA within ninety working days of the date of publication of this Circular.
Fifth: Provide SAMA with quarterly reports starting from the end of the first quarter of the year 2023 until full compliance with the CSF.
Sixth: Fully comply with the requirements stated in the CSF within (18) months.
Seventh: The Cyber Security Committee –or equivalent- of the financial institution must follow up on the implementation of the CSF to ensure full support and resources are provided where necessary. Further to ensure timely escalation of obstacles and other related hindrances to the competent authority that may prevent complete implementation of the CSF.
The business plan and quarterly reports to be sent through mail.
To be informed and complied with.

Governance and Internal Control

Corporate Governance

Prudential and Supervisory Requirements

Capital Requirements and Solvency

Statutory Deposit

Accounting Standards

Risk Management, Investment Policies and Asset Allocation

Key Investment Restrictions

Disclosure and Prudential Returns

Business Activities and Market Conduct

Permissible and Prohibited Activities

Underwriting Practices

Insurance Products

Insurance Products Approval

Health Insurance

Motor Insurance

Other Insurance Products

Unified Forms and Policies

Online Insurance Activities

Claims Settlement

Other Provisions

Financial Reporting, Disclosures, and External Audit

Disclosure

Accounting Standards

Reports Requirements

Actuarial Reports

External Auditors Reports

Financial Reports

Reserving Reports

Persistency Reports

Audit Committee

Insurance-Related Professionals and Activities

Reinsurance

Brokers and Insurance Agents

Actuaries

Loss Adjusters & Loss Assessors

Insurance Claims Settlement Professionals

Insurance Consultants

Points of Sale

Insurance Producers

Enforcement, Sanctions, and Financial Penalties

Miscellaneous Regulations (General Rules and Provisions)

Replacement Plan of the Unified Number Strating with Number (7) Replacing Commercial Register
This circular is currently available only in Arabic, please click here to read the Arabic version.

Business Continuity Management Framework
In continuation to the Central Bank’s pursuit to enhance standards within the insurance sector, and with regards to the business continuity mechanism in the event of accidents or disasters, the Central Bank stresses the importance of an effective, applied and tested mechanism based on best practices to ensure business continuity without interruptions or disruptions of importance services.
Please be informed the insurance and/or reinsurance companies must comply with the Business Continuity Management Framework "BCMF" (attached), by following the guidelines below:
First: Gap Assessment; conduct an assessment of the current situation of business continuity at the company. This should be compared against the requirements stated within the “BCMF” to identify areas of weaknesses. A business plan should be developed to comply with requirements of the Central Bank after assessing the current situation and sending it to the Central Bank within ninety working days of the date of publication of this circular.
Second: Provide the Central Bank with quarterly reports starting from the end of the first quarter of the year 2023 until full compliance with the “BCMF”.
Third: The company must fully comply with the requirements stated in the “BCMF” within one year of the date of publication of this circular.

The business plan and quarterly reports to be sent through email.
To be informed and complied with.

Follow-up circular – Regarding Uploading Motor Insurance Policies to the Najm Net system
This circular is currently available only in Arabic, please click here to read the Arabic version.

Actuarial Submissions for Year 2023
Reference is made to the Actuarial Work Rules for Insurance issued by the Governor’s Decision No. (441/186) dated 06/07/1441H.
We inform you that the Actuarial Reports Schedule for the Year 2023 have been issued in accordance with the above Rules.
Accordingly, all insurance and reinsurance companies shall comply with the attached Schedule and submit the Actuarial Reports prepared in line with the relevant instructions issued by SAMA.
To be informed and complied with.

Linking and Dealing with Electronic Platforms
With regards to the Central Bank’s “SAMA” supervisory responsibility over the insurance sector in the Kingdom, and in reference to the objectives of the Cooperative Insurance Companies Control Law and its implementing regulation to protect the policyholders as well as enhancing the stability of the insurance market. Also, with respect to SAMA’s keenness to ensure data protection related to the insurance business in the Kingdom. And with reference to SAMA’s circular number (43045328) dated 19/05/1443 H, wherein SAMA referred to the Personal data protection law (issued by Royal Decree No. (M/19) dated 09/2/1443H), that imposed steps that the financial institutions shall adhere in order to ensure fully compliance with its provisions.
Accordingly, and in order to enhance the protection of the personal date for the financial institutions clients within the insurance sector. Please be informed that all companies working within the insurance sector must adhere to the following:
1. Do not link with any electronic platform without obtaining SAMA’s prior non-objection. Companies whom already linked with electronic platforms must review their regulatory statue and submit to SAMA for correction within (30) days from the date of this Circular.
2. Do not provide any electronic platforms with any data or information related to insurance business without obtaining SAMA’s prior non- objection.
3. Fully comply with the relevant procedures and instructions issued by SAMA before linking or exchanging data with licensed or authorized platforms by SAMA.
These provisions shall not prejudice any previous authorizations or licenses previously issued by SAMA for linking with electronic platforms.

Reinsurance Cession to the Local Reinsurance Market

In continuation to the Central Bank “SAMA” pursuit to enhance the insurance sector in the Kingdom, and with the aim to foster the development of the sector, and ensure alignment with the objectives of the Saudi Vision; alongside with increasing the insurance sector’s contribution to the local content in covering the risks, and based on article (2) of the Cooperative Insurance Companies Control Law, and articles (26) and (40) of its Implementing Regulation.

Therefore, the following should be complied with:

The insurance companies shall, during the negotiation of concluding reinsurance treaty (proportional and non-proportional) for all classes of business, offer a percentage of their reinsurance treaties to the local reinsurance market, either directly or through reinsurance brokerage companies, as specified below:

- Twenty percent (20%) at least commencing on 01/01/2023 and thereafter.

- Twenty five percent (25%) at least commencing on 01/01/2024 and thereafter.

- Thirty percent (30%) at least commencing on 01/01/2025 and thereafter.

Insurance companies and reinsurance brokerage companies must maintain the documentation showing that the required treaty shares –as per section (1) above- are offered to the local reinsurance market.
The Insurance Company must notify SAMA within (20) business days after the end of each calendar year, in case of failure to comply with the mentioned shares in section (1) above, along with providing the reasons for such non-compliance and its documentation.
The insurance companies must ensure that reinsurance brokerage companies offer to place reinsurance business with local reinsurance market first, before placement with international reinsurers.
The insurance companies must maintain records of all treaty arrangements concluded, and must include the share of the local reinsurance market in those treaty arrangements, or, where applicable, the

6.	documents showing the reasons for refusal of the local reinsurance market to participate in those treaty arrangements.
		a-	Reasons of not participation, or participation at lower shares than stated in section (1) above.
		b-	Details of the size of the reinsurance premium that has been retroceded.

Insurance companies must update their reinsurance strategies to reflect the mechanism stipulated in this Circular and submit it to SAMA to obtain no objection within thirty (30) business days from the date of this Circular.

The provisions of the Circular shall apply on all treaties starting from 01/01/2023.

Formation of Insurance Monitoring Department
This circular is currently available only in Arabic, please click here to read the Arabic version.

SAMA Approval for Inclusion of New Board Members
This circular is currently available only in Arabic, please click here to read the Arabic version.

Updating the Insurance Claim Form for Compulsory Motor (Third Party) Insurance for Individual and Corporates
Reference to the Central Bank’s “SAMA” circular number (98/201612) dated 02/03/1438H regarding the claim form “Form” for compulsory motor (third party) insurance for individuals, and in reference to SAMA’s supervisory responsibility over the insurance sector in the Kingdom, and its effort to protect the rights of the insureds and beneficiaries, in particular the development of claims settlement methods.
It is to be informed that the Form for compulsory motor (third party) has been updated in alignment with the regulatory updates by relevant bodies, along with expanding the scope of its implementation to cover all compulsory motor vehicle (third party) claims filed by either individuals or corporates, based on the wording attached to this Circular. In addition to the ability to digitalize the Form to keep pace with the technology transformation.
Therefore, all companies providing motor insurance shall comply with the updated
Form attached to this Circular. SAMA also emphasis on the importance of complying with all of the Form’s provisions and the guidelines for claim settlements provided by SAMA. This Circular shall replace the Circular number (98/201612), while the attached Form shall be effective from 14/08/2022G.

Appendix to the Circular No. (67/48007) About Customer Service Channels
Reference is made to the Circular No. (67/48007) dated on 02/08/1440H, and the Circular No. (43002199) dated on 08/02/1443H in regard to the clients service channels; and based on Article (2) in Cooperative Insurance Companies Control Law;
We inform you that the scope of the aforementioned circulars – with regard to insurance sector- shall include to all insurance companies, insurance agents, insurance brokers, insurance aggregators and insurance claims settlements companies.
To be informed and complied with.

Medical Expenses Insurance - Pricing & Underwriting Instructions
With reference to Actuarial Work Rules for Insurance and/or Reinsurance Companies, and to the circular number (165) dated 13/08/2018, titled Medical Expenses Insurance – Pricing & Underwriting Instructions 2018.
Please be informed that The Medical Expenses Insurance – Pricing & Underwriting Instructions “the Circular” has been issued as a full replacement of the above-mentioned circular.
Accordingly, please find attached the Circular and related documents.
To be informed and complied with.

Adopting the Amendments on International Accounting Standard 12.
Reference is made to the limited amendments made by the International Accounting Standard Board “IASB” on to the International Accounting Standard 12 (“IAS 12”), approved by the Saudi Organization for Chartered and Professional Accountants. Accordingly, the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition.
All companies operating in the insurance sector shall must comply with the above amendments as applicable to their business. The updates to IAS 12 can be viewed by visiting the website of the Saudi Organization for Chartered and Professional Accountants - International Standards page -.

Approval of IFRS 17 amendments
This circular is currently available only in Arabic, please click here to read the Arabic version.

Pricing Adequacy Report Instructions
With reference to Article (53) of the Actuarial Work Rules for Insurance issued by the Governor’s decision number (441/186) dated 06/07/1441H, wherein the Appointed Actuary of an Insurance Company “Company” is required to submit periodic pricing adequacy reports “Report” to SAMA, the Company’s Senior Management, and its Board of Directors.
The Report shall be produced on a quarterly basis and submitted to SAMA at a frequency specified in the Schedule of Actuarial Submissions, issued by SAMA, in respect of each calendar year.
The Report is required in respect of the Medical Expense and Motor classes of business of the Company.
Report
The Company shall prepare and submit the Report according to the following requirements at a minimum:
First: for the purpose of this Report the following terms shall have the meanings below:
1. The ‘Technical price’ defined as the price for a policy determined using the actuarial basis set by the Appointed Actuary as applicable at the time of issuing/renewing the policy; this price shall be before any adjustments made by underwriters or other authorized individuals at the Company.
2. The ‘Selling price’ defined as the actual price at which a policy is sold.
Second: the Company shall comply with the following:
1. In order to avoid any distortions to the comparison made. Both the Technical price and Selling price must include the same components, including at least the risk premium, commissions, expenses, profit margin, and contingency margin, Effect of any mid-term adjustments due to endorsements, additions, subtractions, etc. shall be ignored.
2. Technical prices generated at the time of selling the policies must be preserved and recorded in the Company’s systems in a reliable manner.
3. The Company must provide the Appointed Actuary with all data and other information required by the Actuary in order to produce the Report. Data must be provided in the format required by the Actuary.
4. The Appointed Actuary shall state all data deficiencies observed (if any), discussions held with the Chief Underwriting Officer (or equivalent) to address those deficiencies, and remedial actions proposed by the Appointed Actuary.
5. Assumptions (if any) used in the Pricing Adequacy analysis must be clearly stated in the Report, along with stating justifications for the assumptions and methodologies used.
6. The Appointed Actuary shall quantify the impact of any deviations from Technical prices on the Company’s profitability by stating the following for each segment of underwritten policies:
  1. Expected Loss Ratio based on the Technical price.
  2. Expected Loss Ratio based on the Selling price.
  3. Expected Combined Ratio based on the Technical price.
  4. Expected Combined Ratio based on the Selling price.
  5. Expected Gain or Loss due to deviation from the Technical price.
7. In the Report, the Chief Underwriting Officer (or equivalent) must state the following:
  1. For any data deficiencies observed by the Appointed Actuary, a remediation plan with clear timelines in respect of each data deficiency.
  2. Confirmation that deviations from the Technical price, as observed in the Report, are in line with the Underwriting Authority Statement approved by the Board of Directors.
  3. For each layer of authority mentioned in the Underwriting Authority Statement, state the average and maximum discount percentages applied in respect of the policies sold during the period of the Report.
  4. Confirmation that the Board of Directors has been or will be made aware of the projected financial impact of deviations from the technical price as quantified by the Appointed Actuary in this Report
8. The granularity of analysis must be commensurate with the nature of business written by the Company. At a minimum, the policies underwritten shall be segmented as provided in the MS Excel templates for Motor (Appendix 1) and Medical (Appendix 2).
Submission
- Each Report and the data contained in the MS Excel template must be signed-off jointly by the Chief Underwriting Officer (or equivalent) and the Appointed Actuary.
- A scanned copy of the signed Excel template must be submitted, together with the Report and MS Excel template, to SAMA via RMS.
Moreover, the Company must seek to automate the production of above reports in order to minimize the need for manual intervention and, hence, enhance the reliability of these reports.

Actuarial Reserve Report Submission
Reference is made to the Actuarial Reserve Report “Report” and the associated Reserve Reporting Template “Template” as at 31/12/2021, due for submission as per the Schedule of Actuarial Submissions issued by SAMA for each calendar year. For the purpose of the Quarterly Reserve reporting, the Report shall be replaced by an Actuarial Reserve Certificate “Certificate” for the year 2022.
Accordingly, the Appointed Actuary shall prepare the above Report or Certificate and Template in adherence to the following:
1. The instructions contained in Circulars (173) “Circular” dated 16/01/2019, with the following considerations:
  1. The first paragraph of the Circular, with reference to Article (28) of ‘Actuarial Work Regulation’ shall be replaced with Article (50) of the ‘Actuarial Work Rules for Insurance’ dated 01/03/2020.
  2. With regards to the Unearned Premium Reserve, in paragraph (3g) of the Circular, the phrase “For Visitor-visa Medical Expense insurance policies with policy term in excess of one year . . .” shall be read as “For Visitor-visa Medical Expense insurance policies, Medical Malpractice insurance policies, and Inherent Defects insurance policies with policy term in excess of one year . . .”.
  3. With regards to the Expense Analysis mentioned in paragraph (4b) and (4c), and investigations regarding mortality, disability and expenses mentioned in sub-paragraph (g)(v) and (g)(vi) of paragraph (8) “Protection and Savings (P&S) Insurance” in the Circular, these requirements shall be deemed to have been met through the submission of the last annual Experience Studies Report. In case of any differences between the assumptions recommended in the above Experience Study Report and those used in the Actuarial Reserve Report, a summary of the changes in assumptions and their justification shall be attached as an appendix to the Actuarial Reserve Report.
  4. With regards to the Salvage and Subrogation (S&S) reserves, comply with paragraph (5e) of the Circular by projecting salvage and subrogation separately, and projecting subrogation separately for policyholders and insurance companies.
2. Continue to report separately on the claims related to COVID19.
3. For Motor and Medical lines of business, estimate the ultimate frequency, ultimate severity and ultimate burning cost of claims, both gross and net of reinsurance.
4. Report on the claims provisions made, separately in Incurred but not reported (IBNR) and Premium Deficiency Reserve (PDR), for regulatory and environmental changes, covering at least the following:
Impact of Article (11) of Implementing Regulation the Cooperative Health Insurance Law.
Impact of COVID 19 on Health insurance claims provision.
Submission:
The Report or Certificate, along with a duly filled Template (attached) shall be submitted to SAMA as per the submission deadlines set by SAMA.

Claims Settlement Companies’ Services
This refers to the Central Bank’s “SAMA” supervisory responsibility over the insurance sector in the Kingdom, the objectives of the Cooperative Insurance Companies Control Law and its Implementing Regulation to support fair and effective competition in the sector, and SAMA’s effort to limit practices that may lead to conflict of interests when considering the responsibilities of Insurance Claims Settlement Companies licensed by SAMA.
Accordingly, effective 01 March 2022, all Insurance Claims Settlement Companies must adhere to the following:
1. Not accept any financial compensation in any form, whether as administrative fees or as commissions from services providers in return for the tasks carried out on behalf of an insurance company.
2. Must receive a payment order from the insurance company assigning the Insurance Claims Settlement tasks before making any direct payment to the services providers, which shall only be made by using an independent (Escrow Account) for each insurance company contracted with.
3. Provide the insurance company, on a quarterly basis, with data of insurance claims related to the health insurance policy for the employees and owners of the Insurance Claims Settlement Company where the insurer is the insurance company that assigned the Insurance Claims Settlement task.
SAMA also emphasizes upon all insurance companies to take all necessary measures to ensure that the Insurance Claims Settlement Companies, which act on their behalf in settling insurance claims, adhere to the standards of fairness and integrity in settling claims.

Annual Experience Studies Report Instructions

These instructions are issued with reference to Article (61), Article (62) and Article (65) of the Actuarial Work Rules for Insurance issued by the Governor’s decision number (441/186) dated 06/07/1441H, wherein the Appointed Actuary of an Insurance or Reinsurance Company “Company” is required to carry out annual Experience Studies Report “Report”.

The report shall be produced by the Company as per the timetable specified in the Schedule of Actuarial Submissions, issued by SAMA, in respect of each calendar year.

Purpose

Enable the Company’s management to understand the extent and drivers of expenses for each line of business.
Enable the Company’s management to understand the trends in mortality and morbidity under protection & savings business, both individual and group segments.
Enable the Company’s management to understand the level and drivers of persistency for individual protection & savings business.
Derive expense, mortality, morbidity and persistency assumptions for the purpose of actuarial reserve calculations.

Report

The Report shall be prepared and comprise the following sections, at a minimum:

First: Expense Study:

Data: The data shall cover general insurance, health insurance, short term protection and savings products. This shall include, at a minimum, the following:

a)	Detailed description of the data used, including the source(s) of data, data validation performed, and any limitations of the data.
b)	Data excluded from the analysis, if any, along with its justification.
c)	Reconciliation checks performed, and plans for remediation where differences are observed (if any).

Methodology & Assumptions, This shall cover the following:

a)	Analysis of Premium Deficiency Reserve (PDR).
b)	Analysis of Unallocated Loss Adjustment Expenses (ULAE).
c)	Analysis of first year and renewal expenses for individual’s protection & savings business.
-	All assumptions and methodologies, including those used for allocating expenses to each line of business, shall be described in detail. The Report shall also state justifications for the assumptions and methodologies used. The expense analysis shall be carried out at a sufficient level of granularity.
-	The analysis performed shall draw on the latest experience of the Company and leading professional practices (such as activity-based cost analysis).

Results and Recommendations, This shall include, at a minimum, the following:

a)	Expense ratios derived for the purpose of Premium Deficiency Reserve calculations for each line of business.
b)	Expense ratios derived for the purpose of Unallocated Loss Adjustment Expense Reserve calculations for each line of business.
c)	Expense ratios derived for the purpose of individual’s protection & savings’ reserve calculations.

Second: Persistency Study:

The Report shall separately consider all material individual long-term protection and savings products written by the Company, and shall comprise the following sections, at a minimum:

Data The data shall cover individual protection & savings business for a minimum of five years or since the time the Company started selling the protection & savings portfolio (if less). This shall include, at a minimum, the following:

a)	Detailed description of the data used, including the source(s) of data, data validation performed and any limitations of the data.
b)	Data excluded from the analysis, if any, along with its justification.
c)	Reconciliation checks performed, and plans for remediation where differences are observed (if any).

Methodology & Assumptions. This shall cover the following at a minimum:

a)	Approach to calculating risk Exposure.
b)	Description of Lapse event.
c)	Treatment of Waiver of Premium (WOP) claims.
d)	Treatment of over-due premiums.
e)	Any simplifications used along with their justification.
f)	Treatment of policies cancelled during the Free-Look Period.
g)	Treatment of policy options, including but not limited to, partial surrenders, policy loans, paid-up option, premium decrements.

Results and Recommendations. This shall include, at a minimum, the following:
a) Result of the study conducted.
b) Clear recommendations based on the study.
c) Detailed rationale supporting the recommendations.

The results shall be shown separately for each category mentioned in the Template provided by SAMA.

Third: Mortality & Morbidity Study:

The Report shall comprise the following sections, at a minimum:

Data This shall include, at a minimum, the following:

a)	Detailed description of the data used, including the source(s) of data, data validation performed and any limitations of the data.
b)	Data excluded from the analysis, if any, along with its justification.
c)	Reconciliation checks performed, and plans for remediation where differences are observed (if any).

Results and Recommendations. This shall include, at a minimum, the following:
a) Result of the study conducted.
b) Clear recommendations based on the study.
c) Detailed rationale supporting the recommendations.

Submission

A duly filled Experience Studies Template ‘attached’, which captures the summary of the data, methodology and results, shall be prepared by the Appointed Actuary and be submitted along with the Report.
The Report and the Template must be submitted via RMS.

To be informed and complied with.

Investment and Asset Liability Management Report’s Instructions

These instructions are issued with reference to Article (60) of the Actuarial Work Rules for Insurance issued by the Governor’s decision number (441/186) dated 06/07/1441H, wherein the Appointed Actuary of an Insurance Company “Company” is required to submit investment and asset liability management report “Report” to SAMA, the Company’s Senior Management, and its Board of Directors.

The Company shall produce the report as per the timetable specified in the Schedule of Actuarial Submissions, issued by SAMA, in respect of each calendar year.

Purpose

- Enable the Company’s Senior Management and Board of Directors to make informed decision on the Company’s investments and assets liability management.

- Provide recommendations to the Company’s Senior Management and Board of Directors regarding the Company’s investment policy and asset liability management strategy, keeping in view the nature and timing of insurance contract assets and liabilities and the availability of appropriate assets.

Report

The Report shall, at a minimum, comprise the following sections:

Data

This shall include, at a minimum, the following:

a)	Detailed description of the data used for the analysis, including the source(s) of data, and data validation performed.
b)	Limitations of data, if any, and plans for remediation.
c)	Description of the Company’s Investment Policy approved by SAMA.

Methodology & Assumptions

The analysis shall include, at a minimum, the following:

a)	Methodology used for the calculation of the duration of assets and liabilities.
b)	Methodology for assessing the suitability of the Investment Policy.
c)	Assumptions used, along with their justification. If an assumption is based on external sources, those external sources shall be identified.
d)	Assessment of compliance of the Company’s current investments with its Investment Policy as well with SAMA’s Investment Regulations.

Results and Recommendations
This shall include, at a minimum, the following:
a) Recommendations regarding the Investment Policy.
b) Recommendations regarding the Asset-Liability management strategy.
c) Detailed rationale supporting the above recommendations.

In addition, the Appointed Actuary shall fill out the spreadsheet template “Template” provided in Appendix (1) which is designed to capture the summary of the above Report.

Appointed Actuary and Board of Directors Responsibilities

The Appointed Actuary must present his recommendations stated in the Report to the Board of Directors within two months of the date of producing the Report. The relevant extract from the minutes of the Board meeting, clearly identifying whether the Board accepted or rejected the above recommendations, in part or in full, must be submitted to SAMA within one month of the date of holding the Board meeting.

Submission

The Report and the Template shall be submitted via RMS.

To be informed and complied with.

Follow-up Circular Regarding the Electronic Addresses of the Administrative Units of the General Directorate of Insurance Control
This section is currently available only in Arabic, please click here to read the Arabic version.

Obligation to Obtain a Professional Test Certificate for the Compliance Officer in the Insurance Sector
This circular is currently available only in Arabic, please click here to read the Arabic version.

Circular (225) Procedures for Reporting and Due Diligence for Financial Account Information (CRS)
This section is currently available only in Arabic, please click here to read the Arabic version.

Quarterly Reserves Template
This refers to the quarterly reporting of actuarial reserves, due for submission to SAMA as per the Schedule of Actuarial Submissions for Year 2021 circulated by SAMA on 22nd December 2020.
For the above submission, the Appointed Actuary shall follow the instructions contained in SAMA’s Circular (207) dated 14/01/2021. Also, the Company shall replace the ‘Actuarial Reserve Report’ with the ‘Actuarial Reserve Certificate’. A template for the Actuarial Reserve Certificate is attached.
Accordingly, the Company must submit a completed Reserve Reporting Template along with the Actuarial Reserve Certificate as per the submission deadline for each quarterly submission; according to Circular (205) dated 22/12/2020.
An updated Reserve Reporting Template to be used by the Company for quarterly submissions is also attached, All submissions must be made through RMS.

Sports Facilities Insurance (219)
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Regulating the Integrated Logistics Special Zone
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Providing After-Sale Electronic Services
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Application of the Provisions of the Multilateral Agreement between Competent Authorities on the Automatic Exchange of Financial Account Information (CRS
This section is currently available only in Arabic, please click here to read the Arabic version.

The Required Due Diligence Under the Common Reporting Standard CRS (211)
Referring to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS) and the attached Common Reporting Standard for Financial Account Information Reporting and Due Diligence (CRS), approved under Royal Decree No. (M/125) dated 1/12/1438H and its regulations issued by Council of Ministers Resolution No. (706) dated 30/11/1438H, and in preparation for the evaluation of the compliance of financial institutions in the Kingdom with CRS standards scheduled for this year:
We would like to inform you that the self-certification form has been updated to align with the requirements of the Automatic Exchange of Information Agreements (attached).
Accordingly, all insurance companies subject to the provisions of the agreement are required to review the form and ensure customer data is updated in accordance with this new form.

Appendix to Circular on the Compulsory Acquisition of the Insurance Fundamentals General Certificate (IFCE)
This section is currently available only in Arabic, please click here to read the Arabic version.

Appendix to Circular on Limiting Advertising on Tadawul to Products that are Expected to Generate more than (5%) of the Company's Sales
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Common Reporting Standard (CRS) Status Message XML Schema: User Guide for Tax Administrations
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Applying Suitability Standards for the Appointment of Board Members, Senior Management, Key Persons in Control Functions
This section is currently available only in Arabic, please click here to read the Arabic version.

Representing Juristic Entity before Judicial Authority
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Mechanism of Correspondence with Civil Defence
This section is currently available only in Arabic, please click here to read the Arabic version.

Updating Websites and Verifying Social Media Accounts
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Automated Connectivity with Companies working in the Insurance Sector
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Submitting Motor Insurance Information on Najim Net System
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Grant a Discount for the 'Named Driver'
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Instructions on Insurance Renewal Messages
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Governor Decision on Seperation between Insurance Brokerage and Reinsurance Brokerage
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Updated Articles of Association Form of Insurance Companies
This section is currently available only in Arabic, please click here to read the Arabic version.

Encouraging Optional Insurance for Saudi Families
This section is currently available only in Arabic, please click here to read the Arabic version.

Obtaining SAMA's non-Objection before Providing Governmental and non-Governmental Agencies with Supervisory and Statistical Data and Information
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Follow Up Gross Written Premiums Data in the Sectoral Disclosure within the Financial Statements
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Gross Written Premiums Data in the Sectoral Disclosure within the Financial Statements
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Remuneration of Chairman of the Board of Directors of Insurance and Reinsurance Companies
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Saudi Arabia Insurance Market Report for 2018
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FATCA – Registration and GIIN
We refer to SAMA’s circular No. (351000112701) dated 28/8/1435H, related to Foreign Account Tax Compliance Act (USA(, in which SAMA had informed you that the Governments of the Kingdom of Saudi Arabia and the United States of America had reached an Agreement in Substance and that KSA had consented to be included on the list of jurisdictions treated as having a Model 1 Inter Governmental Agreement (IGA) in substance.
We have now received communication from the US Department of Treasury through the Ministry of Finance that the extension given to countries that have an agreement in substance to sign an IGA does not include any extension of deadline for their financial institutions to register with the IRS. After reviewing the registration form and based on external legal advice, SAMA does not have any objection for Saudi Insurance and/or Reinsurance Companies to register with the IRS and obtain a Global Intermediary Identification Number (GIIN), if the company is subject to FATCA.
If you have any question in this regard, you may contact SAMA.

Updating Information for Communication with SAMA
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Delay in Uploading Customer Information for Vehicle Insurance on Najm Net
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Transferring Ownership of Totaled Vehicles
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Reminder of the Circular Pertaining to Recommendations for the Vehicles Affected by Floods
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Recommendations for the Vehicles Affected by Floods
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Outsourcing Risks That Can not be Covered in the Local Market to Foreign Companies
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Easing the Process of Receiving Insurance Claims
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Provide the Customer with a Letter of Rejection When Rejecting Claims
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Providing Incorrect Information regarding Motor and Health Insurance Products Prices
This circular is currently available only in Arabic, please click here to read the Arabic version.

Compliance With the Prices Set by the Actuary for Vehicle and Medical Insurance
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Warning of Dealing Without a Mediator
This section is currently available only in Arabic, please click here to read the Arabic version.

Warning of Dealing With Unauthorized Persons
This section is currently available only in Arabic, please click here to read the Arabic version.

Application of the Second Phase of the E-link Project
This section is currently available only in Arabic, please click here to read the Arabic version.

Disclosure of Conflicts of Interest to the BOD
This section is currently available only in Arabic, please click here to read the Arabic version.

Delivery of Confidential Requests
This section is currently available only in Arabic, please click here to read the Arabic version.

Renewal of Insurance Permit Issued by the SAMA for Insurance Companies and / or Reinsurance
This section is currently available only in Arabic, please click here to read the Arabic version.

Quarterly Insurance Sector Data
This section is currently available only in Arabic, please click here to read the Arabic version.

Employees Working in Insurance Sector Must Obtain the General Certificate for Insurance Basics IFCE
This section is currently available only in Arabic, please click here to read the Arabic version.

Announcing the Annual and Quarterly Financial Results
This section is currently available only in Arabic, please click here to read the Arabic version.

Insurance Coverage on Actual User in Leasing Motors and Motors Financially Leased to Individuals
This section is currently available only in Arabic, please click here to read the Arabic version.

Governer's Resolution Following up the Governor's Resolution No. (439-61) 01-03-1439H
This section is currently available only in Arabic, please click here to read the Arabic version.

Governor Decision on Amending the Online Insurance Activities Regulation
This section is currently available only in Arabic, please click here to read the Arabic version.

Nationalizing Insurance Products Sales Positions (for Individuals)
This section is currently available only in Arabic, please click here to read the Arabic version.

Amendments to Malpractice Insurance policies
This section is currently available only in Arabic, please click here to read the Arabic version.

Issuance of Electronic Mails for the Insurance Supervision Department Units
This section is currently available only in Arabic, please click here to read the Arabic version.

Follow Up - Requiring Surveillance Cameras in Stores before the Sell or Issuance of Insurance Policy
This section is currently available only in Arabic, please click here to read the Arabic version.

Follow up- Underwriting Instructions for Motor Insurance 2016
This section is currently available only in Arabic, please click here to read the Arabic version.

Unified Pricing Form for Individuals Motor Insurance
This section is currently available only in Arabic, please click here to read the Arabic version.

Execution of Judicial Decisions against the Insured
This section is currently available only in Arabic, please click here to read the Arabic version.

Application of the Provisions of the Regulation for Treatment of Non-Disclosure of Information for Tax Purposes
This section is currently available only in Arabic, please click here to read the Arabic version.

Refund the Paid Premium for the Uncovered Period in Motor Insurance for Individuals
This section is currently available only in Arabic, please click here to read the Arabic version.

National Address of Companies Working in the Insurance Sector
This section is currently available only in Arabic, please click here to read the Arabic version.

National Address Linkage with Selling or Issuing Insurance Policy
This section is currently available only in Arabic, please click here to read the Arabic version.

Governor's Resolution - Prohibition of Cash Dealing in Financial Transactions Related to Insurance Sector
This section is currently available only in Arabic, please click here to read the Arabic version.

Requiring Surveillance Cameras in Stores Before the Sell or Issuance of Insurance Policy
This section is currently available only in Arabic, please click here to read the Arabic version.

Transfer the Amount of Compensation of Finance Companies
This section is currently available only in Arabic, please click here to read the Arabic version.

Follow up - on the RBS
This section is currently available only in Arabic, please click here to read the Arabic version.

Claims Settlement of Traffic Cases Based on Final Judicial Decisions
This section is currently available only in Arabic, please click here to read the Arabic version.

Inclusion of Insurance Coverage against Catastrophes in Comprehensive Motor Insurance Policies
This section is currently available only in Arabic, please click here to read the Arabic version.

Risk Based Supervision Framework
This section is currently available only in Arabic, please click here to read the Arabic version.

Adding Price Details for Motor Insurance Policies in Najm Net
This section is currently available only in Arabic, please click here to read the Arabic version.

Nationalizing Insurance Products Sales Positions (for Individuals)
This section is currently available only in Arabic, please click here to read the Arabic version.

Follow up with SAMA's Website Regarding Announcements of Insurance Companies
This section is currently available only in Arabic, please click here to read the Arabic version.

Follow Up- Underwriting Motor Insurance 2016
This section is currently available only in Arabic, please click here to read the Arabic version.

Rules for Establishing a Customer Care Department in Insurance Companies
This section is currently available only in Arabic, please click here to read the Arabic version.

Follow Up - Nationalizing Motor Claims Departments and Customer Care Departments in Insurance Companies and Insurance Services Companies
This section is currently available only in Arabic, please click here to read the Arabic version.

Refusal of Some Insurance Companies to Provide Insurance Coverage to a Class of Applicants in Compulsory Motor Insurance
This section is currently available only in Arabic, please click here to read the Arabic version.

Refusal of some Insurance Companies to Offer Travel Insurance Coverage to the Seniors
This section is currently available only in Arabic, please click here to read the Arabic version.

Nationalizing Motor Claims Departments and Customer Care Departments in Insurance Companies and Insurance Services Companies
This section is currently available only in Arabic, please click here to read the Arabic version.

Submission of Annual Financial Statements and Quarterly Financial Statements
This section is currently available only in Arabic, please click here to read the Arabic version.

Enabling Insurance Companies to Use the Bank Accounts Verification System When Paying Motor Insurance Claims or Recovering Part of the Insurance Premium Via IBAN Deposit
This section is currently available only in Arabic, please click here to read the Arabic version.

Settlement of Motor Insurance Claims of Third-Party's Vehicles for Individuals for Claims not Exceed the Amount of 2000 Riyals
This section is currently available only in Arabic, please click here to read the Arabic version.

Payment of Insurance Claims of the Compulsory Third Party (for individuals) by Depositing the Compensation Amount Into the Beneficiary's Bank Account Directly Via IBAN
This section is currently available only in Arabic, please click here to read the Arabic version.

Uploading Motor Insurance Policies on NAJM Net
This section is currently available only in Arabic, please click here to read the Arabic version.

Emphasis on Provide a Copy of Consumers Protection Principles of Insurance Companies
This section is currently available only in Arabic, please click here to read the Arabic version.

Reliance on the Gregorian Calendar to Determine the Effective and End Date of Insurance Coverage Period
This section is currently available only in Arabic, please click here to read the Arabic version.

Assertion on Obtaining Customer's Contact Information
This circular is currently available only in Arabic, please click here to read the Arabic version.

Rules of Requesting Cancellation of Motor Insurance Policy Upon Transferring of Ownership of the Vehicle
This section is currently available only in Arabic, please click here to read the Arabic version.

Statutory Deposit Account
This section is currently available only in Arabic, please click here to read the Arabic version.

Article (150) of the Companies Law
This section is currently available only in Arabic, please click here to read the Arabic version.

Surplus Distribution Policy
No: 201503000058 Date(g): 2/3/2015 | Date(h): 12/5/1436

Rules Governing Insurance Aggregation Activities
Saudi Central Bank has issued this Rules according to the Governor’s Decision number (441/4) dated 25/06/1441H, based on the powers vested to Saudi Central Bank by the Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003), and its Implementing Regulation issued by the Decision of the Minister of Finance No. (1/596) dated 01/03/1425H (corresponding to 20/04/2004).

The Standard Insurance Policy of Medical Malpractice
The Saudi Central Bank has issued this Rules according to the Governor’s Decision number (1/S/443) dated 20/02/1443H based on the powers vested to SAMA by the Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003), and its Implementing Regulation issued by the Decision of the Minister of Finance No. (1/596) dated 01/03/1425H (corresponding to 20/04/2004).

The Standard Insurance Policy of Professional Indemnity for Auditors of the Entities Supervised by the Capital Market Authority
The Saudi Central Bank has issued this Policy in accordance to the Governor’s Decision number (4/S/443) dated 14/12/1443H based on the authority vested to Saudi Central Bank by the Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003), and its Implementing Regulation issued by the Decision of the Minister of Finance No. (1/596) dated 01/03/1425H (corresponding to 20/04/2004).

The Standard Policy of Inherent Defects Insurance (IDI)
The Saudi Arabian Monetary Authority has issued this Policy according to the Governor’s decision number (441/187) dated 05/08/1441H, based on the powers vested to Saudi Central bank by the Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003), and its Implementing Regulation issued by the Decision of the Minister of Finance No. (1/596) dated 01/03/1425H (corresponding to 20/04/2004).

Insurance Corporate Governance Regulation

Online Insurance Activities Regulation

This regulation has been issued in both Arabic and English. In the event of discrepancy between the two contexts, the Arabic text takes priority over the English text.

Taking into Account the Issuance of Checks Payable to People (Heirs) in the Name of the Deceased
This circular is currently available only in Arabic, please click here to read the Arabic version.

Follow up - Establishing Customer Care Department in Insurance Companies
This circular is currently available only in Arabic, please click here to read the Arabic version.

Amendment of Motor Insurance Commission
This circular is currently available only in Arabic, please click here to read the Arabic version.

Purpose
1. This Policy presents general principles for “distribution of surplus” to policyholders in accordance with Article 70 (2e) of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies promulgated by Royal Decree No. (M/32) dated 2.6.1424 H. The above article states that “10% of the net surplus shall be distributed to the policyholders directly, or in the form of reduction in premiums for the next year. The remaining 90% of the net surplus shall be transferred to the shareholders’ income statement,”.
  A written approval from Saudi Arabian Monetary Agency (herein after referred to as Agency) must be obtained for surplus distribution and timings.
2. The senior management of the insurance company and the company’s Board of Directors should be fully conversant with the contents of the Policy and ensure implementation of the policies and procedures contained herein in totality and in accordance with applicable regulations.
3. This Policy should be read in conjunction with the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations.
4. The company should apply this Policy for 2015 financial year and the following years.
5. The company shall maintain separate registers for each class of insurance (General Insurance, Health Insurance, and Protection and Saving Insurance). However, if the company is selling only Group Protection products, the company should include these products within the Health Insurance or General Insurance register for the purpose of calculation the surplus.
6. This Policy is applicable for General Insurance and Health Insurance classes, and Group protection products if the company is selling only these products of the Protection and Saving Insurance class.

Article One Definitions

The terms and phrases used in these Rules shall have the same meaning as defined in the Implementing Regulation of the Cooperative Insurance Companies Control Law and the Online Insurance Activities Regulation.

For the purpose of applying the provisions of these Rules, the following terms and phrases, wherever mentioned herein, shall have the meanings assigned thereto, unless the context otherwise requires:

1.1	Central bank: Saudi Central Bank*.
1.2	Law: Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated2/6/1424H (corresponding to31/7/2003), amended by Royal Decree No. (M/30) dated 27/05/1434H (corresponding to 8/4/2013).
1.3	Rules: The Rules Governing Insurance Aggregation Activities.
1.4	Insurance Company: the company licensed to practice insurance business in accordance with the provisions of the Cooperative Insurance Companies Control Law.
1.5	Insurance Aggregator: A company licensed/approved by Saudi Central Bank to practice Insurance Aggregation Activities.
1.6	Insurance Aggregation Activities: Online insurance brokerage activities carried out to complete the purchase of insurance policies for the insured, including comparison of coverage and prices offered by Insurance Companies and facilitating the sale and purchase of policies.
1.7	Electronic Platform: Any electronic means used to conduct Insurance Aggregation Activities for example a website and application.

* The Saudi Arabian Monetary Agency was replaced by the name of Saudi Central Bank in accordance with The Saudi Central Bank Law No. (M/36), dated 11/04/1442H, corresponding in 26/11/2020AD.

Saudi Central Bank The Standard Insurance Policy of Medical Malpractice

Saudi Central Bank The Standard Insurance Policy of Professional Indemnity for Auditors of the Entities Supervised by the Capital Market Authority

Saudi Arabian Monetary Authority The Standard Policy of Inherent Defects Insurance (IDI)

Part 1: Introduction
1. This Regulation enumerates Saudi Central Bank's corporate governance requirements that must be met by insurance and/or reinsurance companies.
2. The objective of This Regulation is to set high standards of corporate governance within the insurance industry in accordance with the recognized best international practices.
3. Saudi Central Bank may, at any time, require any of the insurance service providers to comply with some or all of the requirements of this Regulation.
4. This Regulation shall be read in conjunction with the following:
  1. The Law on Supervision of Cooperative Insurance Companies promulgated by Royal Decree M/32 dated 2/6/1424 H and its Implementing Regulations
  2. The Companies Law
  3. The Corporate Governance Regulations in the Kingdom of Saudi Arabia and the Listing Rules, issued by the Board of the Capital Market Authority (CMA)
  4. The Insurance Market Code of Conduct Regulation, the Risk Management Regulation, the Antifraud Regulation, the Anti-money Laundering and Combating Terrorism Financing Rules, the Regulation of Reinsurance Activities, the Insurance Intermediaries Regulation, the Online Insurance Activities Regulation, the Investment Regulation the Outsourcing Regulation, the Insurance Audit Committee Regulation, the Actuarial Work Regulation for Insurance and Reinsurance Companies, the Requirements for Appointments to Senior Positions in Financial Institutions Supervised by the Saudi Arabian Monetary Agency, and any other regulations and relevant directives and circulars and resolutions issued by Saudi Central Bank.
5. This regulation has been issued in both Arabic and English. In the event of discrepancy in the interpretation of the two texts, the Arabic text prevails.

Introduction

Article One Introduction
This Policy shall specify the minimum limits of Medical Malpractice liability coverage in accordance with the terms, conditions and exceptions provided herein or attached hereto. In consideration of the Insured having paid the premium to the Company, the Company agrees to provide insurance coverage subject to the terms, conditions and exclusions of this Policy, and shall provide coverage up to the amounts and limits stated in this Policy, or as amended by Endorsement
The Company and the Insured shall not be entitled to agree on liability limits lower than those set herein. However, the Company and the Insured may agree on additional coverage not specified herein.

Article One Introduction
This Policy specifies the minimum limits of Professional Indemnity coverage raising from Professional Failures of the auditors of the entities supervised by CMA; in accordance with the terms, conditions and exclusions provided herein or attached hereto, and the Company agrees to provide insurance coverage up to the amounts and limits stated in this Policy, or as amended by endorsement in consideration of the Insured having paid the Premium to the Company.
The Company and the Insured shall not be entitled to agree on liability limits lower than those set herein. However, the Company and the Insured may agree on additional coverage not specified herein.

Preamble
1. This Policy shall specify the minimum coverage of compulsory Insurance on Inherent Defects that may discovered on Premises and constructions after occupation in nongovernmental construction projects, in accordance with the terms, conditions and exceptions provided herein or attached hereto. In consideration of the Insured having paid the premium to the Insurer, the Insurer agrees to provide insurance subject to the terms, conditions and exclusions of this Policy, and shall provide coverage up to the amounts and limits detailed in the Schedule, or as amended by Endorsement, as Limits of Indemnity during the Period of Insurance. The Insurer and the Insured may not agree on amending the insurance coverage or terms and conditions than what is set herein unless prior written approval is obtained from Saudi Central Bank.
2. This Policy and its Schedule, the Proposal Form, Endorsements and the Certificate of Approval shall be read as one document and any word or expression to which a specific meaning or definition has been given shall have such specific meaning wherever it may appear, unless specifically restated purely for the purposes of individual endorsements.

First Purpose
1. This regulation specifies the requirements and provisions for conducting insurance activities by insurance companies, insurance brokers and agents over the internet.
2. This regulation specifies the requirements and provisions for conducting insurance activities by insurance companies, insurance brokers and agents over the internet.
3. This regulation must be complied with in conjunction with the Law on Supervision of Cooperative Insurance Companies promulgated by Royal Decree M/32 dated 2/6/1424 H and its Implementing Regulations, and the Online Regulation promulgated by Royal Decree M/18 dated 8/3/1428 H and its Implementing Regulations, and the Anti-Cyber Crime Law promulgated by Royal Decree M/17 dated 8/3/1428 H in addition to any Regulations or other instructions issued by Saudi Central Bank and specially the Anti Money Laundering & Combating Terrorism Financing Regulation, the Anti-Fraud Regulation, the Market Code of Conduct Regulation, the Outsourcing Regulation for Insurance and/or Reinsurance Companies and Insurance service providers. In addition to other relevant laws, regulation, instructions and decisions.

Article Two Definitions
The following words and phrases, wherever they occur herein, shall have the meanings assigned thereto, unless the context requires otherwise:
1- The Company: The licensed Insurance Company that practices insurance businesses in
accordance with Cooperative Insurance Companies Control Law.
2- Policy: The Standard Insurance Policy of Medical Malpractice.
3- The Insured: the medical
practitioner as defined in Law of Practicing Healthcare Professions, who has entered into an insurance contract.
4- Medical Malpractice: Any bodily, physical injury or mental injury, sickness, illness, disease, or death of any patient caused by the Insured’s negligent act, error or omission during ordinary, Emergency Medical Treatment, home medical visits and telehealth care within the scope of the job or profession during the presence in the Kingdom of Saudi Arabia.
5- Other Emergency Medical Treatment: medical treatment provided by the Insured at the scene of the sudden event, who was present either by coincidence or in response to an emergency call following the sudden event.
6- Claim: A Claim for Indemnity of damages or losses caused by Medical Malpractice covered under the Policy.
7- Defense Costs: All cost, fees, and expenses incurred in defending the Insured or for the purpose of settling any Claim within the limits of coverage stated in the Policy Schedule.
8-Products: Any solid, liquid or
gaseous substance or component part thereof.
9- Extended Reporting Period: the benefit, which provides the Insured with an extended period to report any Claims occurring during the Policy period, which start from the expiry date of the Policy or the date of cancelation till the end of the Extended Reporting Period.
10- Administration Fees: The
amount charged towards the administrative costs for the issuance of the Policy.
11- Premium: Amount paid by the Insured to the Company in exchange for the Company’s acceptance to indemnify the Insured; in accordance with insurance coverage stated in the Policy.
12- Deductible: The portion of the loss amount mentioned in the Policy Schedule, which is to be borne by the Insured.
13- Indemnity: The amount to be paid by the Company based on a verdict against the Insured due to Medical Malpractice including Defense Costs in accordance to the limit insurance coverage.
14- Compulsory Retroactive Insurance: Compulsory Coverage for a period prior to the inception date the Policy.
15- Additional Retroactive Insurance: the coverage that the Company decided to provide to the Insured for a period prior to the inception date of the Policy.
16- Retroactive Date: the inception date of either Compulsory or Additional Retroactive Insurance.
17- Material Fact: Any information, which may affect the Company’s decision in specifying the Premium amount by 25% or more, or the terms of the Policy, or the Claim approval.
18- Policy Schedule: The schedule annexed to the Policy containing information about the Insured; which is considered an integral part of the Policy.

Article Two Definitions
The following words and phrases, wherever occurred herein, shall have the meanings assigned thereto, unless the context requires otherwise:
1- The Company: The licensed
Insurance Company that practices insurance businesses in accordance with Cooperative Insurance Companies Control Law.
2- Policy: The Standard Insurance Policy of Professional Indemnity for Auditors of Entities Supervised by Capital Market Authority
3- The Insured: Auditing firms of the entities supervised by CMA.
4- Authority: Capital Market Authority.
5- Professional Services: Auditing the financial statements of the entities supervised by CMA in accordance to the audit criteria approved by the Saudi Organization for Charted and Professional Accountants (SOCPA) for the purpose of expressing an opinion on whether these financial statements show the fairness of the financial position of the entity on a given date and the results of its operation for a specific financial period, or examine the initial financial statements prepared by the entity, for the purpose of concluding whether anything leads to believe that the financial statements are not prepared from all fundamental aspects in accordance with the framework of the applicable financial statements.
6- Professional Failure: Negligent act, error and omission in providing Professional Services.
7- Claim: A Claim for indemnity of damages or losses caused by Professional Indemnity covered by this Policy.
8- Defense Costs: All cost, fees, and expenses incurred in defending the Insured and/or for settling any Claim within the limits of coverage stated in the Policy Schedule.
9- Extended Reporting Period: The benefit that provides the Insured with an extended period to report any Claims occurring during the Policy period, which start from the expiry date of the Policy or the date of cancelation until the end of the Extended Reporting Period.
10-Administration Fees: The amount charged against the administrative costs for the issuance of the Policy.
11-Premium: Amount paid by the Insured to the Company in exchange for the Company’s acceptance to indemnify the Insured; in accordance with insurance coverage stated in the Policy.
12-Deductible: The amount borne by the Insured from the indemnity, as mentioned in the Policy Schedule
13-Indemnity: The amount to be paid by the Company based on a verdict against the Insured due to Professional Failure including Defense Costs, and in accordance to the limit of the insurance coverage.
14- Retroactive Insurance: a Coverage for a period prior to the inception date of the Policy.
15- Retroactive Date: The inception date of the Retroactive Insurance.
16- Material Fact: any information requested by the Company from the insurance applicant during the conclusion of the Policy, which may affect the Company’s decision in accepting the insurance or accepting the insurance with different conditions.
17-Policy Schedule: The schedule annexed to the Policy containing information about the Insured; which is considered an integral part of the Policy.

Definitions
For the purposes of this Policy, the following definitions shall apply:
1. Policy
The Policy of Inherent Defects Insurance.
2. Building Contract
The contract or contracts for the design and construction of the Premises and the contract’s documents.
3. Certificate of Approval
The Certificate(s) issued by the Technical Inspection Service to the Insurer at the same time as or following practical completion under the Building Contract, and any supplementary certificate issued by the Technical Inspection Service to the Insurer to certify continuing integrity of the Premises in respect of any re-examination in accordance with the Operative Clause.
4. Occupancy Certificate
A permission to occupy the building to be issued by the concerned authority confirming substantial completion of the Premises.
5. Date of Inception
The Date of Inception will be the date shown on the policy schedule.
6. Total Sum Insured
The sum shown in the Schedule representing the full rebuilding costs of the Premises at the Date of Inception and/or adjusted in accordance with Clauses (7) and/or (11) of General Conditions.
7. Deductible
The first amount of any claim, as stated in the Policy Schedule, which remains at the Insured’s own risk and is not payable by the Insurer.
8. Inherent Defect
Any defect in the Structural Works or the Envelope weakening the strength and steadiness or stability of the Premises and attributable to a fault, error or omission in design, materials, geological investigation or construction which was undiscovered at the date of issue of the Occupancy Certificate.
9. Insurer
The Insurance Company that provides insurance services as per this Policy.
10. Insured
The party or parties named in the Schedule, their successors in title and their assignees (subject to Insurer’s agreement in writing) to the extent of their respective rights and interests in the Premises. For the purpose of this Policy, the Contractor shall be the Insured before the start of the Period of Insurance, and the owner of the Premises shall be the Insured during the Period of Insurance as stated in clause (3) of Article (3) of this Policy.
11. Contractor
Natural or juristic person licensed to undertake construction works, engaged pursuant to Building Contract, and mandated by the concerned authority to obtain Inherent Defect Insurance.
12. Damage /Loss
The cost of reinstatement of physical loss or damage of total or partial collapse, or destruction of Insured Premises caused by an Inherent Defect.
13. Premises
The whole and each part of the Works at the address stated in the Schedule and which is the subject of:
•The Occupancy Certificate.
•The Certificate of Approval issued by the Technical Inspection Service attached to and forming an integral part of this Policy.
Comprising:
a. Structural Works
All internal and external load-bearing structures essential to the stability or strength of the Premises including but not limited to foundations, columns, walls, floors, beams.
b. Envelope
All works forming part of external walls and roofing of the Premises but excluding:
1. Moveable elements of external windows, doors, skylights.
2. External cladding unless it is essential for the stability of the building.
3. Equipment, Fixtures and Fittings.
c. Non Structural Works
All non-load bearing parts of the Premises other than those works described in Definition No 13 (b) and 13(d) including but not limited to floor coverings, ceilings, partitions, internal windows and doors,
d. Equipment, Fixtures and Fittings
All non-loading bearing parts of the Premises other than those works described in Definition No. 13 (c) above as Non Structural Works including but not limited to:
Electrical wiring and connections, all fixtures and fittings, all equipment and fixtures for the collection and distribution of gas, water, heating and ventilation. All permanent mechanical and electrical apparatus including boilers and similar plant included in the Building Contract irrespective of whether such equipment, fixtures and fittings are fixed to or incorporated in any part of the Structural Works.
e. External Works
All external non-structural works owned by the Insured and the subject to the Building Contract, including but not limited to pavement, cross-over, paved areas, pedestrian and vehicular landscaping and all external drains, sewers, pipes, cables, wires and other service media.
14. Technical Inspection Service
The party or parties appointed by the Insurer at the expense of the Insured, to provide such examination of plans, specifications, bills of quantities and other documentation in relation to the Works and such inspections as the Technical Inspection Service and Insurer shall require.
15. Works
The works completed under the Building Contract.
16. Waterproofing
Part of the Works serving to protect the Premises from the ingress of water of any kind originating externally to the Premises. For the avoidance of doubt, this definition does not extend to any part of the Works serving to protect the Premises against the effects of humidity or condensation.
17. Policy Schedule
The Schedule annexed to the Policy containing information required to be imbedded in the Schedule.

Definitions
1. Without prejudice to the provisions of article (1) of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies issued by decision of H.E. the Minister of Finance No. 1/596 dated 01/03/1425H, the following terms and expressions wherever mentioned in this Regulation shall have the meanings shown assigned thereto unless the context requires otherwise:
  Central Bank: The Saudi Central Bank*.
  Board of Directors (the Board): the Company's Board of Directors as accepted by the laws in the Kingdom of Saudi Arabia.
  Chairman of the Board (Chairman): a Non-executive Board Member elected by the Board to preside over its meetings and organize its activities.
  Chief Executive Officer (CEO): the officer with highest rank in the senior executive management of the Company, who is in charge of its daily management, regardless of the title of his or her position.
  Company (Companies): the insurance and/or reinsurance company licensed by Saudi Central Bank under the Law of Supervision of Cooperative Insurance companies and its Implementing Regulations (or the insurance service provider required by Saudi Central Bank to comply with some, or all of the requirements of this Regulation based on Article (3) of this Regulation).
  Related Company: a company (or one of several companies that Saudi Central Bank may consider to be acting in concert) holding a shareholding of 5% or more of the equity of the Company, or a company in which the Company (either alone or with other companies that Saudi Central Bank may consider to be acting in concert) holds a shareholding of 5% or more.
  Related Persons: close family members of parents, spouse, descendants; any person with a business relationship that might influence the decision making process; and any establishment in which any member of the Board of Directors has more than 5% interest.
  
  Significant Shareholders: natural or legal persons that, directly or indirectly, alone or in association, controls 5% or more of the Company's shareholding.
  Executive Board Member: a member of the Board of Directors who is also a member of the executive management of the company and participates in the daily affairs of the company and earns a monthly salary in return thereof.
  Non-executive Board Member: a member of the Board who provides opinions and technical advice and is not involved in any way in the management of the company and does not receive a monthly or an annual salary.
  Independent Board Member: a member of the Board who enjoys complete independence. This means that the member is fully independent from management and the company. Independence is the ability to judge things after taking into account all relevant information without undue influence from management or from other external entities.
  Independence cannot be attained by a Board member in the following situations, including but not limited to:
  1. Being a Significant Shareholder in the Company, or in a Related Company, working for or representing a Significant Shareholder
  2. Being a member of the Board in a Related Company or one of its subsidiaries, or having been one during the past two years
  3. Being a member of the Board of the Company for more than nine years
  4. Holding a Senior Management position in the Company, or in a Related Company, or having held one during the past two years
  5. Being an employee with the Company, with a Related Company, or with a company that provides services to the Company (e.g., external auditors, consulting firms, etc.) or having worked with any one of the above during the past two (2) years
  6. Being a Related Person of a member of the Board or Senior Management of the Company or of a Related Company
  7. Having a contractual or business relationship with the Company (either directly or through an entity in which he or she is a Significant Shareholder, a Board member, or a manager) which resulted in paying to, or receiving from, the Company the equivalent of two hundred and fifty thousand (250,000) Saudi riyal or more (other than his or her remuneration as a director of the Board and amounts related to insurance contracts) during the past two (2) years
  8. Being under any financial obligation towards the Company or any members of its Board or Senior Management that might limit the exercise of independence in judgment and decision making
  Senior Management (Management): the Managing Director, Chief Executive Officer, General Manager, their deputies, Chief Financial Officer, Managers of key departments, officers of risk management, internal audit, and compliance functions, and similar positions in the Financial Institution, in addition to incumbents of any other positions determined by Saudi Central Bank.
  Senior Positions: Members of the board and senior management.
  Stakeholders: the persons or parties who have an interest in the company, including shareholders, policyholders, claimants, employees, reinsurers, regulatory and supervisory bodies.
  The rest of the words and statements used in this Regulation shall have the same meaning as per Article (1) of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies unless the context requires otherwise.
* The Saudi Arabian Monetary Agency was replaced by the name of Saudi Central Bank in accordance with The Saudi Central Bank Law No. (M/36), dated 11/04/1442H, corresponding in 26/11/2020AD.

Second Definitions
1. The following terms and statements in this regulations refers to the meanings explained here, unless stated otherwise:
  Central Bank: refers to Saudi Central Bank*.
  Regulation: refers to the online insurance activities regulation.
  Company: refers to the insurance companies, insurance brokers and agents licensed by Saudi Central Bank to conduct business in the Kingdom.
  Customer: refers to the insured, the web site user, or any person who submits a request to get an insurance cover through the web site.
  Online transactions: refers to any exchange, contract, communication or other procedure conducted or executed— fully or in part— online.
  Online Statements: refers to online statements in the form of text, symbols, pictures or drawings or other form of online formats combined or in parts.
  
  Online Insurance Activities: refers to any business conducted by the company through the internet, including, but not limited to, selling insurance policies, collecting premiums, receiving claims, and receiving and handling with complaints.
  Website: refers to the company's web site address that is licensed by the designated authority and used on the company's prints and advertisements.
  Hard copy: refers to the output of computer in printed form.
  Soft Copy: refers to any document stored in the memory of the computer, or on a hard disc (internal or external), or any other electronic storage mean, the content of which can be viewed on a computer and transferred electronically through, but not limited to, email.
  Unauthorized Access: refers to the access of a person on purpose to a computer or website or an information system or network, without authorization.
  The remaining terms used in this regulation have the same meaning as stated in article 1 of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies.
* The Saudi Arabian Monetary Agency was replaced by the name of Saudi Central Bank in accordance with The Saudi Central Bank Law No. (M/36), dated 11/04/1442H, corresponding in 26/11/2020AD.

Article Three Insurance Coverage
First: Insurance coverage period starts in accordance to Policy terms and conditions- without prejudice to the transitional provisions issued by SAMA- as follows:
1. In case the Policy being issued and renewed by the same Company without interruption in the insurance coverage: The Company must provide Compulsory Retroactive Insurance starting from the inception date of the coverage under the first Policy being issued by the Company till the expiry date of the last Policy being issued by the Company.
2. In case the Policy being issued by a new Company or being renewed by current company with interruption not more than 14 calendar days :
The Company must provide Compulsory Retroactive Insurance starting from the inception date of the coverage Under the first Policy being issued either by the current Company or by previous Company (ies) of the Insured.
3. In case the Policy being issued by a
new Company, or being renewed by
current Company: with interruption
for more than 14 calendar days :
The insurance coverage shall start from the inception date of the coverage being issued by the Company, however, the Company may elect to provide Additional Retroactive Insurance staring from the inception date of the first Policy being issued for the Insured either by current Company or previous Company ( ies) or otherwise as agreed.
- In any of the above cases, The Company must state the type of Retroactive Insurance (Compulsory or additional)provided and Retroactive Date in Policy Schedule.
- The Company shall not be obliged – at the time of concluding the policy- to cover the Additional Retroactive Insurance which have been provided to the Insured by previous Policies
- The Company is not obliged to indemnify for any Medical Malpractice occurred within either Compulsory or Additional Retroactive Insurance unless it is unknown to the insured at the time the policy is being concluded .
Second: this Policy covers, as specified herein, the following:
a- Indemnity for all amounts for which the Insured is legally liable to pay to others, due to Medical Malpractice based on a final verdict issued by judicial component body.
b- Indemnity of Defense Costs.
The total Indemnity stated in subtitle (a) and (b) of this article shall not exceed the limit of insurance coverage stated in the Policy Schedule
Third: Limit of Insurance Coverage The Company and the Insured must agree on the maximum limit of insurance coverage provided that it should not be less than the limit stated in the Policy Schedule.

Article Three Insurance Coverage
First: Insurance coverage period shall start in accordance to the Policy’s terms and conditions as follows:
1. In case the Policy is being issued and renewed by the same Company without interruption to the insurance coverage:
The Company must provide Retroactive Insurance coverage starting from the inception date of the first Policy being issued by the Company until the expiry date of the last Policy being issued by the Company.
2. In case the Policy is being issued by a new Company without interruption in the insurance coverage :
a. In case there are previous insurance coverage for a period less than three years:
The Company must provide Retroactive Insurance coverage starting from the inception date of the first policy issued by the previous company/companies; provided that no known
Professional Failure at the time of concluding the insurance contract.
b. In case there are previous insurance coverages for a period exceeding three years:
The Company must provide Retroactive Insurance for a minimum of three years prior to the inception date of the current insurance coverages provided that there is no known Professional Failure at the time of concluding the insurance contract.
Second: This Policy covers, as the following:
A. Indemnity for all the amounts the Insured is legally liable to pay to others, due to any Professional Failure committed while providing Professional
Services within the Kingdom of Saudi Arabia and based on final verdict issued by judicial component body.
B. Indemnity of Defense Costs.
C. Indemnity in accordance to any additional coverage stated in the Fourth point of this article.
The total Indemnity stated in subtitle (A) and (B) & (C) of this article shall not exceed the limit of insurance coverage stated in the Policy Schedule.
Third: Limit of Insurance Coverage The Company and the Insured may agree on a higher limit of insurance coverage; provided that it should not be less than the limit stated in the Policy Schedule.
Fourth : Additional Coverage The Company must provide the following coverages:
1. Fraud and dishonesty (up to 10% of the Limit of Insurance Coverage).
2. Liable and slander (up to 10% of the Limit of Insurance Coverage).
3. Unintentional breach of confidentiality (up to 10% of the Limit of Insurance Coverage).
4. Loss of documents (up to 10% of the Limit of Insurance Coverage).
5. Infringement of copyright (up to 10% of the Limit of Insurance Coverage).
6. Intellectual Property infringement (up to 10% of the Limit of Insurance Coverage).

Insuring Agreement
1. Operative Clause
The Insurer shall indemnify the Insured against the cost of repairing, replacing and/or strengthening the Premises following and consequent upon an Inherent Defect which is discovered and is notified to the Insurer during the Period of Insurance and not excluded herein causing any of the following events:
a. Physical damage to the Premises; or
b. The threat of imminent collapse to the Premises, which requires immediate remedial measures for the prevention of an actual collapse within the Period of Insurance.
2. Additional Benefits
In addition to and consequent upon the above indemnity, and in connection with events (a) or (b) described above in (1) of this Article, the Insurer will indemnify:
a. The cost of demolishing the Premises and/or the removal of debris from the Premises incurred by the Insured up to the Limit of Indemnity prescribed in the Schedule.
b. The legal, professional or consultants’ fees incurred by the Insured up to the Limit of Indemnity prescribed in the Schedule. The Insurer will not be liable to the Insured for fees incurred for the purpose of preparing a claim under this Policy.
c. The additional costs of repair or replacing and/or strengthening which arise out of alterations in design, use or application of improved materials, improved or altered methods of working or construction incurred solely in compliance with or consequent upon any building or other regulations under or in pursuance of any related law and regulations. This does not include the costs of complying with such requirements where such requirements have come to the attention of the Insured before the events (a) or (b) described in clause (1) of this Article become manifest, or such costs which relate to undamaged or unaffected parts of the Premises.
3. Period of Insurance
a. The period of Ten years (calculated using the Gregorian Calendar) commencing on the Date of Inception and expiring at midnight on the Date of Expiry as shown in the Schedule, provided that:
1. The Occupancy Certificate has been issued.
2. The premiums due have been paid to Insurer in accordance with Premium Payments clause provided in Article (5).
3. Insurer has received the Certificate of Approval.
4. Insurer has issued an endorsement indicating that the Policy is in force.
b. The Period of Waterproofing coverage is the period commencing 12 months after the Date of Inception and expiring at midnight on the Date of Expiry as shown in the Schedule, provided that:
1. The Insurer has received a supplementary Certificate of Approval from the Technical Inspection Service for the Waterproofing works.
2. The additional premiums have been paid to the Insurer if the supplementary Certificate of Approval is not unqualified.
3. Insurer has issued an endorsement indicating that the Waterproofing coverage is in force.
c. In those cases where the Building Contract provides for more than one Occupancy Certificate:
1. Inception shall take place in respect of Premises which consist of a single building following issuance of the Occupancy Certificate for the Premises as a whole unless otherwise agreed in writing by the Insurer.
2. Inception shall take place in respect of Premises which consist of more than one building following the issuance of the Occupancy Certificate for each building unless otherwise agreed in writing by the Insurer.
4. Under Insurance
If an Inherent Defect has been discovered, and the full rebuilding costs of the Premises is greater than the Total Sum Insured or adjusted in accordance with Clauses (7) and/or (11) of General Conditions, the insured will be entitled to compensation according to the Total Sum Insured specified in the Policy Schedule to the full rebuilding costs.
5. Limits of Indemnity
The liability of the Insurer shall not exceed the Limit of Indemnity shown in the Schedule for the Period of Insurance unless cover has been increased by endorsement and the appropriate additional premium paid to the Insurer but excluding in respect of each and every claim the amount specified in the Schedule as the Deductible. If the Insured comprises more than one party, the total liability of the Insurer shall not exceed the amount for which the Insurer would have been liable as if there had been a claim by only one Insured.
6. Application of Deductible
The amount of the Deductible specified in the Schedule shall apply to each Inherent Defect, after the application of all other Terms and Conditions of the Policy, and not to the aggregate of claims arising during the Period of Insurance. Multiple claims arising from the same Inherent Defect shall be treated as one claim for purposes of application of the Deductible.

Compliance Measures
7.Companies must establish appropriate internal controls and procedures to ensure and monitor compliance with this Regulation and any related laws and regulations. In case the company contracts with other parties, it must ensure the compliance of all contracted parties with the provisions of this Regulation and any related laws and regulations.

8.Companies must maintain adequate records to demonstrate compliance with this Regulation and with any related laws and regulations, including but not limited to the Company's code of corporate governance, remuneration policy, code of ethics, disclosure policies and procedures, terms of reference for the Board and its committees, organizational charts, charters of control functions, detailed job descriptions of managers, minutes of the meeting of the Board of Directors and its committees, minutes of the general assembly meetings, and internal and external Board communications.

Non-Compliance
9.Non-compliance with the requirements set forth in this Regulation will be deemed a breach of the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations and the licensing conditions and may expose violating Companies to enforcement actions.

Third Compliance Measures
1. The company must establish appropriate internal controls and procedures to ensure and monitor compliance with this regulation and any related laws. In case the company contracts with other parties, it must ensure the compliance of all parties with the provisions of this regulation and any related laws.
2. The company must maintain adequate records to demonstrate compliance with this regulation and any related laws, including—but not limited to—online activities business plan, outsourcing contracts to external parties, website hosting contracts.
3. The company must publish this regulation, along with all any related laws and regulations on its website.
4. The company must comply with the provisions of this regulation within 6 months from the date of issuance of this regulation.

Article Four Exclusions
The insurance coverage of the Policy does not include the following:
1. Any Medical Malpractice from the Insured who does not hold a valid and proper license during the Policy period.
2. The Deductible(s) stated in the Policy Schedule
3. Any Medical Malpractice, Claim or Lawsuit instituted outside of the Kingdom of Saudi Arabia
4. Any Claim arising out of a specific liability assumed by the Insured under contract which goes beyond the duty to use such skill and care as is usual in the exercise of the Insured’ activities stated in the registration card issued by the component authority and/or job contract.
5. Any claim arising out of Medical Malpractice occurred :
  A) Prior to inception date of the Policy stated in the Policy Schedule if Compulsory or Additional Retroactive Insurance is not applicable.
  B) Prior to Retroactive Insurance Date stated in the Policy Schedule if Compulsory or Additional Retroactive Insurance is applicable.
6. Any Claim arising out of the manufacture of any Products, or the construction, alteration, repair, repacking, servicing or treating of any Products sold, supplied or distributed by the Insured, or any Claim arising out of the failure of any product to fulfil the purpose for which it was designed, or to perform as specified, warranted or guaranteed.
7. Any Medical Malpractice occurred during the performance of experiments, or academic research, or the prescription of drugs or medicines or use of drugs or medicines for the purposes of clinical trials, or for testing the effectiveness or otherwise of such drugs or medicines.
8. Any Medical Malpractice arising out of the performance of general anesthesia unless performed by anesthesia specialist / consultant.
9. Any Medical Malpractice directly or indirectly caused by or contributed to:
  a. Any act in violation of any Saudi laws or regulations, any fines, penalties, punitive or exemplary damages.
  b. Any dishonest, fraudulent or criminal act or willful misconduct of the Insured.
  c. The performance of the activities of the Insured whilst under the influence of alcohol, drugs, or medical medications that are not medically permitted to perform duties after taking them.
10. Any Claim directly or indirectly caused by, or contributed to by, or arising from ionizing radiation(s) or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel or from the radioactive, toxic, explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof. However, this exclusion does not apply to the use of radioactive substances or radiation as far as they are only needed for customary medical treatment or examination , provided that it is kept and used with the usual standard precautions for these hazardous substances.
11. Any Claim arising out of war, invasion, acts of foreign enemies, hostilities, (whether war be declared or not), civil war, rebellion, revolution, insurrection, mutiny, civil commotion, military or usurped power, riot, strike, lockout, military popular uprising or confiscation or nationalization or requisition or destruction of or damage to property by, or under the order of, any government or public or local authority.
12. Any Medical Malpractice arising out of the performance of procedures or operations for non- emergency case in a place medically unqualified -except home medical visits and telehealth care- subject to adherence of the component authorities’ standards & regulations
13. Claims arising from the patient's dissatisfaction in the results of plastic/aesthetic surgery and/or silicon implants due to the lack of improvement in his/her aesthetic appearance.
14. The procedures of blood banks except where these are purely providing blood or blood products for any medical procedures undertaken by the Insured.
15. Any Claims arising out of possession, application, use, handling, or maintenance of asbestos or asbestos containing products.
16. Any Medical Malpractice during abortions, unless in compliance with competent authorities.
17. Genetic damages/manipulation.

Article Four Exclusions
The insurance coverage of the Policy does not include the following:
1. Any Professional Failure that goes beyond the scope of the Professional Services defined in the Policy.
2. The Deductible(s) stated in the Policy Schedule.
3. Any Known Claim arising from Professional Failure occurred prior to the inception date of the coverage or the retroactive date.
4. Any Claim /suitcase brought outside the Kingdom of Saudi Arabia.
5. Any Claim related to material damage or bodily injury/death or consequential losses.
6. Any fines, penalties, punitive or exemplary damages imposed on the Auditor.
7. Cyber Attacks.
8. Liability of the Directors and officers of the Insured other than the Professional services.

Policy Exclusions
This Policy does not cover the cost of repairing, replacing and/or strengthening the Premises following any physical damage or threat of imminent collapse caused by, arising from or consequent upon:
1. Alterations of Geological Conditions
Including but not limited to changes of the groundwater level or flow, whether due to a natural event or man-made, suffered after the date of issue of the Occupancy Certificate.
2. Capital Appreciation Taxes and Similar Charges
The amount of any tax, duty, charge, rate or levy arising out of capital appreciation;
3. Certificate of Approval Reservation
Any matter notified to the Insurer by the Technical Inspection Service and referred to as a reservation in the Certificate of Approval or recorded in the Occupancy Certificate unless subsequently rectified and approved in writing by the Insurer;
4. Deductible
5. Other Perils
Fire, lightning, explosion, earthquake, storm, tempest, flood, frost, bursting or overflowing of water tanks, pipes or other apparatus, water discharged or leaking from an automatic sprinkler installation, pressure waves caused by aircraft or other aerial devices travelling at sonicor supersonic speeds or the impact of aircraft or other aerial devices or Articles dropped or falling therefrom.
6. Failure or Omission to Repair
The failure or omission of the Insured to commence or substantially undertake the repair, replacement or strengthening of the Premises for which indemnity is provided under this Policy within the period agreed in writing with the Insurer.
7. Economic Loss
Any direct or indirect economic loss, such as loss of enjoyment, use, income, business opportunity, inconvenience, distress or any other indirect or economic loss of any kind or description whatsoever other than as provided elsewhere in this Policy. Any consequential or economic loss or damage of any kind or description whatsoever including but not limited to loss, costs, damages, expenses or penalties as a result of delay.
8. Fungi, Insect, Animal or Vermin Damage
Any cost or expense incurred to clean up, remove or remediate, or any cost or expense incurred to test for, monitor or assess the existence concentration of effects of fungi, insect, animal or vermin damage.
9. Maintenance or Use
Inadequate maintenance or abnormal use of the Premises or the imposition of any load greater than that for which the structure of the Premises was designed or the use of the Premises for any purpose other than that for which they were intended and as stated in the Schedule.
10. Non-Structural Works, Equipment, Fixtures and Fittings, and External Works
Any fault, defect, error or omission in the design, workmanship, or materials of any of the following:
a. Non Structural Works
b. Equipment, Fittings and Fixtures.
c. External Works.
11. Radioactivity
Ionizing radiation or contamination by radioactivity from any nuclear waste or from the combustion of nuclear fuel or the radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof;12. Structural Changes
Any structural alterations, repairs, modifications or additions to the Premises during the Period of Insurance unless the Insurer has been informed, the Policy endorsed, and any appropriate additional premium paid to the Insurer;
13. War and other Hostilities / Terrorism Including:
a. War, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, mutiny, riot, strike, lock-out, civil commotion, military or usurped power, acts of a group of malicious persons or persons acting on behalf of or in connection with any political organization, conspiracy, confiscation, commandeering, requisition or destruction of or Damage to property.
b. Any act of terrorism For the purpose of this exclusion an act of terrorism means an act, including but not limited to the use of force or violence and/or the threat thereof, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s) or government(s), committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to put the public, or any section of the public, in fear.
This exclusion also excludes damage cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any action taken in controlling, preventing, suppressing or in any way relating to (a) and/or (b) above. If the Insurer alleges that by reason of this exclusion, any damage, cost or expense is not covered by this Policy the burden of proving the contrary shall be upon the Insured. In the event any portion of this exclusion is found to be invalid or unenforceable, the remainder shall remain in full force and effect.
14. Wear and Tear or Discoloration Including:
a. Wear and tear or other gradual deterioration;
b. Erosion;
c. Any change in color, texture, opacity or staining or superficial deterioration or marring of finishings or surface appearance or ageing processes;
d. Natural shrinkage, distortion, or other gradually developing condition, unless caused by an otherwise indemnifiable claim.
15. Willful Acts or Omissions of the Insured
16. Corrosion
Corrosion or oxidation of structural steel elements, rebars, pre-stressing or post-tensioning bars caused by:
a. Attacks of contaminates such as but not limitedto chlorides, sulphates, marine salts in seawater, spray or vapour, de-icing salts, or
b. An aggressive environment such as but not limited to high humidity, polluted atmospheres or aggressive soil
17. Insured’s Professional Advisors or Contractors responsibility
Defects which are the responsibility of the insured’s professional advisors or Contractors whether within the terms of the Building Contract or otherwise identified and notified to the Insured before issue of the Occupancy Certificate unless subsequently rectified and approved in writing by the Insurer;
18. Subsidence, heave or landslip unless due to an Inherent Defect.
19. Faulty or deficient Waterproofing
Faulty or deficient Waterproofing in those parts of the Premises below ground level. Unless this cover is requested by the owner of the Premises
20. Liability for personal injury or bodily injury.
21. Landscaping, including but not limited tovegetation and seeds.

Fourth Non-Compliance
1. Non-compliance with the requirements set forth in this regulation will be deemed a breach of the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations and licensing conditions and may subject Companies to enforcement action.

Article Five Notifications & Claims Settlements
1- Notification
A- In case of any accident or circumstance that may give rise to an admissible Claim, the Insured must notify the Company as soon as possible, provided that notification shall be during the Policy period based on the provisions of the Extended Reporting Period stated in this Policy and the Policy Schedule.
B- The Insured shall notify the Company –from the date of knowledge- in any of the cases below:
1. The receipt of notice from any person of an intention to hold the Insured responsible for any Medical Malpractice; or
2. Any conduct or circumstance which is likely to give rise to a Claim for Medical Malpractice being made against the Insured.
3. Every Claim, summons, or warrant.
4. Any change in Material Fact.
  2- Claims Settlement:
  A. Defense Costs:
  1- The Company has the right to defend and to appoint a lawyer for the Insured in any lawsuit arising out of Medical Malpractice covered by the Policy. And the Insured may appoint the lawyer after agreeing with the Company; whereas the Company shall bear the Defense Costs paid by the Insured.
  2- The Company may sue in the name of the Insured or for its own benefit to Claim any Indemnity raising from the Policy.
  3- The Company shall have the right to conduct any negotiations or proceedings on the settlement of any Claim subject to the consent of the Insured who has the right to refuse any settlement recommended by the Company or its legal representatives and elects to continue any legal procedures.
  However, in such a case, the liability of the Company shall not exceed the sum of settlement proposed, in addition to the Defense Costs or other costs agreed with the Company till the date of the Insured objection on the settlement subject to the limit of insurance coverage stated in the Policy Schedule
  4- The Insured shall assist and cooperate in the defense of any Claim.
  B. The Company shall not be obligated to indemnify, or to continue undertaking defense of any suit or proceeding after the limit of insurance coverage stated in the Policy Schedule has been exhausted.
  C. Series of Claims:
  If series of Claims arising from one Medical Malpractice have been submitted, it shall be considered as one Claim, and one Deductible shall apply.

Article Five Notifications & Claims Settlements
1- Notification
A- In case of any accident or circumstance that may give a rise to an admissible Claim, the Insured must notify the Company as soon as possible, provided that a notification should be during the Policy period or based on the provisions related to the Extended Reporting Period stated in this Policy and the Policy Schedule.
B- The Insured shall notify the Company –from the date of knowledge- with any of the cases below:
1. The receipt of notice of an intention to hold the Insured responsible for any Professional Failure.
2. Any conduct or circumstance which is likely to give rise to a Claim for Professional Failure being made against the Insured.
3. Every Claim, summons, or warrant.
4. Any change in Material Fact.
2- Claims Settlement:
A. Defense Costs:
1. The Company has the right to defend and to appoint a lawyer for the Insured in any lawsuit arising from Professional Indemnity covered by the Policy. And the Insured may appoint the lawyer after agreeing with the Company; whereas the Company shall bear the Defense Costs paid by the Insured.
2. The Company may sue in the name of the Insured or for its own benefit to Claim any Indemnity raising from the Policy.
3. The Company shall have the right to conduct any negotiations or proceedings to the settlement of any Claim subject to the consent of the Insured who has the right to refuse any settlement recommended by the Company or its legal representatives and to continue any legal procedures.
However, in such a case, the liability of the Company shall not exceed the sum of settlement proposed, in addition to the Defense Costs or other costs agreed upon with the Company until the date of the objection; given that is subject to the limit of insurance coverage stated in the Policy Schedule.
4. The Insured shall assist and cooperate in the defense of any Claim.
5. The Insured has the right to acquire from the Company all information and/or documentation related to the defense, investigation, settlement of any Claim and/or investigation in any circumstances.
B. The Company shall not be obligated to Indemnify, or to continue undertaking defense of any suit or proceeding after the limit of insurance coverage stated in the Policy Schedule has been depleted.
C. Series of Claims:
If series of Claims arising from one Professional Failure have been submitted, it shall be considered as one Claim, and one time Deductible shall apply.

General Conditions
1. Duties of the Insured
The Insured will:
a. Supply the Insurer with a copy of the Occupancy Certificate once issued.
b. At their own expense, or through occupiers of the Premises, take all reasonable precautions to prevent physical damage or threat of collapse to the Premises and shall comply with any law and regulations which relate to the Premises.
2. Premium Calculation and Payments
a. Deposit Premium:
1. The deposit premium is calculated based on the estimated Total Sum Insured as specified in the Policy Schedule.
2. The Insured shall pay the deposit premium upon acceptance of the Policy, and The Insurer shall issue the Policy accordingly.
b. Final Premium:
1. The final premium is calculated after the completion of constructions and issuance of the Certificate of Approval, the Insured shall provide the Insurer with the final Total Sum Insured (actual cost of the Premises constructions).
2. The Insured shall pay the balance of final premium minus the deposit premium before the issuance of the Occupancy Certificate.
c. The Insured shall pay any additional premium due or for modifications applied on the Policy to the Insurer within 30 days of notification of the Insured of the amount due.
d. In case of non-payment of the premium, the Insurer may include the Contractor’s name in the records of the authority mandating Inherent Defect insurance and the entity authorized to collect and record credit information
immediately after the expiration of (30) days from the date of notification of the amount due.
3. Assignment
The Insured shall not assign this Policy without the prior written consent of the Insurer and at the same time as any permitted assignment, the Insured shall insofar as they are able to assign to the assignee of the Policy all its rights, title and interest in and to contracts in respect of the supply of materials for, design and construction of the Premises.
4. Fraudulent Acts
If any claim is fraudulent or dishonest or if any fraudulent or dishonest means or devices are used by the Insured or any person acting on behalf of the Insured in order to obtain any benefit under this Policy or if any damage is occasioned by the willful act of or with the connivance of the Insured, all benefit under this Policy will be forfeited.
5. Change in Risk
If any material change shall occur varying any of the circumstances disclosed to or known to the Insurer whether occurring before or after the date of this Policy which, had it been known to Insurer, would have influenced their acceptance of the risk or the premium at which they would have accepted it, the Insured shall immediately give notice to Insurer of such change with full particulars thereof and the Insurer shall have the right to vary the insurance premium in accordance with this change of risk.
6. Misdescription, Error or Omission
All benefits under this Policy will be voidable in the event of misrepresentation, misdescription, error, omission or non-disclosure by or on behalf of the Insured with intention to defraud.
7. Total Sum Insured Alteration
The Insured may at any time during the Period of Insurance, request an increase in the Total Sum Insured by written application to the Insurer and if the increase is accepted, cover will commence upon payment to the Insurer of such additional premium as they may require. Before agreeing to such increase, the Insurer has the right to request the Insured to arrange an examination of the Premises by the Technical Inspection Service at the expense of the Insured.
8. Insurance of Deductible
No insurance may be contracted by the Insured to cover the amount or part of the amount of the Deductible.
9. Law and Jurisdiction
Any dispute that arises concerning this Policy shall be subject to laws and regulations in force in the Kingdom of Saudi Arabia and shall be settled by the Committees for Resolution of Insurance Disputes and Violations, as set forth under Article 20 of the Cooperative Insurance Companies Control Law.
10. Surplus Distribution
The Insurer will comply with distribution of surplus provisions provided in the Implementing Regulation of Cooperative Insurance Companies Control Law between policyholders and shareholders or in accordance with rules, regulations and instructions issued by SAMA.
11. Actual Full Rebuilding Cost of the Premises(Actual Total Sum insured) Deviating from the Estimated Full Rebuilding Cost of the Premises(provisional Total Sum insured):
a. Both the actual and provisional Total Sum Insured must be as per Building Contract value.
b. At any time before the Date of Inception, the insurer has to clarify to the Insured that the actual full rebuilding cost of the Premises at the Date of Inception may deviate from the estimated full rebuilding cost of the Premises.
c. The Insured shall after the completion of Premises constructions and before issuance of Occupancy Certificate, notify the Insurer of the actual full rebuilding cost of the Premises and the reasons of its increase or decrease by providing full documents on such deviation. Coverage will begin on express written confirmation and on terms and conditions agreed by Insurer.
12. Waterproofing & Period of Waterproofing Coverage
a. This coverage does not indemnify the Insured in respect of any defects or deficiencies in waterproofing first discovered during the (12) Months period after the Date of Inception.
b. The Insurer indemnifies the Insured against the cost of:
1. Repairing or replacing that part of the Waterproofing of the roof and/or the external walls of the Premises damaged by an inherent Defect in such Waterproofing;
2. Repairing or replacing those parts of the Premises damaged as a result of an Inherent Defect in the Waterproofing of the roof and/or the external walls.
c. Provided that such Inherent Defect is first discovered and notified to the Insurer during the Period of Waterproofing Insurance.
d. Inspections have been carried out during the period of construction and during the period of execution of the Waterproofing works and (12) months after the Date of Inception and that Insurer has received a supplementary Certificate of Approval from the Technical Inspection Service following such inspections. If the Certificate of Approval issued (12) months after the Date of Inception is not unqualified, the Insurer may review the Insurance premium or delay the beginning of the Period of Waterproofing Coverage.

Article Six Extended Reporting Period
1. The Company must offer the Insured the benefit of Extended Reporting Period and explain its importance specially in the following cases:-
A. Retirement of the Insured
B. Expiry or termination of the Insured’s license
C. Expiry or termination of the Insured’s contract with medical service providers.
D. Cancellation of the policy.
2. In case the Extended Reporting Period has been added and the Insured concludes the policy with new Company without interruption exceeding 2 months, the Company who issued the policy including Extended Reporting Period is responsible for Indemnity provided that Medical Malpractice has been occurred within the policy period of the Company who issued the policy with the benefit.

Article Six Extended Reporting Period
1. The Company must offer the Insured the benefit of Extended Reporting Period for a period no less than Six months and shall explain its importance; especially in the following cases:
A. Discontinuing or suspension the Insured from providing Professional Services.
B. Cancellation of the Policy.
C. The Insured register cancelation at the CMA.
2. In case the Extended Reporting Period benefit has been added; and the Insured concludes the Policy with a new Company, the Company who issued the policy including Extended Reporting Period is responsible for Indemnity provided that Professional Failure has occurred within the Policy period of the Company who issued the Policy with the benefit.

Claims Conditions
1. Claims Procedure
a. Upon discovery of an Inherent Defect which may give rise to a claim under this Policy or the occurrence of any damage not covered under this Policy but which may threaten the stability of the Premises, the Insured will at their own expense:
1. Notify the Insurer as soon as reasonably practical;
2. Take all necessary precautions to prevent further or any damage;
3. Within (60) days of such discovery submit in writing details of the claim.
4. Supply or to the extent this is not possible, assist in procuring all reports, certificates, plans, specifications, quantities information and assistance as may reasonably be required by the Insurer.
b. The Insured shall not be entitled to abandon any property to the Insurer, whether taken possession of by the Insurer or not.
2. Access to Premises
The Insured will allow the Insurer or their representatives to access the Premises at all reasonable times. Furthermore the Insurer and any person authorized by the Insurer may enter the Premises for the purposes of investigations related to claims without diminishing any of the Insurer’s rights under this Policy.
3. Basis of Claim Settlement:
a. In respect of an Inherent Defect causing:
1. Physical damage to the Premises, the basis of settlement of the claim shall be the cost of repairing the damage to the Premises or renewing, replacing and/or strengthening those parts of the Premises thereby directly affected to a condition substantially the same to their condition when new except insofar as it is necessary to alter the condition of the Premises to relieve the effects of the Inherent Defect directly causing the said physical damage.
2. The threat of imminent collapse, the basis of settlement of the claim shall be the costs necessarily incurred by way of remedial measures to prevent an actual collapse of the Premises within the Period of Insurance.
b. But not exceeding the Limit of Indemnity stated in the Schedule any one claim and in the aggregate.
c. The cost of any temporary and/or provisional repairs will be met by the Insurer provided their consent has been granted in writing to such repairs and that these repairs either constitute part of the final repairs or reduce the risk of further damage to the Premises.
d. The cost of any other alteration, additions and/or improvements shall not be recoverable under this Policy except as provided for in Clause 2(c) of Article (3) of the Policy.
4. Payments on Account
At the request of the Insured, the Insurer will subject to liability having been accepted and application of the Deductible provide payment on account in respect of any claim subject to compliance with the terms and conditions of the Policy. The Insured shall provide the Insurer with what may be required by the Insurer to provide such payment on account.
5. Primary Insurance
In the event of a Damage indemnified by this Policy, which is also indemnifiable either in whole or in part under any other policy or policies of insurance, effected by or on behalf of any of the parties comprising the Insured. The Insurer will indemnifythe Insured as if such other policy or policies of insurance were not in force.
6. Reinstatement of Sum Insured
The Total Sum Insured is reduced by the amount of each and every claim in excess of the Deductible from the date of first notification of each and every claim to the Insurer. The Insured has the option, subject to the agreement in writing of the Insurer, to reinstate the Total Sum Insured on payment of the appropriate additional premium.
7. Subrogation:
Any claimant under this Policy will at the request and at the expense of the Insurer, cooperate with the Insurer and issue powers of attorney enabling the Insurer to carry out the proceedings, defending and settlement procedures on behalf of the Insured, and perform all required actions to guarantee the Insurer's right to recover, from any other party, any amounts due as a result of indemnity paid by the insurer under this Policy.

Article Seven Cancelation
1. In Case the Insurance is mandatory:
The Insured and the Company shall not cancel the Policy except in the following cases:
1- The existence of an alternative Policy that covers the remaining period of the Policy to be cancelled.
2- Expiry or Termination of practitioner’s license for any reason.
2. In case the insurance is not mandatory:-
The Insured has the right to cancel the policy anytime.
In both cases the refunded premium to be calculated as follows:-
In the event of cancelation, the Company shall refund the Insured the due amount payable for the uncovered period by depositing the remaining amount to their bank account via IBAN, within three working days from the date on which the Company becomes aware of the occurrence of any of the cases mentioned above. The due amount payable to the Insured for the uncovered period is calculated by subtracting the elapsed days from the total Policy term (in days) and then dividing the result by the total Policy term. The result is then multiplied by the insurance Premium less Administrative Fees and the cost of Extended Reporting Period benefit to determine the return Premium:
(365 - elapsed days) /365 ×insurance Premium less administrative fees and the cost of Extended Reporting Period benefit( if any) = return Premium
The Company is exempted from its obligation to pay the due amount in the case that there is a Claim related to the Policy to be cancelled with a value exceeding the amount to be refunded as per the calculation formula mentioned above.

Article Seven Cancelation
The Insured and the Company shall not cancel the Policy except in the following cases:
1. The existence of an alternative Policy that covers the remaining period of the Policy to be cancelled.
2. Discontinuing or suspension of the Insured from providing Professional Services.
3. The Insured register cancelation at the CMA
In the event of cancelation, the Company shall refund the Insured the due amount payable for the uncovered period by depositing the remaining amount to their bank account via IBAN, within three working days from the date on which the Company becomes aware of the occurrence of any of the cases mentioned above. The due amount payable to the Insured for the uncovered period is calculated by subtracting the elapsed days from the total Policy term (in days) and then dividing the result by the total Policy term. The result is then multiplied by the insurance Premium less Administrative Fees and the cost of Extended Reporting Period benefit to determine the return Premium:
(365 - elapsed days) /365 × insurance Premium less administrative fees and the cost of Extended Reporting Period benefit( if any) = return Premium
The Company is exempted from its obligation to pay the due amount in the case that there is a Claim related to the Policy to be cancelled with a value exceeding the amount to be refunded as per the calculation formula mentioned above.

Cancellation

Neither the Insurer nor the Insured has the right to cancel this Policy during the Period of Insurance except in the following situations:

A paid claim(s) up to the Limit of Indemnity stated in the Policy Schedule where the Insured did not request to apply Reinstatement as in Clause (6) of the Claims Conditions.
Total destruction of the Premises unless caused by an Inherent Defect.

Policy Schedule

-Policy Schedule - The Standard Policy of Inherent Defects Insurance

الصيغة النموذجية لوثيقة التأمين على العيوب الخفية -جدول الوثيقة –

Policy Number:

رقم الوثيقة

XXX

Policy Issue Date:

تاريخ إصدار الوثيقة

DD/MM/YYYY

Insured

المؤمن له

Premises Owner

مالك المباني

[Owner Name]

[اسم المالكا

National Address of the Owner

العنوان الوطني للمالك

Contractor:

المنفذ(المقاول)

[Contractor Name]

[اسم المنفذ]

National Address of the Contractor:

العنوان الوطني للمنفذ (المقاول)

Insured Premises

المباني المؤمن عليها

Name of Project:

اسم المشروع

[Name of Project]

[اسم المشروعا

Premises Location:

موقع المباني

[Premises Location]

[موقع المباني)

Project Description and/or Use:

وصف المشروع و/أو استخداماته

[Project Description]

[وصف المشروع)

Estimated Full Rebuilding Cost of the Premises at the Policy Signing Date:

التكلفة المقدرة لإعادة بناء المباني في تاريخ توقيع الوثيقة

[Estimated Value]

[التكلفة المقدرة]

Period of Insurance

فترة التغطية التأمينية

Ten (10) years from the Date of Inception

عشرة (10) سنوات من تاريخ سريان الوثيقة

Date of Inception

تاريخ سريان الوثيقة

Estimated Date of Issue of the Occupancy Certificate:

التاريخ المتوقع لإصدار شهادة الإشغال

DD/MM/YYYY

Estimated expiry date

تاريخ الانتهاء المتوقع

DD/MM/YYYY

(Date of Inception and expiry date are to be adjusted by endorsement upon issuance of the Occupancy Certificate)

(تاريخ سريان الوثيقة وانتهاءها يعدلان من خلال ملحق عند إصدارشهادة الإشغال)

Sum Insured

القيمة التأمينية

Final Full Rebuilding Cost of the Premises

التكلفة النهائية لإعادة بناء المباني

[Sum Insured]

[القيمة التأمينية]

Deductible

مبلغ التحمل

For Residential Premises:

المباني السكنية

5% of Claim amount with a minimum SAR 25,000 and maximum SAR 3,000,000.

%5 من مبلغ المطالبة، (25،000) ريال سعودي كحد أدني و (3،000،000) ريال سعودي كحد أقص ى.

For other non-Residential Premises:

المباني غير السكنية

0.1% of Total Sum Insured with a minimum of SAR 25 000.

%0.1 من القيمة التأمينية، (25،000) ريال سعودي كحد أدنی.

Limit of Indemnity

حدود التعويض

Physical Damage/Threat of Imminent Collapse/Waterproofing

الأضرار المادية/ التهديد بوقوع انهيار وشيك/ العزل المائي

[Limit of Indemnity]

[حدود التعويضا

Cost of Demolishing the Premises and/or the Removal of Debris

تكلفة هدم المبنى أو إزالة المخلفات

10% of claim amount

%10 من مبلغ المطالبة

Legal, professional or consultants’ fees

الرسوم القانونية أو المهنية أو الاستشارية

[xxx]

Premium

الأقساط

Provisional Premium Equivalent to a Premium Rate applicable on the estimated full rebuilding cost of the Premises

القسط المتوقع ما يساوي معدل أقساط تنطبق على التكلفة المقدرة لإعادة بناء المباني

[Prov Premium]

[القسط المتوقع)

Deposit Premium equivalent to X % of the Provisional Premium:

قسط الضمان ما يعادل * % من القسط المبدئي

[Deposit Premium]

[قسط الضمانا

Final Premium is due before issuance of the Occupancy Certificate.

يستحق مبلغ القسط النهائي قبل إصدار شهادة الإشغال

Final premium is calculated based on the actual Full Rebuilding Cost of the Premises(Actual Total Sum insured)

يتم احتساب القسط الغهائي بناء على التكلفة الفعلية لإعادة البناء (القيمة التأمينية النهائية )

Technical Inspection Services Company

شركة الفاحص الفني

The following company (s) shall be appointed to carry out the Technical Inspection Service:

تعين الشركة أو الشركات الأتية للقيام بالفحص الفني

[Company Name]

[اسم الشركة]

Endorsements

الملاحق

[No]

[رقم]

[Title]

[العنوان]

[No]

[رقم]

[Title]

[العنوان]

[No]

[رقم]

[Title]

[العنوان]

For and on Behalf of the Insurance Company

لشركة التأمين ونيابةً عنها

Date

التاريخ

Place

الموقع

Signature

التوقيع

Company Seal

ختم الشركة

Article Eight General Conditions

1- The Insured obligations:

a. Maintain accurate descriptive records of all professional services used in procedures, which shall be available for inspection and use by the Company or their duly appointed representatives in so far as they pertain to any Claim hereunder.

b. Provide the Company or their duly appointed representative such information, assistance, signed statements or depositions as the Company may require within the scope of this Policy.

c. Not to claim responsibility with the intention of harming the Company, pay, undertake, or propose to pay any amount to any party harmed from the Medical Malpractice without obtaining an approval from the Company.

2- Fraud:

The Insured must provide and declare a correct statement. The rights and benefits arising from this Policy shall be forfeited if the Claim involves proven fraud or it was submitted or used false statements, or if the Insured or his representative used fraudulent approaches or methods to gain benefit from this Policy or if the liability or damage results from a deliberate act by, or collusion with, the Insured.

3- Judicial Jurisdiction and Governing law:

The Policy and any dispute that arises concerning this Policy shall be subject to the laws and regulations in force in the Kingdom of Saudi Arabia and shall be settled by the Committees for Resolution of Insurance Disputes and Violations.

جدول وثيقة الـتأمين ضد الأخطارالمهنية الطبية

Policy Schedule of Medical Malpractice Insurance

Policy issuance date

تاريخ إصدار الوثيقة

Policy Number

رقم الوثيقة

Insured

المؤمن لھ

National Address of the Insured

العنوان الوطني للمؤمن لھ

Scope of Medical Practice

مجال الممارسة الطبية

Limit of Insurance Coverage

حد التغطية التأمينية

Professions

Limit any one occurrence and aggregate ( annually)

حد المسؤولية لكل واقعة وفي الإجمالي ( سنويا)

التخصصات

Nurse

SAR 100,000/-

التمریض

Technician

الفنیون

Medical Assistant

المساعدون الصحيون

Pharmacist

صيادلة

Physicians (Non- Surgical)

SAR 300,000/-

طبيب غير جراح

Dentists

أطباء الأسنان

Surgeons

SAR 500,000/-

طبيب جراحة

Anesthetist

التخدير

Obstetrician & Gynecologist

النساء والولادة

Pediatrician

طبيب أطفال

inception date of insurance coverage

تاريخ بدء سريان التغطية التأمينية

Extended Reporting Period ( if any):

تمديد مدة التبليغ عن المطالبات ( ان وجدت)

Retroactive type

نوع الأثر الرجعي

Retroactive Date ( Compulsory / Additional)

تاريخ الأثر الرجعي الالزامي/ الاضافي

Period of Insurance

مدة التغطية التأمينية

Deducible

التحمل

Premium

القسط

لشركة التأمين أو من ينوب عنها

For and on behalf of the Insurance Company

Date

التاريخ

Signature

التوقيع

Company Seal

ختم الشركة

Article Eight General Conditions

1. The Insured obligations:

a. Maintain accurate descriptive

records of all Professional Services used in conducting his/her business which shall be available for inspection and used by the Company or their duly appointed representatives in so far as they pertain to any Claim hereunder.

b. Provide the Company or their duly appointed representative with all information, assistance, signed statements or depositions as the Company may require within the scope of this Policy.

c. Not to Claim responsibility with the intention of harming the Company, pay, undertake, or propose to pay any amount to any party harmed from the Professional Failure without obtaining an approval from the Company.

2- Fraud:

The Insured must provide and declare a correct statement. The rights and benefits arising from this Policy shall be forfeited if the Claim involves proven fraud or if it is submitted or used false statements, or if the Insured or his/her representative used fraudulent approaches or methods to gain benefit from this Policy or if the liability or damage results from a deliberate act by, or collusion with, the Insured.

3- Judicial Jurisdiction and Governing law:

The Policy and any dispute that arises concerning this Policy shall be subject to the laws and regulations in force within the Kingdom of Saudi Arabia and shall be settled by the Committees for Resolution of Insurance Disputes and Violations.

Policy Schedule for Professional Indemnity for Auditors of Entities Supervised by Capital Market Authority

Policy issuance date

Policy Number

Insured name

Insured information

National

address

City

branch

National address

Head

quarter

First

branch

Second branch

		Commercial registration number
		Registration number at CMA
	Scope of Professional Services
	Limit of Insurance Coverage
Minimum limit for coverage (for one Claim or multiple Claims during the period of the Policy)	Auditing fees

			25,000,000 Saudi Riyal	up to 10,000,000
			37,500,000 Saudi Riyal	more than 10,000,000 SAR to 15,000,000
			50,000,000 Saudi Riyal	more than 15,000,000 SAR to 20,000,000
			62,500,000 Saudi Riyal	more than 10,000,000 SAR to 15,000,000
			75,000,000 Saudi Riyal	more than 25,000,000 SAR to 30,000,000
			87,500,000 Saudi Riyal	more than 30,000,000 SAR to 35,000,000
			100,000,000 Saudi Riyal	more than 10,000,000 SAR to 15,000,000

Total auditing fees carried out by the Insured for the last

fiscal year

Estimated

Turnover for

the Insured for the current

year

Other info of turnover for

the Insured for previous years

Period of Insurance	Inception date of the insurance coverage: from: 00/00/0000 to: 00/00/000
Period of Insurance		Retroactive Date from: 00/00/0000


		Extended Reporting Period (if any):
SAR.................................... SAR.................................... SAR.................................... SAR.................................... SAR..................................... SAR.....................................	☐Fraud and dishonesty ☐Liable and slander	Additional coverage (limited to 10% of the Insurance coverage)
Additional coverage (limited to 10% of the Insurance coverage)	☐Unintentional breach of confidentiality ☐Loss of documents ☐ Infringement of copyright

	Intellectual Property infringement
		Deducible
		Premium
For and on behalf of the Insurance Company
		Date
		Signature
		Company Seal

General Definitions

A.	Change in gross unearned premium reserve: refers to the difference between the balance of gross unearned premium reserve at the end of the period and the balance of the gross unearned premium reserve at the beginning of the period.
B.	Current Reporting Period: refers to the current financial period/year unless mentioned otherwise.
C.	Insurance company: refers to all insurance companies.
D.	Gross claims incurred: refers to all claims reported to the company during the current period, including claims applicable to insurance placed directly, reinsurance accepted, and reinsurance ceded, and claims that have been incurred but not reported at the reporting date.
E.	Gross claim IBNR reserve: refers to the amount set aside by the insurer for claims that have been incurred but not reported at the reporting date.
F.	Gross claims paid: refers to all claims paid (i.e., released) directly or through reinsurance agreements, including lawyer fees, adjustment fees, and all other expenses related to settlement of claims.
G.	Gross earned premiums: refers to the difference between the gross written premium and the change in Gross unearned premium as of the accounting date for which it is calculated.
H.	Gross Outstanding claims reserve: refers to the amount set aside by the insurer for claims that have been reported but not settled.
I.	Unexpired risk reserve (URR): refers to a prospective assessment of the amount that needs to be set aside in order to provide for claims and costs that will result out of unexpired future periods of cover.
J.	Gross Unearned premium reserve: refers to the portion of premiums which is matched to a future period in accordance with the related policy risk and is unearned as of the end of the reporting period.
K.	Gross written premiums: refers to all premiums for insurance business accepted directly and reinsurance assumed/accepted.
L.	Other reserves: refers to reserves set aside by an insurance company other than those mentioned above.
M.	Prior Reporting Period: refers to the corresponding period from the prior calendar year.
N.	Protection and Savings Insurance: provides individual or group coverage for death related consequences, and permanent and partial disability with a saving/ retirement plan for an additional premium paid by the insured.
7.	The remaining terms used in this Policy have the same meaning as stated in Article 1 of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies.

Article Two Scope of Application
These Rules shall apply to Insurance Aggregation Activities.

Part 2: General Provisions
1. The Company’s Board must put in place and develop a code of corporate governance in accordance with this Regulation and make it available to the Company’s shareholders within three hundred and sixty (360) calendar days from the issuance date of this Regulation for licensed companies, and from the date of issuing the license for other companies. The Board must present the code to the General Assembly for
  approval in the first meeting thereafter and submit a copy thereof to Saudi Central Bank within twenty-one (21) working days from the date of its approval by the General Assembly. In addition, the Board must review the Company's code of corporate governance at least on an annual basis and recommend any necessary amendments to the General Assembly. All amendments must be submitted to Saudi Central Bank within twenty-one (21) working days from the date of the amendment.
2. The Company must put in place a remuneration and compensation policy in accordance with this Regulation, duly approved by its Board of Directors, and submit a copy of the policy to Saudi Central Bank within one hundred and eighty (180) calendar days from the date of issuance of this Regulation for licensed companies, and from the date of issuance of license for other companies. In addition, the Board must review the Company's remuneration policy and consider any necessary amendments on an annual basis, as a minimum. All subsequent amendments thereon must be submitted to Saudi Central Bank within twenty-one (21) working days from the date of the amendment.
3. The Company must put in place a code of ethics after duly approved by its Board of Directors, to ensure that the Company's activities are conducted in a fair and ethical manner. The code of ethics shall at least address the following:
  1. Conflict of interest
  2. Integrity and honesty
  3. Compliance with applicable laws and regulations
  4. Confidentiality of information
  5. Fair dealing
  6. Protection of Company’s assets
  7. Guidelines for ethical behavior
  8. Mechanism for reporting illegal or unethical behavior (i.e., whistle blowing)
4. The Company shall provide Saudi Central Bank with a copy of the organizational structure approved by the Board, and any updates on it thereafter, within twenty-one (21) working days from the date it is approved by the Board.

Part 1 General Provisions

Accountability
1. The governance structure of the Company should reflect the accountability of the Senior Management to the Board and the accountability of the Board to the shareholders and other Stakeholders, through relevant internal systems and policies.
2. The Board of Directors is ultimately accountable and responsible for the performance, conduct, and regulatory compliance of the Company. Delegating authority to Board committees or Senior Management shall not absolve the Board of its responsibilities. Furthermore, the Board is responsible for the performance of third parties engaged to perform jobs or manage functions.

First Business Plan
1. The company must, prior to requesting Saudi Central Bank's approval for conducting online insurance activities, develop a business plan specific to the online insurance business activities. The business plan must be reviewed by the Board of Directors before being submitted to Saudi Central Bank and should include but not be limited to:
  1. Analysis of the forecasted volume of online insurance activities over the next 3 years.
  2. Analysis of the risks associated with online business and the measures that will be taken to mitigate these risks, including but not limited to adverse selection risks, money laundering, strategic risks, and potential website unauthorized access.
  3. Contingency plan documenting the actions to be taken in the event of a failure of one or several components of the online system, including corrective and business continuity measures, as well as the obligation to report the event to the proper authorities within the Company and Saudi Central Bank.
2. The company must obtain Saudi Central Bank's written approval before adopting its online business plan. In addition, the company must obtain Saudi Central Bank's written approval on any significant amendments or modifications to the business plan and Saudi Central Bank might require a modification or change to the business plan when it sees necessary.
3. The business plan of online insurance activities must be approved and set by the board of directors after obtaining Saudi Central Bank's written approval and must be reviewed annually, or when making any fundamental change to the company's strategy related to online insurance activities.

Disclosure and Transparency
16. The Board shall lay down written formal policies and procedures for disclosure, specifying, at minimum, the types of information to be disclosed, means and frequency of disclosing information, and the process to ensure the quality, adequacy, and timeliness of disclosure, in accordance with the requirements of applicable laws and regulations.
17. The Board is responsible for ensuring an appropriate level of transparency and timely and adequate disclosure of material events relating to the Company's financial situation and performance, risk exposures and risk management, and corporate governance.
18. The Company shall ensure that the disclosed information is comprehensive, meaningful, relevant, timely, consistent, reliable, and accessible by public without undue expense or delay.
19. The Board shall provide the general assembly with a report containing comprehensive and objective assessment of the Company's situation and performance, at least on an annual basis, including but not limited to the following:
a) Analytical review of the Company's financial performance during the last period
b) Key decisions made and their impact on the Company's performance and position
c) Assessment of the Company's strategy and financial position
Names of any joint stock company(ies) in which a member of the
d) Company's Board is a board member
e) Any punishment, preventive restriction or penalty imposed on the company by any judiciary, supervisory or regulatory body
f) Any punishment, preventive restriction or penalty imposed on any board member by any judiciary, supervisory or regulatory body if it is related to the company
a) Assessment of potential risks and how such risks are being managed
b) Projections of future performance
20. In addition to any other applicable disclosure requirements by Saudi Central Bank or other regulatory bodies, the Company's annual report shall include the following information (regardless of order):
i) For the Board: functions, composition, names of the chairman and vice-chairman, dates of current term start and end, number of Nonexecutive Independent Board Members, number of meetings held during the period, date and attendance of each meeting, and details of remuneration for each of the Board members
j) For each Board member: name, classification (Executive, Non-Executive, or Independent), other companies in which he or she acts as a Board member, represented entity (if applicable), other positions held within the Company (if applicable)

k) For each Board committee: name of the committee, its functions, its members (classified as Chairman, Executive Board Member, Nonexecutive Non-independent Board Member, Non-executive Independent Board member, or non-Board member), number of meetings held during the period, date and attendance of each meeting, members’ remuneration for serving in the committee
l) Profiles of members of senior management (including name, position, qualifications, and experience of each senior manager)
m) Total compensation and remuneration paid to the Board members, five highest-paid members of Senior Management (the executive chairman and the financial director if they are among those highest paid members) during the period (divided into salaries, allowances, bonuses, and any other components), in addition to a description of any performance-linked incentives available for members of Senior Management
n) Ownership in the Company (direct and indirect) by Board members and members of Senior Management, and any changes of their ownership over the last year as listed in the approved shareholders' register.
o) Descriptions of transactions with any related parties, including Significant Shareholders and members of the Board and Senior Management, that took place during the period, and how such transactions are or were approved
p) Any potential cases of conflict of interest and how they were addressed
q) Names of all Significant Shareholders and their ownership in the Company
r) Results of the annual audit of the effectiveness and efficiency of the internal control system of the Company
s) Statement on the Company’s compliance with the requirements of this Regulation and with the Company’s code of corporate governance, along with the justification for any instances of noncompliance
21. The Company shall make available to its shareholders, and on the internet, its code of corporate governance and annual reports.
22. The Company shall not announce any anticipated actions that require Saudi Central Bank’s prior approval or non-objection, before obtaining the actual approval or non-objection, taking in consideration all related laws and regulations.

Second Insurance Products
1. The company should submit a request to Saudi Central Bank for obtaining an approval on its insurance products that will be sold on its website, taking into consideration the Not selling any Protection and Savings Insurance policies on its website or any other website.

Fitness and Propriety
1. Members of the Board, Board committees, and Senior Management shall be trustworthy and shall have the integrity, competency, knowledge, and experience to fulfill their respective roles and shall comply with all laws, regulations, and rules issued by Saudi Central Bank at all times.
2. Significant Shareholders shall be of good conduct and reputation, financially sound, with no convictions related to committing any action involving moral dishonesty or contravention of laws in the Kingdom of Saudi Arabia or any other jurisdiction.
3. All appointments to senior positions including as members of the Board of Directors and its committees shall be made in accordance with Saudi Central Bank's Requirements for Appointments to Senior Positions in the Financial Institutions.
4. The nomination and remuneration policy followed by the Company shall have formal and rigorous standards and procedures to continuously monitor and assess the fitness and propriety of Board members, members of Board committees, members of Senior Management, in accordance with the requirements of Article (23) of this Regulation, and shall immediately notify Saudi Central Bank of any information or circumstances that may be relevant to assessment of fitness and propriety of these persons within a maximum period of (3) three business days from the day of obtaining the information or from the day of change occurrence.

Third Management of the Website
1. The company must establish a unit within the IT department to be in charge of the website and its operational aspects including but not limited to posting content, monitoring performance, handling customer inquiries, tracking key performance indicators, measuring the traffic of data, and handling maintenance.
2. The company must obtain Saudi Central Bank's written approval before signing a contract for outsourcing the management of the website to any third party.
3. After obtaining Saudi Central Bank's written approval for outsourcing the management of the website to a third party, the company must check the compliance of that party with the articles of this regulation and other related laws and regulations.
4. In case of outsourcing the management of the website to a third party that approved to work in the Kingdom according to the relevant laws, the company must appoint a communication officer in charge of the relation with the third party to whom the management of the website has been outsourced. The communication officer's responsibilities include but are not limited to monitoring the content of the website, answering customer inquiries and requests, ensuring that the third party meets the conditions and standards defined in the outsourcing agreement, and ensuring compliance of the third party with the relevant laws and regulations.

Independence
1. The governance structure of the company shall support independent decision making throughout the organization by, for example, establishing clear separation of duties between the Board and the Management, enhancing the independence of control functions, and controlling the risk of conflict of interest.
2. The Board should leverage the services of independent external parties to provide assurance on the adequacy and effectiveness of the governance structure and processes of the Company and on other technical areas, where the Board might lack relevant expertise.

Fourth Transparency and Disclosures
1. The company must provide and clarify on its website the information that is necessary for customers who want to have an insurance cover through its website.
2. The company must ensure that the information presented on its website is correct, accurate, clear, up-to-date, and comprehensive.

Conflict of Interest
1. The Company shall take reasonable measures to identify cases of potential conflict of interest and have clear written procedures for dealing with those cases in a fair and transparent manner.
2. Members of the Board and Senior Management shall not have any interest, directly or indirectly, in the Company’s business and contracts, without a prior authorization from the general assembly, to be renewed each year. The activities to be performed through general bidding, where the member is the best bidder, shall constitute an exception to this rule, subject to Saudi Central Bank's non-objection. Members of the Board and Senior Management shall notify the Board of any personal interest they may have in the business and in contracts entered into by the Company. The notification shall be noted in the minutes of the Board meeting. Board members with a personal interest in specific Company’s businesses or contracts shall not vote, neither in the general assembly nor in the Board meeting, on the resolution to be adopted with regards to their personal interests. The Chairman of the Board shall notify the general assembly, when convened, of the activities and contracts
  where a member of the Board and Senior Management may have a personal interest and their amounts, and shall attach to such notification a special report prepared by the Company’s external auditors.
3. No member of the Board or Senior Management shall, without a prior authorization of the general assembly, to be renewed annually, participate in any activity which may likely compete with the activities of the Company, or trade in any branch of the activities carried out by the Company.
4. Members of the Board and Senior Management who own an interest in an Insurance Service Provider (e.g. brokers, agents, etc.) shall:
  1. disclose to the Board their interest in the insurance-related company, in writing, at the earliest opportunity
  2. never encourage or solicit dealings with the company in which they hold an interest
  3. refrain from voting in decisions related to dealings with the company in which they hold an interest
  Additionally, the Company shall notify the general assembly, when convened, of all businesses with any insurance-related company in which a member of the Board or Senior Management has an interest, and shall attach to such notification a special report prepared by the company's external auditors.
5. The Chairman shall provide the general assembly with details of insurance contracts in which members of the Board or Senior Management or their related parties have an interest, including the line of business, size, and associated losses, if any.

Fifth Security and Safety of Data
1. The company must ensure the confidentiality of all information collected through its website and not disclose such information to any party without the written approval of Saudi Central Bank. And it is the responsibility of the company to establish appropriate procedures and controls to secure the confidentiality of information.
2. The company commits at all times to ensure the security and safety of information provided on its website , this includes—but is not limited to— information provided to customers, information collected and stored through the company or the third party contracted by the company whether this party is responsible to connect the internet service, host, or manage the website. And the company must, in particular, ensure the protection of customers' personal information from loss or unauthorized access, this includes—but is not limited to -the use, edit or disclosure of information.
3. The company must set different levels of control and supervision on insurance activities that are practiced on its website as follows:
  1. The company must implement the minimum required security procedures to prevent unauthorized changes to the basic content of information displayed on its website.
  2. The company must take additional security procedures to protect exchanged information, with customers or website visitors, from editing, theft, or unauthorized use.
  3. The company must implement the maximum procedures and provide up to- date techniques and IT programs to ensure the protection and safety of payments made on its website. This includes—but is not limited to—using the payment systems adopted and licensed by Saudi Central Bank for payments related to issuance or renewal of an insurance policy.
4. The unit responsible for the website must supervise the design, execution, follow up, and update of the security system of the website.
5. Without prejudice to Article (10/c) of this regulation and to avoid the failure of the website's system or any related part, the company must establish the appropriate procedures to face emergency or catastrophe cases. This includes—but is not limited to— keeping backup copies for all information and data displayed by the company, issued to customers, or submitted to the company's website, and setting a clear procedure to restore systems on the website in the case of damage to a part or more of the system.

Remuneration
1. The Company’s articles of association shall specify the remuneration for the Chairman and Board members for their services. Board members remuneration can be modified only by the extraordinary general assembly.
2. The Board shall propose the remuneration package for the Board, based on the recommendations of the Nomination and Remuneration Committee, in accordance with applicable laws, regulations and rules and with the conditions set by the general assembly, subject to the approval by the general assembly.
  The Company shall ensure that all written details of the proposed remuneration and considerations are accessible to the Shareholders prior to the general assembly at which the remuneration and considerations shall be put to voting.
3. The Company shall have a remuneration policy, as per Article (11) of this Regulation, covering all levels and categories of employees, whether regular or contractual. The remuneration policy shall address the following at minimum:
  1. Objectives of the compensation scheme (with focus on promoting effective risk management and achieving financial soundness and stability of the Company)
  2. Structure of the compensation system (including key determinants of compensation, alignment of compensation with risk taking, etc.)
  3. Determinants of the mix of remuneration components (fixed and variable components; cash and noncash benefits, etc.)
  4. Linking compensation with performance
4. The Board shall be responsible to ensure that the compensation level and structure:
  1. are fair
  2. are aligned with the Company’s objectives
  3. encourage prudent behaviors and does not induce taking high risk transactions to achieve short-term profits, and it complies with the Company's risk management policy approved by the Board
  4. do not cause any conflict of interest that might negatively impact the Company’s performance
  5. achieve the interests of policyholders, shareholders and the Company’s long-term objectives
5. The Company shall have a performance measurement system in place to evaluate and measure the performance of its employees at various levels, in an objective and formal manner. The performance measurement of Senior Management, in particular, shall be based on the longer-term performance of the Company, and not based on only one year's performance.
6. The nomination and remuneration committee shall ensure that an annual remuneration review (internally through the internal audit function or externally commissioned by a specialized firm) is conducted independently of executive management.
7. The remuneration structure of employees working in control functions (such as internal audit, and compliance) shall be designed to ensure objectivity and independence of these functions. In this regard, it should be ensured that the executive management of the company is not intervening in the process of performance measurement and compensation determination of such employees.
8. Members of the Board and Senior Management (except sales managers) shall not receive any commission or rewards on sales-related activities (e.g. production). Furthermore, no variable component of the compensation for members of the Board and Senior Management (except for sales managers) shall be directly based on premium volume.

Sixth Size of the Website
1. The company must verify the capacity of its website to be expanded and to assimilate any additions that might arise in the future this includes—but is not limited to—capacity of the website to assimilate any increase in the number of users, and assimilate the online insurance activities resulting from sales of insurance policies, receiving claims and handling complaints.

Seventh Website Accessibility
1. The company's website must be accessible twenty-four hours a day during the whole year and the website's unit must monitor the website's availability.
  In case the website is undergoing maintenance procedures, the website's unit must ensure that it does not exceed twenty-four hours as a maximum. In case the maintenance procedures are not finalized within the set period (i.e., twenty-four hours), the company must notify Saudi Central Bank in writing about the reasons that caused the damage to the website and specify the timeframe expected to reactivate the website.

Eighth Outsourcing the Online Insurance Activities
1. The company must—after applying the procedures included in this regulation— when outsourcing online insurance activities to another party or outsourcing the development, hosting, management, or maintenance of its website or any other work related to the website, include a specific text in the outsourcing contract that obliges the other party to abide by the rules set in this regulation, the Outsourcing Regulation to Insurance and/or Reinsurance and Insurance service providers, the Market Code of Conduct Regulation and other regulations related to the content specified in Article (3) of this regulation.
2. A company, wishing to sell its insurance products through a third-party website licensed to do so, must obtain Saudi Central Bank's prior written approval. The company must also verify that the third party's website meets the following conditions:
  1. If the same third party's website is used to sell insurance products related to other companies, each insurance product offered must be clearly linked to the company offering it.
  2. Include all information and statements that the company must disclose, this includes—but is not limited to—the name of the company, its address, its licensing status, the nature of its insurance activities, and the contact details of the company.
  3. The third party must clarify, on its website, the role it undertakes and its obligations with respect to the users such as the insured. It must also specify whether it is an agent, or a broker licensed by Saudi Central Bank.

Compliance Requirements
1. The company should establish appropriate written internal controls and procedures to ensure and monitor compliance with this Policy.
2. The company shall deposit the Policyholders' Surplus amounts in a separate bank account.
3. The company should maintain adequate records to demonstrate compliance with this Policy.
4. The financial function should be vested with the responsibility of monitoring the process of surplus distribution and review it with the external auditors prior to distribution and the internal audit function should ensure compliance with this Policy and report to the company’s Audit Committee the status of surplus distribution to policyholders.
5. The company should inform policyholders who are not entitled to the distribution of surplus.
6. Internal audit function should report any violation of this Policy to the company’s audit committee and provide the compliance function with a copy of the report.
7. The company should ensure a proper technology and information supporting mechanism is in place to enable a transparent system of computation of surplus, which should be subject to audit and compliance review.

Article Three Purpose
The Rules set out the requirements and controls necessary for granting the license to carry out online Insurance Aggregation Activities in Saudi Arabia, in addition to the rules concerning the relationship between the Insurance Aggregator and Insurance Companies.

Part 3: Specific Provisions

Part 2 Special Provisions

Section 1: Shareholders
42.The Company shall provide shareholders with comprehensive, adequate, accurate, and timely information to enable them to exercise their rights efficiently, and ensure that all shareholders receive equitable treatment.
43.The company should enable shareholders to be briefed on the minutes of the General Assembly.
44.The Company shall take available procedures to encourage minority shareholders and non-institutional shareholders to fulfill their roles as shareholders of the Company.
45.Shareholders must be granted the opportunity to communicate their opinions and concerns to the Board and Senior Management on a regular basis (e.g. through the general assembly).

First Pre-Sale Provisions
Advertisement/ Promotion
1. The company or the party for which any online activity is being outsourced must, when promoting or advertising online, abide by Articles (28) and (29) set forth in the Insurance Market Code of Conduct Regulation.
Insurance Policy Terms
1. The company or the party for which any online business is outsourced must inform any person requesting an insurance cover, about the entire policy including—but not limited to—the full wording of the terms and conditions of the policy and the coverage and benefits provided by this policy.
2. The company or the party for which any online activity is outsourced must abide by Article (37) set forth in the Insurance Market Code of Conduct Regulation.
Identification of the Customer
1. Before selling or issuing any online policy, the company must verify the authenticity of its customers' identity and the documents submitted, and set the verification procedures appropriate for this purpose.
2. Without any prejudice of the Anti-Money Laundering & Combating Terrorism Financing Regulation issued by Saudi Central Bank, the company must inform Saudi Central Bank and provide a report to the Financial Investigation Unit (FIU) in the Ministry of Interior concerning any suspicious activity through its website.
3. The company must keep records of all customers' policies and identification documents, received from its website.
4. As indicated in Articles (20), (21) and (22) of this regulation, The company must create an electronic record for every customer and set up the following procedures and measures as a minimum to:
  a Changing customers' passwords periodically.
  b Requiring customers to reenter their password after specific period of not using the website.
  c Verifying the accuracy of the customers' email by sending a verification (activation) link.

Section 2: Board of Directors

Second Sale Roles
Insurance Policy
1. The company must issue all online insurance policies in a dated and complete version with all contents, including—but not limited to—the policy's proposal, terms and conditions, coverage limits and endorsements. In addition the company must provide the customer with a copy of the complete insurance policy through all available methods and means, and as a minimum the company must provide a soft copy in Portable Document Format (PDF) sent by email upon issuance whereby the dates of inception and expiry of the coverage are clearly stated.
2. The company must ensure the customer is able to view, print and download a complete copy of the insurance policy from his account on the company's website, at any time. In case the online insurance policy requires any special program, the company must provide the necessary programs on its website.
3. The company must, upon the customer's request, provide a hard copy of the insurance policy issued online signed and stamped by the company, or any other Document related to this policy, immediately from any of the company's branches or its agents' branches or by sending the requested documents by post within seven working days from the date of the customer's request.

Chairman of the Board
1. The Board must choose a Non-Executive Director as Chairman of the Board, and also the Board may select a nonexecutive member as Vice-Chairman (after obtaining "no-objection" from Saudi Central Bank).
2. The Board shall authorize the Chairman to organize its activities and grant him or her the necessary powers to discharge his or her responsibilities.
3. The Company's code of corporate governance shall define the roles and responsibilities of the Chairman.
  In addition to any other regulatory or supervisory requirements and to the duties of Board members, the duties of the Chairman shall include but not be limited to the following:
  1. Organizing the Board's activities, including setting the agenda for Board meetings in consultation with the CEO and other Board members, presiding over Board meetings, and overseeing the process of providing the Board with information and reports
  2. Representing the Company before judicial bodies and supervising the relationships between the Board and internal and external parties
  3. Supporting the Board's efforts in promoting higher standards of corporate governance and ensuring compliance with applicable laws and regulations at all times
4. The Chairman's responsibilities shall not overlap with those of the CEO. The responsibilities of the Chairman of the Board shall be restricted to his or her supervisory role and shall not extend to the executive responsibilities reserved for the CEO.
5. It is prohibited to conjoin the position of the Chairman of the Board with any other executive position in the company, such as the Chief Executive Officer (CEO) or the managing director or the general manager.
6. The Chairman shall ensure that the Board conducts its activities responsibly, without unduly interfering with the Company's operational activities.
7. The Board can, by a majority vote of all Board members, dismiss its elected Chairman at any time.

Members of the Board
1. The Board shall be of an efficient size. The number of Board members must not be more than eleven (11) or less than five (5) members on a permanent basis.
2. The Board composition shall reflect sufficient representation of Nonexecutive Independent Members, and in all cases, Non-executive Independent Members shall not be less than two (2), or a third of the Board, whichever is greater.
3. Members of the Board shall collectively have the appropriate diversity with respect to qualifications, knowledge, experience, and skills in the various areas of the Company's business and operations. In addition, each individual Board member must possess the appropriate level of qualifications, knowledge, experience, skills, and the integrity to effectively perform his or her role and discharge his or her responsibilities.
4. A Board member shall not be a member of a board of another local insurance and/or reinsurance company, or any other board committees, or occupying a leadership position in such companies.
5. The Company shall have formal and transparent policies, standards and procedures for Board nomination, which are approved by the general assembly and communicated to Saudi Central Bank.
6. The Board nomination process shall take into account the following:
  t) Allowing sufficient time for receiving nomination proposals for Board memberships
  u) Reviewing nomination proposals for Board memberships by the nomination and remuneration committee and documenting any findings and recommendations
  v) Obtaining Saudi Central Bank's written non-objection prior to the appointment of any Board member
  w) Providing shareholders with adequate information on the candidates' qualifications and relationships with the Company prior to voting
  x) Applying the Cumulative Voting Method when voting in the general assembly for appointing Board members
7. The Company must notify Saudi Central Bank when a nomination proposal for Board membership has been rejected and must specify the reasons for the rejection.
8. The number of Board candidates presented to the general assembly for voting shall exceed the number of available seats in order - to provide the general assembly the opportunity to select among several candidates.
  The Board can engage the services of an independent specialized external party to identify additional candidates for Board membership when the number of Board candidates is insufficient.
9. If the position of a Board member becomes vacant, the Board can, after obtaining Saudi Central Bank's prior written non-objection, temporarily appoint a new member to the vacant position for the remainder of his or her predecessor's term, provided that such appointment is presented for approval at the next general assembly.
10. Members of the Board shall undergo an induction program once they join the Board. Each member shall be provided with a letter of appointment outlining his or her roles and responsibilities, and comprehensive information on the Company's business and strategic plans and on applicable laws and regulations.
11. Members of the Board shall endeavor to educate themselves on, and be regularly updated of, regulatory developments and to undergo periodic training, as needed, on relevant areas and topics, including but not limited to corporate governance, risk management, finance, solvency, insurance, internal control, law, regulatory compliance, and any other important topics.
12. The code of corporate governance of the Company shall define the roles and responsibilities of Board members.
  In addition to any other regulatory or supervisory requirements, the duties of the Board shall include but not be limited to the following:
  1. Providing strategic guidance to the Company, including setting objectives and formulating strategic plans
  2. Supervising the implementation of strategic plans and major transactions
  3. Approving key policies and procedures and regularly reviewing and updating them
  4. Establishing and monitoring the Company's internal control system and ensuring its adequacy and effectiveness
  5. Establishing and monitoring a risk management system, where risks are assessed, managed, and monitored on a continuous basis
  6. Selecting and changing (if needed) executives in key positions, and ensuring that the Company has an appropriate replacement policy for their replacement by an appropriate alternative with the necessary skills and eligibility for the office
  7. Supervising Senior Management and monitoring the Company's performance against the performance objectives set by the Board
  8. Ensuring the integrity of the Company's accounting and financial reporting system and the appropriateness of its disclosure process
  9. Ensuring that the interests of the policyholders are being protected at all times
  10. Promoting higher standards of corporate governance and ensuring compliance with applicable laws and regulations at all times
13. The Board shall establish written policies and procedures to organize its activities in a formal and transparent manner.
14. The Board shall grant the audit committee the appropriate level of authority to investigate any matter within its mandate and shall ensure that the internal audit function is autonomous and is granted full access to all the information it needs to conduct its activities. In addition, the Board should take all necessary measures to ensure the responsiveness of Senior Management to internal auditors' queries and recommendations.
15. The Board is responsible for promoting a culture of good corporate governance and high ethical standards.
16. All individual members of the Board shall have the same proportionate control and influence over the decisions of the Board.
17. Members of the Board shall always be fully informed of the course of business and act in good faith; with due diligence; in compliance with the applicable laws and regulations; and in the best interest of the Company's shareholders, policyholders, and other Stakeholders.
18. Members of the Board shall perform their duties free from any external influence, whether from within or outside the Company. Members of the Board shall not allow their own personal interest, or the interest of the parties they represent, to come before, or in conflict with, that of the Company, its shareholders, and other Stakeholders.
19. Members of the Board and its committees are prohibited from disclosing to shareholders or the public any confidential information obtained as they perform their role, other than in the general assembly, and must not use such information for their own benefit and personal gain.
20. The Board's meetings shall be held on a regular basis and as needed. The Board shall hold at least four (4) meetings every year and at least one every quarter.
21. Non-executive members of the Board shall hold closed meetings, without the presence of Management members, at least once every year. Staff of the control functions can be invited to attend these meetings, upon the request of the non-executive members holding the meeting.
22. Minutes of the Board meetings shall be recorded, signed by the Chairman and the Secretary of the Board, and entered into an official register.
23. Minutes of the Board meetings shall indicate the meeting's attendance, topics discussed, major deliberations, voting process, objections and abstentions from voting (with reasons if any), decisions taken, and reservations. All records and documents reviewed during the meeting and/or referred to in the minutes shall be attached to the minutes.
24. Members of the Board shall be granted unrestricted access to any relevant information regarding the Company.
25. The Board shall be able to seek external independent advice, when necessary, at the Company's expense.
26. The nomination and remuneration committee shall evaluate the performance of the Board (i.e. overall and individual performance) at least annually, using formal, transparent, and objective criteria.
27. Membership of the Board shall be terminated upon:
  1. Expiration of the appointment term
  2. Resignation of the Board member
  3. Death of the Board member
  4. Becoming physically or mentally impaired in a way that could severely limit his or her ability to properly perform his or her role
  5. Being declared bankrupt or insolvent or making a settlement request with creditors or ceasing to pay debts
  6. Being convicted of an offence involving moral dishonesty or contravention of laws in the Kingdom of Saudi Arabia or any other jurisdiction
  7. Failure to fulfill the Board member's obligations in a way that harms the Company (in which case the termination of the Board member must be approved by the general assembly)
  8. Failing to attend three (3) meetings that were held within one year without a legitimate and acceptable reason
  9. Inability to continue performing their role based on any of the applicable laws and regulations in the Kingdom of Saudi Arabia
28. Subject to the applicable disclosure requirements, Saudi Central Bank must be notified when a member of the Board resigns or when his or her membership is being terminated for any reason other than the end of appointment term within (5) business days from the date on which the member leaves.
29. The Board is accountable to the shareholders, regulatory and supervisory bodies, and other Stakeholders.

Secretary of the Board
1. The Board shall appoint a Secretary of the Board, for its term, to arrange the Board activities and provide support and assistance to Board members. The Secretary can be a member of the Board or of Company's staff.
2. The Secretary of the Board shall have adequate experience and knowledge of the Company's business and activities, possess strong communication skills, and be well-informed of applicable laws and regulations and best practices in corporate governance.
3. The code of corporate governance of the Company shall define the roles and responsibilities of the Secretary of the Board.
  In addition to any other regulatory or supervisory requirements, the Secretary of the Board of Directors shall conduct his/her responsibilities as directed by the Chairman of the Board. His/Her responsibilities include, but are not be limited to, the following: arranging meetings of the Board; in addition to ensuring the availability of appropriate means of communication for the exchange and recording of information between the Board and its committees and between members of senior management and non-executive board members; in addition to maintaining minutes of the Board meetings. The minutes are the permanent official record of the work and decisions taken by the Board and its subcommittees. The Minutes shall be accurate and shall clearly reflect all the items and topics discussed during the meetings of the Board of Directors and shall record all decisions taken and any other matters discussed at the meetings.
4. The Board's minutes shall document any votes made during the meetings, including objections or abstention from voting. Any documents referred to during the meetings shall be attached and referred to in the minutes. A comprehensive statement shall be prepared containing the names of the present and absent members, and a list of committees approved and any case of abstention (if any) by any member and the reasons thereof.
5. The secretary shall give advance notices, send meeting agendas with any relevant materials to Board members and ensure their delivery within a period of (10) working days prior to the meeting.
6. Minutes of the meetings shall be distributed to the parties concerned within a period not exceeding fifteen (15) days. The person or entity responsible for implementing the resolutions taken shall be determined. The Board should, at the beginning of each year, set a specific timetable for receiving reports from the committees concerned and internal and external auditors, and shall ensure that the mechanism for the collection, preparation and submission of reports and data is in place and in line with the internal adopted policy. It shall also ensure the preparation of important information and its presentation to the Board on a timely basis.
7. The compensation of the secretary for performing this role shall be determined by the Board.

Section 3: Board's Committees
1. The Board shall establish specialized Board committees to extend its oversight into particular areas of the Company's activities, such as nomination and remuneration, audit, risk management, investment, regulatory compliance, disclosure, governance, human resource, strategic development, etc., and delegate the necessary powers to its committees and monitor their performance.
2. At a minimum, the Board shall establish an executive committee, an audit committee, a nomination and remuneration committee, a risk management committee, and an investment committee.
3. The Board of Directors shall approve the by-laws of all committees of the Board. Each committee should have general procedures laid down by the Board, specifying its functions, its duration, scope of its work, its powers and duties, and the mechanism through which the Board monitors its activities.
4. Board committees shall operate in a manner similar to that of the Board. In particular, Articles 68, 69, 70, 71, 74, 75, 86 and 87 of this Regulation shall apply to Board committees as they apply to the Board.
5. The Board shall carefully review the meeting minutes and recommendations of its committees.
6. The committees shall be able to seek external professional advice, when necessary, to perform its role, at the Company's expense, after obtaining the Board's approval.

Third Post-Sale Provisions Services
1. The company must, when selling any insurance policy on its website, abide by Articles (50) and (51) of the Insurance Market Code of Conduct Regulation specific to post-sale.
2. The company must put in place clear procedures for the cancelation of insurance policies, issued online, through its website. The procedures must ensure the confirmation and willingness of the customer to cancel the policy. In case of cancellation of the online insurance policy due to deficiency or ambiguousness in the systems, parts, components or programs of the website, the company must reimburse the customer for any damage incurred from the policy cancellation. In the case where the customer maliciously cancels the policy, the company must prove it and provide the customer in writing with the reasons for refusing to pay any future claims related to the cancelled policy.
3. The company must communicate with customers using at least two available communication means. Which include— but are not limited to—emails, recorded mail, text messages, phone, etc.
4. The company must, when sending a notice or advertisement to two or more customers via email or any other communication means, verify and ensure that the notice or advertisement does not contain any personal information related to the customer, and it must ensure that none of the recipients becomes aware of the identity of any other recipient.
5. Once the company issues an insurance policy through its website, it must provide a particular section for after-sale services on its website. This section must include but not limited to the following services:
  a Obtaining any additional type of services related to the policy in force.
  b Performing any endorsement on the policy such as additions, renewals, or cancelations.
  c Verifying the status of the policy (i.e., valid, expired, canceled).
  d Checking the date of inception and expiry of coverage.
  e Checking a schedule of the dates for premiums payments.
  f Checking paid premiums and the dates of payments and values.
6. The company must notify the customer in advance of the upcoming expiry of the insurance policy. The notification should be done within a timespan sufficient to allow the customer to renew the policy or obtain an insurance cover from another insurance company. In addition, the notification should be done through all communication means stated in Article (41) of this regulation.
7. The company must put in place necessary procedures to ensure the compliance of the cancelation process of compulsory insurance policies, through the website, with the provisions and instructions regulating the process of cancelation for this type of policies.
8. The company must notify the customer through email upon expiry of the cover of an insurance policy issued online. In addition, the company must notify the customer through email of the cancelation of an insurance policy issued online, and the company must include in the notification the date and reason of cancelation.
Dealing with Claims
1. The company must provide on its website to the customers or third party (harmed) electronic forms to report claims and upload copies of the claims' documents. After accepting the electronic claims form, the company must provide the applicant a reference number, and before paying the amount due through its website the company may receive original copies of the claim documentation to confirm and validate it.
Complaints
1. The company must, without prejudice to Articles (55) and (56) of the Insurance Market Code of conduct Regulations, provide on its website, all the information necessary for the customer or third party (harmed) to file a complaint and follow up on its status. The information must include as a minimum:
  a The complaint forms.
  b Contact information of the complaint handling department.
  c Appropriate contacts to inquire about complaints, (e.g., emails, fax, mailing address).
  d An overall description of the complaint handling procedures including estimated time to process complaints.
  e The contact details of the General Secretariat of the Committee for the Resolution of Insurance Disputes and Violations.

Executive Committee
1. The Board shall form an executive committee and appoint its members in accordance with the Company's articles of association and any rules issued by the general assembly.
2. The code of corporate governance of the Company shall define the roles and responsibilities of the executive committee, its composition, and the rules governing its activities.
3. The executive committee may be composed of executive and nonexecutive members. It shall include between three (3) to five (5) members.
4. The executive committee meetings shall be held on a regular basis and as needed, such that the committee meets at least six (6) times every year.
5. The executive committee reports to the Board.

Nomination and Remuneration Committee
1. The Board shall form a nomination and remuneration committee and appoint its members in accordance with the rules it issues based on the proposal of the general assembly, provided that the rules shall include their terms and the committee work mechanism.
2. The code of corporate governance of the Company shall define the roles and responsibilities of the nomination and remuneration committee.
  In addition to any other regulatory or supervisory requirements, the duties of the nomination and remuneration committee shall include but not be limited to the following:
  a) Making recommendations to the Board on the nomination of Board members and Board committee members in accordance with regulatory requirements and approved policies and standards
  b) Reviewing the requirement of suitable skills for membership of the Board and its committees on an annual basis and preparing descriptions of the required capabilities and qualifications for such memberships, including the time that a member should reserve for the activities of the Board and/or Board committees
  
  c) Regularly evaluating the structure and composition of the Board and its committees and determining their points of weakness and recommending remedies
  d) Assessing and monitoring the independence of Board and Board committee members and ensuring the absence of any conflict of interest, including ensuring the independence of the independent members, at least on an annual basis
  e)Drawing up clear policies regarding the compensations and remunerations of members of the Board, the Board committees, and Senior Management
  f) Evaluating the performance of the Board and Board committee members on a regular basis
  g) Making recommendations to the Board with regards to selecting and dismissing members of Senior Management
  h) Establishing a succession policy and procedures for the CEO and other key members of Senior Management and monitoring the implementation of the succession plans and process
  i) Reviewing the compensation plans for members of Senior Management
  j) Supervising the compensation plans for members of Senior Management
  k) Making recommendations to the Board on various issues related to nomination and remuneration
3. The nomination and remuneration committee shall be composed of three (3) members as a minimum, two of these must be independent members. The Chairman of the Board cannot chair this committee.
4. The nomination and remuneration committee meetings shall be held on a regular basis and as needed, such that the committee meets at least twice every year.
5. The nomination and remuneration committee reports to the Board.

Audit Committee
1. The Board shall form an audit committee and appoint its members in accordance with the requirements of the Insurance Audit Committee Regulation issued by Saudi Central Bank. The audit committee reports to the Board.
2. The code of corporate governance of the Company shall define the roles and responsibilities of the audit committee and the manner in which it discharges its responsibilities in accordance with the requirements of the Insurance Audit Committee Regulation issued by Saudi Central Bank and other applicable laws, regulations, and rules.

Risk Management Committee
1. The Board shall form a risk management committee and appoint its members in accordance with the rules issued by the general assembly.
2. The code of corporate governance of the Company shall define the roles and responsibilities of the risk management committee.
  
  In addition to any other regulatory or supervisory requirements, the duties of the risk management committee shall include but not be limited to the following
  a) Identifying risks that may imperil the Company and maintaining an acceptable risk profile for the Company
  b) Overseeing the risk management system and assessing its effectiveness
  c) Defining a comprehensive risk management strategy for the Company, overseeing its implementation, and reviewing and updating it on a regular basis by taking into account developments that are internal and external to the Company
  d) Reviewing risk management policies
  e) Re-evaluating the Company's tolerance for, and exposure to, risk on a regular basis (e.g., through stress testing exercises).
  f) Reporting to the Board details of risk exposures and recommending actions to manage them
  g) Advising the Board on issues related to risk management
3. The risk management committee shall be composed of at least (3) members headed by a non-executive member, its members have with an appropriate financial and risk management knowledge.
4. The risk management committee reports to the Board.

Investment Committee
1. The Board shall form an investment committee and appoint its members in accordance with the rules issued by the general assembly.
2. The code of corporate governance of the Company shall define the roles and responsibilities of the investment committee.
  In addition to any other regulatory or supervisory requirements, the duties of the investment committee shall include but not be limited to the following:
  a) Formulating the investment policy and reviewing its implementation on a quarterly basis
  b) Reviewing the performance of each asset class
  c) Monitoring the overall risks of the investment policy
  d) Submitting a performance review report to the Board of Directors
  e) Ensuring the compliance of all investment activities with the requirements of the Investment Regulation issued by Saudi Central Bank and any other applicable laws and regulations
3. The investment committee shall be composed of at least three (3) members and in accordance to article thirty-four (34) of the Investment Regulation.
4. The investment committee reports to the Board.

Section 4: Control Functions

Risk Management Function
1. The risk management function is in charge of identifying, assessing, quantifying, controlling, mitigating, and monitoring the Company's risks, on a continuous basis and at an individual and aggregate level.
2. The code of corporate governance of the Company shall define the roles and responsibilities and structure of the risk management function.
  In addition to any other regulatory or supervisory requirements, the duties of the risk management function shall include but not be limited to the following:
  a) Implementing the risk management strategy
  b) Monitoring the Company's risk profile
  c) Developing effective risk management policies and procedures to identify, assess, quantify, control, mitigate, and monitor risks
  d) Identifying emerging risks and recommending remedial actions to mitigate and control them
  e) Regularly evaluating the Company's tolerance for, and exposure to, risks (e.g., through stress testing exercises)
  f) Establishing a contingency plan
  g) Coordinating with Senior Management to ensure the effectiveness and efficiency of the risk management system
3. The risk management function shall conduct its activities in accordance with the risk management regulation and any other regulatory or supervisory requirements issued by Saudi Central Bank.
4. The risk management function must be independent from the underwriting function.
5. The number, knowledge, and experience of employees within the risk management function shall be commensurate with the nature, scale and complexity of the Company's business. Notwithstanding, the Company shall at least have two (2) risk management officers: one for general and health insurance and one for protection and saving insurance. Companies that write only general and health insurance, or only protection and saving insurance can have one risk management officer.
6. The risk management function may report to the CEO or other senior management, the risk management officer should also report and have direct access to the risk committee without impediment.

Internal Audit Function
1. The internal audit function is responsible for evaluating, and recommending actions to improve the adequacy and effectiveness of internal controls, policies, processes, and reporting procedures, and the extent of adherence to them.
2. The code of corporate governance of the Company shall define the roles and responsibilities and structure of the internal audit function.

Compliance Function
1. The compliance function is responsible for monitoring the Company's compliance, at all times, with all applicable laws, regulations, and rules issued by Saudi Central Bank and other related regulatory bodies, and to take necessary actions to enhance the regulatory compliance.
2. The code of corporate governance of the Company shall define the roles and responsibilities and structure of the compliance function.

Section 5: Appointed Actuary
1. The Appointed Actuary shall discharge his or her responsibilities as stipulated in Article (20) of the Implementing Regulations of the Law on Supervision of Cooperative Insurance Companies and in accordance with the requirements of the Actuarial Work Regulation for Insurance and Reinsurance Companies issued by Saudi Central Bank.
2. The code of corporate governance of the Company shall define the roles and responsibilities of the Appointed Actuary and the manner in which he or she discharges his or her responsibilities in accordance with the requirements of the Actuarial Work Regulation for Insurance and Reinsurance Companies issued by Saudi Central Bank and other applicable laws, regulations, and rules.

Section 6: Senior Management
1. The Senior Management are responsible for supervising the day-to-day activities of the Company.
2. The code of corporate governance of the Company shall define the roles and responsibilities, structure, and reporting lines of the Senior Management members.
  In addition to any other regulatory or supervisory requirements, the duties of the Senior Management shall include but not be limited to the following:
  a) Implementing the strategic plans of the Company
  b) Managing the day-to-day activities
  c) Setting procedures for identifying, measuring, mitigating and monitoring risks
  d) Setting policies, procedures, and controls to ensure the adequacy and effectiveness of the internal control system
  e) Record keeping and audit trails
  f) Acting on the Board's instructions and reporting to the Board
  g) Ensuring that regulatory and supervisory requirements are met to the highest extent possible
3. Each Senior Management position shall have a documented and detailed job description specifying its roles and responsibilities, specifications or qualifications, reporting lines, key role interactions, authority, and authority limits.
4. Members of the Senior Management must possess the skills, knowledge, and experience needed for effective and prudent management of the Company. Proof of the qualifications of senior managers shall be provided to Saudi Central Bank upon request.
5. Senior Management shall provide the Board with a comprehensive overview of its performance in every board meeting at least.
6. Priority shall be given to Saudis for senior management positions. Before appointing non-Saudis in senior positions, the Company shall prove the lack of available qualified Saudi personnel for the required position, in accordance with the Saudi Central Bank's Requirements for Appointments to Senior Positions in Financial Institutions, issued in July 2013.

Basis For Distribution
1. As per Part (2/e) of the Article (70) of the Implementing Regulations, 10% of the net surplus from insurance operations should be distributed to the policyholders directly (“Surplus Amount”) or in the form of reduction in premium for next year. This surplus amount is separately shown in the Statement Income of Insurance Operation.
2. The realized surplus is for a current reporting period (i.e. January-December), it means that only the premiums that have participated in the earnings of that financial year should qualify for surplus distribution. Such premiums are not necessarily the same as the full underwriting year’s premiums. For example, policies underwritten in the prior reporting period do not provide gross premiums but earned premiums.
3. Inwards reinsurance is not entitled to surplus distribution. The gross earned premiums, after excluding the Inwards reinsurance premium, should be the basis of calculation of surplus distribution.

Article Four General Provisions
1. Without prejudice to the provisions of the Law, the insurance aggregator license application shall be submitted to Saudi Central Bank in accordance with the requirements and procedures set forth in these Rules along with the instructions issued by Saudi Central Bank in this regard from time to time.
2. The provisions of the Law and its Implementing Regulation, Insurance Intermediaries Regulation, Online Insurance Activities Regulation and Saudi Central Bank’s relevant rules and instructions and relevant laws and regulations issued by other authorities shall govern whatever is not provided for therein and to the extent possible.

Calculation of the Gross Earned Premiums
1. Obtain a listing of all individual policies that have participated in gross earned premium during the current reporting period in respect of which the distribution is being made.
  The listing should include:
- Customer ID
- Policy Number
- Endorsements Certificates
- Name of Insured as stated in the Policy
- Line of Business
- Coverage Period
- Issue Date
- Gross Earned Premium
- Investment Share of Premium (Protection & Savings)
- Unearned Premium
- Gross Claims Incurred
- Outstanding Claims
- Invoice/Debit/Credit Note Number.
This listing assures that no policy or gross premium earned during the year has been missed.
1. For each individual policy in the above listing, the gross earned premium in current reporting period equals to the gross written premiums in current reporting period plus the change of unearned premiums reserves (UPR) for those policies. The list also include policies written in a previous year with an unearned premium reserve at the beginning of the year.

Article Five License Requirements

1.	The applicant for insurance aggregator license shall:
		a)	be a joint stock or limited liability company licensed to operate in Saudi Arabia; and
		b)	have a minimum capital of:
				-	Five hundred thousand Saudi Riyals (500,000) for an Insurance Aggregator only.
				-	Three million Saudi Riyals (3,000,000) for an insurance broker conducting Insurance Aggregation Activities.
				-	Saudi Central Bank shall determine the additional minimum capital required based on the insurance lines and products as specified by the applicant in the business plan referred to in subsection (2) of this article.
2.	The application shall include a specific business plan for Insurance Aggregation Activities. The plan shall, as a minimum, include the following:
		a)	Insurance lines and products to be displayed on the Electronic Platform, and analysis of the volume of online insurance transactions expected over the next three years;
		b)	Analysis of the risks related to web transactions and precautionary measures and actions necessary to reduce such risks, including, money laundering crimes, strategic risks and illegal access to the data; and
		c)	Emergency plan that includes actions to be taken if one or more components of the Electronic Platform go down. The plan must include corrective measures to ensure business continuity and reporting mechanisms to Saudi Central Bank and the company.
3.	The application submitted to Saudi Central Bank shall include all regulatory requirements and documents required by Saudi Central Bank to examine the application.
4.	The license shall not be granted unless the applicant presents a professional liability insurance policy covering negligence, errors and omissions from an Insurance Company. The insurance coverage shall not be less than (5,000,000) five million Saudi riyals.

Calculation of Gross Claims Incurred
1. For each individual policy, the gross claims incurred in current reporting period equals to the gross claim paid in current reporting period plus the outstanding claims during the current reporting period plus the portion of other reserves during the current reporting period (e.g. IBNR, URR) that are related to the individual policy.
2. The other reserves for each individual policy shall be calculated as follow:
Other Reserves x ((individual gross earned premiums as calculated in Article (17) of this policy /(total gross earned premiums after excluding the Inwards reinsurance premium))

Article Six Licensing phases

Insurance aggregator’s license shall be granted as follows:

Phase one:	Submit the application to Saudi Central Bank in accordance with the procedures set forth in the Implementing Regulation of the Law and the instructions issued by Saudi Central Bank in this regard.
Phase two:	Subject to the fulfilment of the requirements referred to in Article (5) “License Requirements”, the applicant may be provided with Saudi Central Bank’s initial non- objection .
Phase three:	Upon receiving Saudi Central Bank’s initial non-objection, the applicant shall link with at least (5) Insurance Companies within (60) business days from the date of the initial non-objection issuance.
Phase four:	The applicant shall launch the pilot Electronic Platform within a period specified by Saudi Central Bank.
Phase five:	Upon verification of the applicant’s compliance with the requirements set forth herein, Saudi Central Bank shall issue the insurance aggregator license.

Surplus Eligibility
1. For each individual policy, the company should calculate the ratio of the gross claims incurred over the gross earned premiums. The company should eliminate policies with ratio of 70% or above.
2. Individual policies, where the ratio is greater than the specified percentage (e.g. 70%), should be excluded from distribution surplus calculation without combining them with other policies for other lines of business that one client may be having in his name. However, subject to practicality, if a client buys a number of separate policies to cover a number of similar risks in the same line of business, all such policies in the name of the same client should be combined to arrive at the ratio for determining the surplus eligibility.
3. The company should eliminate all policies that were cancelled during the current reporting period.
4. The company should eliminate fronting policies, which an insurance company acts as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer in exchange for a commission. For the purpose of this Policy, any issued policy with retained risks of 1% or less of the sum insured is considered a fronting policy.
5. The company then should eliminate policies, where the policyholders are not entitled to the surplus distribution.
6. The resulting list, after elimination of excluded policies indicated, contains all policies that are eligible for the distribution of the surplus amount for the current reporting period.

Article Seven Technical Requirements for Linking with Insurance Companies

7.1	The Insurance Aggregator shall improve and operate the Electronic Platform to carry out Insurance Aggregation Activities and develop standard technical interfaces through Web Services to ensure the following:
		a)	Exchange of information and electronic communication with the Insurance Companies' technical systems in order to exchange basic client information with Insurance Companies.
		b)	Enable companies to assess insured risks.
		c)	Provide the client with insurance quotes online, the payment method and procedures and policy information once issued by the Insurance Company.
		d)	Perform any operations required by Insurance Aggregation Activities.
7.2	Insurance requests, offers and policies shall be submitted, received and issued instantly through the Web Services “API” linked between the Electronic Platform and the technical systems of the Insurance Companies.
7.3	Prior to linking with an Insurance Company the Insurance Aggregator shall ensure that the Insurance Company’s IT infrastructure is ready and equipped to allow information exchange and electronic communication through the web services and Electronic Platform, as per the communication mechanism agreed on and set forth in Paragraph (7.1) above.

Distribution Scheme Per Policy
1. All policies that are identified as ineligible according to the Articles mentioned in Surplus Eligibility Section should be excluded from the policyholders' surplus distribution. The total gross earned premiums of all eligible policies after excluding the Inwards reinsurance premium will be the base on which the policyholders’ surplus (“Surplus Amount”) will be distributed.
  The share of surplus for each eligible policy shall be based on the ’contribution’ of such eligible policies. The Contribution from an eligible policy shall be calculated as:
  (Gross Earned Premium less Gross Incurred Claim)
2. Then, the share of the eligible individual policy in the surplus amount will be calculated by multiplying Contribution per Eligible Policy multiplied by Total Share Surplus and divided by Total Contribution from all Eligible Policies.
3. Where a client holds a number of participating policies, a statement should be prepared for his total entitlement, summarizing the entitlement from individual policies held by that Client.

Article Eight Obligations to Ensure Accuracy and Protection of Information Provided

8.1	The Insurance Aggregator shall ensure the validity and accuracy of the insurance offers and establish the necessary validation procedures.
8.2	The Insurance Aggregator shall verify the identity of the client, ensure the validity of the information and documents provided by the Client online, through the use of documents, data or information are obtained from reliable and independent sources before providing them to Insurance Companies. The insurance aggregator shall be responsible for the validation. The Insurance Company may electronically verify the information and request any information using any other electronic services.
8.3	The Insurance Aggregator shall keep electronic records of client’s documents and identities obtained through its Electronic Platform.
8.4	In accordance with the instructions issued to ensure security and integrity of the information, the Insurance Aggregator shall establish an electronic record for each client and set the following procedures and measures, as a minimum, to protect the client record:
		a.	Verify the client email address and phone number by sending an authentication link; and
		b.	Develop the procedures necessary to ensure that information provided is up to date, for example, using the national address.

Article Nine Obligations of Insurance Aggregator and Insurance Company

9.1	The electronic linkage between Insurance Companies and Insurance Aggregators shall be for the purpose of conducting Insurance Aggregation Activities only and shall not be used for any other purposes.
9.2	Comply with Saudi Central Bank instructions with respect to commission rates.
9.3	Inform the clients of any matter related to the insurance process through email and text messages.
9.4	Set a mechanism to prevent fraud incidents that might occur while selling insurance products through the platform. The mechanism shall include but not limited to the following:
		a)	The Insurance Aggregator shall not insure more than five vehicles belonging to the same insured. If the maximum number of vehicles is exceeded, the Insurance Aggregator shall notify the insurance applicant to refer to the Insurance Company’s point of sale.
		b)	the insurance policy shall be linked with the insured’s personal data and information after verifying it through an approved, reliable and independent source;
		c)	The national address shall be directly and automatically linked. Manual insertion of the national address shall not be allowed.

The Insurance Company shall:

9.5	Offer insurance products’ prices in accordance with the approved underwriting guidelines.
9.6	Notify the Insurance Aggregator through the Electronic Platform once the insurance policy is issued, providing the Insurance Aggregator with all policy information, including the duration of the policy and coverage limits, as well as an electronically signed and dated digital copy of the insurance policy.
9.7	If disclosure of insurance policy information is required in accordance with applicable laws and regulations:
		a)	Disclose the required information related to the insurance policies it issued.
		b)	Ensure compliance with all legal procedures of disclosure.
		c)	Take all necessary procedures to protect the confidentiality of such information.

The Insurance Aggregator shall:

9.8	Adopt a business plan approved by a resolution of the company’s Board of Directors after obtaining Saudi Central Bank's non-objection. The plan shall be reviewed annually by the Board and Saudi Central Bank’s non-objection shall be obtained when making any material change to the strategy of the Insurance Aggregator. Moreover, Saudi Central Bank shall have the right to request an amendment to or a change of the plan, if deemed necessary.
9.9	Clarify the nature of services provided for clients through its Electronic Platform and ensure that the nature of the relation between the parties is clear.
9.10	Disclose license information to clients.
9.11	Obtain appropriate approvals and acknowledgements from the clients before using the Electronic Platform.
9.12	Provide a list of insurance companies that have been linked to through the Electronic Platform. Such list serves as a reference for clients. In addition, the Insurance Aggregator shall not participate in any marketing campaigns for companies to which the Insurance Aggregator is linked. Further, the Insurance Aggregator shall not prefer an Insurance Company to another in order to prevent any potential conflict of interest.
9.13	The Insurance Aggregator shall clarify and provide on the Electronic Platform all terms and conditions of the Electronic Platform, security instructions, payment methods, information confidentiality, other instructions pertaining to the use of the Platform and all data that must be legally disclosed.
9.14	Provide a website feature that enables the clients to upload photos and files in order for the Insurance Company to accurately price the insurance policy.
9.15	Apply Two-Factor Authentication (2FA) process to finalize the insurance policy purchase. Text message based two factor authentication shall be supported as one of the 2FA methods. The Insurance Aggregator shall also notify clients through email or text message once the insurance policy is issued.3
9.16	Disclose data of commissions received as a result of the insurance policies.
9.17	Notify clients of any fees or extra charges in exchange for any related services.
9.18	Send an email or text message to the clients with the insurance premium and the phone number of complaint management department or client service department at the Insurance Company.
9.19	Notify the clients of any changes in disclosure and conditions.
9.20	Notify the client in case the Insurance Company refuses to issue the policy or if additional documents are requested through email and text message.
9.21	Provide a feature on the Electronic Platform that enables clients to contact the Insurance Aggregator’s client service representatives directly through the platform.
9.22	Not receive any insurance premiums on behalf of the Insurance Company as such premiums shall be collected by the Insurance Company directly.
9.23	Notify the clients before the expiration of the insurance policy within reasonable time, in not less than 15 days.

Payment
1. Surplus payment should be made by credit note, to offset against future premium, or cheque/bank transfer sent directly to the policyholder. The surplus amount that is below S.R. 500 does not have to be send by cheque/bank transfer.
2. Policyholders should have the choice to have a cash or cheque/bank transfer or seek rebate in the renewal amount(s) due.
3. The client’s share of the surplus is subject to the settlement of all due premiums, irrespective of the year in which such premiums incepted and therefore could be offset against such due premiums.
4. If the policyholder chooses to come to the company’s offices to collect their surplus amount even if it is below S.R. 500, the company is required to pay by form of cheque this amount within 5 working days from the date of notification.
5. Surplus amount that remain unclaimed for more than 5 years will be written back to the Income Statement of Insurance Operation. If a customer makes a claim after five years, the same will be honored and charged to the Statement Income of Insurance Operation. The company will maintain the records of the surplus payable for a period of ten years. After ten years, the company must seek SAMA approval for dealing with any outstanding amounts within the Income Statement of Insurance Operation.
6. The Company should inform its policyholders through short message service (SMS), email, or a formal letter about the distribution of surplus and the company's methodology to distribute the surplus amount within (15) business days from the date of annual general assembly that approved the annual financial statements.
7. The distribution of surplus should be made within six months from the date of annual general assembly that approved the annual financial statements.
8. The company can give the surplus amount to authorized charities if the company obtains the policyholder’s written permission.

Article Ten Concluding Provisions

10.1	The Insurance Aggregator shall establish appropriate internal controls and procedures to ensure compliance with these Rules. In case of contracting with third parties to provide services related to Insurance Aggregation, the Insurance Aggregator shall ensure that all parties comply with these Rules.
10.2	The Insurance Aggregator shall keep sufficient electronic records to confirm compliance with the Rules and other relevant laws and regulations. Such records include, the business plan of Insurance Aggregation Activities and supporting documents of its implementation, outsourcing contracts and web hosting contracts.
10.3	The Insurance Aggregator shall publish these Rules and any other laws or regulations governing its business on the Electronic Platform.
10.4	Non-compliance with these Rules shall be deemed a violation of the Law and its Implementing Regulation and may subject the company to regulatory penalties.

Financial Sector’s Cyber Threat
Based on the supervisory role of the Saudi Central Bank on the financial sector, and in reference to the Cybersecurity strategy for the financial sector which aims at creating a secure and reliable financial sector that enables growth and prosperity. And taking into consideration the changes in business models of financial institutions, relying on technology in financial transactions, and attracting emerging and modern technologies.
Whereas a change has been observed in the level of Threat Landscape to the financial sector, which resulted in a rapid and noticeable development by the Advance Persistence Threat “APT” groups targeting the financial sector for different purposes on several levels such as their Tactics, Techniques, and Procedures; which requires the development of proactive detection and analysis capabilities for financial institutions to work proactively in line with the development of the threat actors.
Accordingly, the Financial Sector Cyber Threat Intelligence Principles "Principles" had been adopted, which aims to establish scientific and practical foundations for proactive detection and analysis of the cyber threats as well as enhancing the practices of financial institutions with regard to cyber threat intelligence; to take precautionary measures and feed the various technical, operational and business

departments with Threat Intelligence appropriate to the work of these departments, the Principles are divided on several levels, as follows:
- Core principles - required basis activities needed to perform planning, production and dissemination of threat intelligence.
- Strategic principles - strategic level cyber intelligence focused on the objectives, motivations and intent of threat actors.
- Operational Principles - to produce information about modus operandi, behavior and classification of the different stages of attacks (Taxonomization).
- Tactical principles - includes information about technical elements and components of cyber attacks
Accordingly, to enhance the cyber resilience of the financial sector and raise the maturity level of threat intelligence capability; The financial institutions shall be guided by these principles. In case of implementing the principles, we recommend that the stages of implementation are as following:
Conducting a gap assessment of the current status of Threat Intelligence management, compared to what is stated in the principles, with its various levels, to identify the gaps.
Develop a roadmap for full compliance with the Principles as of this circular date, according to the following periods:
Six months for core, operational and tactical principles.
Twelve months for strategic principles.
Present the prepared Roadmap to the Board of Directors, inform them of it, and obtain approval of the plan and the necessary support for its implementation.
The cyber security committee in the financial institution shall follow up the implementation of the principles and the extent of commitment to the approved plan and provide full support to solve the obstacles and challenges facing the competent teams in the financial institution; while escalating internally to the authorized person on anything that may affect or obstruct the implementation of the principles.
Provide the necessary support to the Cyber Security Department to fully implement the principles,

enhance the role of cyber threat intelligence, and ensure that they are provided with competency and trained national human resources, technological tools and appropriate training to carry out their tasks to the fullest.
If there are inquiries in this regard, you can contact the General Department of Cyber Risk Control represented by the Cybersecurity Fusion Center at the e-mail.
To be informed and complied with.

Follow-up circular - Regarding FATCA instructions if the TIN is not available for the financial account
Following up to the Central Bank Circular No. (216) dated 11/04/2021 referred to the Agreement between the Government of the Kingdom of Saudi Arabia and the Government of the United States of America issued regarding applying Foreign Account Tax Compliance Act (“FATCA”) to improve tax compliance, ratified by Royal Decree No. (M/52) dated 10/05/1438H. And reference to the updates made to the Agreement regarding the mechanism for disclosing tax figures.

Therefore, we would like to emphasize that all insurance companies subject to the provisions of the agreement must review and comply with updated instructions and apply them when submitting reports for the final period 2023 at the end of September 2024 in the event that the U.S.Tax Identification Number (TIN) is not available for the reportable account. By accessing the link below, which explains the updates to the mechanism for disclosing tax numbers in the reporting section.
Frequently Asked Questions FAQs FATCA Compliance
Compliance Legal | Internal Revenue Service
(irs.gov)
For more information, you can contact the Zakat, Tax and Customs Authority through email.

To be informed and complied with.

Follow-up circular - NCD

With regards to the Central Bank’s “SAMA” role in supervising the insurance sector in the Kingdom, and in reference to the objectives of the Cooperative Insurance Companies Control Law and its implementing regulation to protect the policyholders as well as enhancing the stability of the insurance market. Also, with reference to SAMA’s circular number (156) dated 27/06/1439 H, and Circular number (161) dated 1439/11/06. Which laid down the rules for determination of ‘No Claim Discount’ (NCD).

We inform you that all Insurance Companies, and NAJM for Insurance Services must comply with the NCD rules explained in above mentioned circulars, as well as the following:

Maintain a Master NCD record of every policyholder and named driver as a primary reference for the deduction entitlement mechanism for all insured vehicles.
A Master NCD record shall not be affected by any temporary reduction for NCD.
The reduction of NCD mechanism shall be made on the following basis:

3,1	In the event of a claim:
		a)	For a policyholder with a single insured vehicle, the reduction shall be calculated on a policy year basis.
		b)	For a policyholder with multiple insured vehicles, the reduction shall be calculated on a calendar year basis.
		c)	The reduction in NCD shall be made only once during a year, i.e., policy year or calendar year as per clauses (a and b) above, even if the number of claims exceed one.
		d)	For the purposes of implementing the NCD mechanism, the claim is considered as happening in the year in which the claim is filed.

3,2	In the event of discontinuation of the insurance:
		a)	Where the period during which a vehicle remains uninsured exceeds (30) days but is less than (180) days, Master NCD record shall not be affected. However, until the vehicle remains uninsured, all other vehicles of the policyholder will get ‘nil’ NCD.
		b)	Where the period during which a vehicle remains uninsured exceeds (180) days, the NCD for all the vehicles shall be canceled for the current insurance year, and the Master NCD record shall be reset to ‘nil’.
		c)	If an individual who happened to be policyholder or a named driver on a policy in the past does not appear as an insured for a period exceeding 12 months, the Master NCD record of the individual shall be set to ‘nil’.

Accordingly, all companies shall implement and comply with it as of 21/02/2023.

Circular (233) Third Party VAT Compensation Mechanism
In line with SAMA's role in protecting the interests and rights of policyholders and beneficiaries of insurance services, and with reference to the Third-Party Compensation Mechanism outlined in the Unified Compulsory Motor Insurance Policy issued under Governor's Decision No. (439/93) dated 17/10/1439H, as amended by Governor's Decision No. (441/1) dated 02/01/1441H, and to ensure the fairness of the third-party compensation mechanism in accordance with the VAT-related provisions issued by the competent authorities
Insurance companies must, when settling motor vehicle claims for third parties, clarify their entitlement to compensation for the VAT amount and explain the mechanism for such compensation. They must adhere to the following when compensating:
1. Compensation based on the repair costs provided by the entity responsible for assessing vehicle damage.
2. Compensation for the VAT amount based on repair invoices issued in accordance with the requirements of the competent authority.
For your information and act accordingly.

Cooperative Insurance Companies Control Law
The Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003) amended by the Royal Decree No. (M30) dated 27/5/1434H (corresponding to 08/04/2013), and amended in accordance to the Royal Decree No. (M/12) dated 23/1/1443H (corresponding to 01/09/2021).

Article 1
Insurance in the Kingdom of Saudi Arabia shall be provided by insurance companies registered in the Kingdom operating in accordance with the practice of cooperative insurance in line with the provisions of the Articles of Incorporation of the National Company for Cooperative Insurance issued by Royal Decree No (M/5) dated 17/4/1405H, and not inconsistent with the provisions of Shari’ah

Article 2

Subject to the provisions of the Law of Cooperative Health Insurance issued by Royal Decree No. (M/10) dated 1/5/1420H, the Saudi Central Bank shall have the power to:
1.	Receive and review incorporation requests of cooperative insurance and reinsurance companies and insurance related services providers; to assure fulfilment of requests to the licensing requirements set out by the Saudi Central Bank, and issue the initial approval in order to refer the requests to the competent authority to complete incorporation procedures.
2.	Issue licenses, supervise, control, and regulate the activities of insurance and reinsurance companies and insurance-related service providers, and shall exercise its powers as stated under the provisions of this Law and its Implementing Regulation, and notably to:
	a.	Regulate and approve rules for investment of insurance and reinsurance premiums, and design a formula for distribution of insurance and reinsurance surplus among shareholders and policyholders, provided that separate accounts are kept for shareholders, policyholders and insurance operations.
	b.	Determine the sums of money required to be deposited in one of the local banks in order to practice each of the different classes of insurance.
	c.	Approve standard forms of insurance and reinsurance policies, and determine the minimum insurance amount for third party liability coverage, subject to the provisions of laws applicable in this regard.
	d.	Set rules determining the method of investing the assets of insurance and reinsurance companies.
	e.	Set general rules determining the assets each company shall allocate inside and outside the Kingdom, the minimum and maximum assets required for each class of insurance and the conditions that shall be observed in each class, and the minimum and maximum underwriting premiums in relation to the capital and reserves of the company.
	f.	Set rules protecting the rights of beneficiaries, and ensure the ability of the insurance companies to fulfil the claims and obligations.
3.	Obtain fees of licenses and provided services, and such fees shall be determined by the Governor.

Article 3

1.	No person in the Kingdom shall conduct insurance or reinsurance activities or provide insurance related services without obtaining the license from the Saudi Central Bank.
2.	Subject to Paragraph (1) of this Article, the insurance and reinsurance company shall comply with the following:
	a.	The company shall be a joint-stock company.
	b.	The principal purpose of the company shall be to conduct insurance or reinsurance activities, and the company shall not undertake other activities unless they are necessary or complementary to its principal purpose.
3.	Insurance and reinsurance companies may not submit a request for initial public offering to sell any of its stocks without obtaining the prior approval of the Saudi Central Bank, which shall set the rules for such approval.
4.	Insurance companies shall not directly own insurance brokerage companies or establishments, and reinsurance companies shall not own reinsurance brokerage companies or establishments.
5.	The capital of the insurance or reinsurance company shall only be amended upon approval of the Saudi Central Bank and pursuant to the provisions of the Companies Law. The Implementing Regulation shall determine the minimum paid-up capital for insurance or reinsurance company, which shall not be less than three hundred million Saudi riyals.

Article 4
The implementing regulation shall specify the insurance operations governed by this Law, and each insurance company shall specify the classes of insurance it shall provide.

Article 5
An insurance or re-insurance company - upon commencing business - may not suspend its insurance activities without the prior approval of the Saudi Central Bank. This is to ensure that insurance companies take all necessary measures to safeguard the rights of the policyholders and the investors.

Article 6
Nomination of members of the board of directors of insurance and reinsurance companies and insurance-related service providers, members of audit committees, committees emerging from the board, managers and senior positions specified by the Saudi Central Bank shall be subject to the approval of the Saudi Central Bank. The Saudi Central Bank shall set the rules of their appointment.

Article 7
The chairman of the board of directors of an insurance or re-insurance company, managing director, a member of the board of directors and general manager shall be liable, each within the limits of his authority, for the company’s violation of any of the provisions of this Law or its implementing regulation.

Article 8
The Saudi Central Bank may inspect the records and accounts of any insurance or re-insurance company through the Saudi Central Bank’s employees or auditors appointed by it, provided that the inspection be carried out at the site of the insurance or re-insurance company. In this case the employees of the company shall submit whatever is in their possession or under their authority or records, data, and documents requested from them, and disclose any information they have, relating to the company, to the employees of the Saudi Central Bank or whoever it may appoint as auditors.

Article 9
An insurance or re-insurance company may not open any branch or office inside or outside the Kingdom, agree to merge with, own any insurance or banking activity, have control thereof, or own shares of another insurance or re-insurance company without the written approval of the Saudi Central Bank.

Article 10

1.	The general assembly of the insurance or reinsurance company shall annually appoint two auditing offices from among the certified accountants licensed to practice the profession in the Kingdom and shall determine their fees.
2.	The auditors shall include in their annual report presented to the general assembly– in addition to the data provided for in the Companies Law– their opinion as to whether the financial statements of the company correctly reflect its true financial position on the date of the balance sheet and the results of its activities during the fiscal year which expires on that date, and as to whether the preparation, presentation and audit of these statements conform to the generally accepted accounting principles applied in the Kingdom.
3.	Financial statements and the auditors’ report shall be published within three months from the date of the end of the company’s fiscal year.

Article 11

The Saudi Central Bank may at any time request any insurance or re-insurance company to submit to it– at the time and in the form it determines– any information it deems necessary to fulfill the purposes of this Law. It shall also send to the Saudi Central Bank at its request the following:
1.	A statement of the revenues and expenses for each insurance class.
2.	A detailed statement of the insurance activities carried out by the company during the stated period.
3.	Statistical statements and general information about the activities of the company.
4.	A statement of the investments of the company.
5.	Any other information requested by the Saudi Central Bank.

Article 12
It is prohibited for any person who obtains any information, while carrying out any work related to the application of the provisions of this Law, to disclose or benefit from it in any way.

Article 13
All insurance and re-insurance companies shall submit to the Department of Zakat and Income Tax their zakat or tax returns, the audited financial statements and any other information or documents which the Department deems necessary for the purpose of determining the amount subject to zakat or taxation in accordance with the provisions of the Tax Law, the Zakat Collection Law and their implementing regulation and payment of the sums due, within the times specified by the Law.

Article 14
Insurance and re-insurance companies governed by this Law shall deposit in one of the local banks, a statutory deposit to the order of the Saudi Central Bank, and the implementing regulation shall determine the rules relating to this deposit.

Article 15
The insurance and re-insurance companies shall allocate a part of their annual profits, not less than 20%, as a statutory reserve, until the total reserve amounts to 100% of the capital paid.

Article 16
All insurance and re-insurance companies shall set up the required reserves for their insurance classes, and other reserves as provided for in the implementing regulation of this Law.

Article 17
All insurance and re-insurance companies governed by the provisions of this Law shall keep a separate account for each class of insurance as specified in the implementing regulation of this Law. They shall also keep records and books to record insurance policies issued by the company, names and addresses of the holders of such policies and the date of concluding each policy, its effectiveness, prices and conditions provided for in it. Any change or amendment occurring in such policies shall also be recorded in these records and books. The Saudi Central Bank may issue the decisions it deems necessary to compel insurance companies to record in the books and records any data it deems necessary to exercise its authority of control and supervision. The data contained in the records and books mentioned above may be entered in the computer in accordance with the rules and procedures provided for in the implementing regulation of the Law of Commercial Books.

Article 18
Officers of the Saudi Central Bank appointed by a decision of the Saudi Central Bank’s Governor, shall be responsible to carry out activities of inspection, supervision, and restrain of violations of the provisions of this Law or its Implementing Regulation. The responsibilities and framework of those officers shall be determined in the Implementing Regulation. At the discretion of the Governor; supporting tasks of inspection, supervision and restrain may be referred to the private sector.

Article 19

1.	If the Saudi Central Bank finds that any insurance or reinsurance company or insurance-related service provider has followed a policy to which it may adversely affect its ability to fulfill its obligations, has violated professional standards, or has violated the provisions of this Law or its Implementing Regulation, the Saudi Central Bank may impose one or both of the two following penalties:
	a.	Fine stipulated in Article (21) of this Law.
	b.	Cancellation of the issued license, provided that such cancellation is supported by the committee referred to in Article (20) of this Law.
2.	In addition to provisions of Sub-Paragraph (a) of Paragraph (1) of this Article, the Saudi Central Bank may take against the insurance or reinsurance company or insurance-related service provider stated in paragraph (1) of this Article any of the following actions:
	a.	Issue a warning.
	b.	Require presenting an appropriate program that explains the corrective measures to be taken.
	c.	Compel to stop practicing all or some activities.
	d.	Prevent distribution of profits to meet the solvency margin requirements.
	e.	Suspend the person responsible for the violation from work and suspend their powers.
	f.	Suspend any of the persons referred to in Article (6) of this Law from work.
	g.	Appoint one or more consultants to provide them with consultation regarding the management of its activities at their expense.
	h.	Any other action specified in the Implementing Regulation.
3.	The Saudi Central Bank may, instead of imposing the penalty stipulated in Sub-Paragraph (b) of Paragraph (1) of this Article, take against the entities stated in Paragraph (1) of this Article any of the actions stipulated in Paragraph (2) of this Article.
4.	The Saudi Central Bank may announce the penalties it imposes based on Paragraph (1) of this Article when they are final, and may also announce the actions taken based on Paragraph (2) of this Article as it deems necessary to protect the insureds and the stability of the insurance sector, and the Saudi Central Bank shall set the necessary rules for such announcements.

Article 20

One or more preliminary committees shall be formed by resolution of the Council of Ministers. The committee(s) shall be composed of not less than three specialized members, working full-time if possible, and at least one of them must be a regulatory consultant. The Committee members shall maintain a three-year membership subject to renewal. The committee(s) shall be responsible for:
1.	Settling all disputes arising from insurance contracts, including disputes arising between insurance companies and their clients and beneficiaries of the insurance coverages, or between insurance companies and third party in case of subrogation, and disputes arising between insurance-related service providers and their clients.
2.	Settling all disputes arising among insurance companies, reinsurance companies, and insurance related services providers.
3.	Settling grievances filed against the penalties and actions imposed by the Saudi Central Bank in accordance with Article (19) of this Law, provided that the grievance is filed to the committee within (30) days from the date of notification of action. The committee may issue decisions awarding damages, requesting to revert to the original status or issuing any other decisions as appropriate to protect the rights of the aggrieved.
4.	Looking into decision of license cancellation issued by the Saudi Central Bank.

Article 21

	1.	Without prejudice to any harsher punishment provided for in any other law, anyone who conduct insurance activities or insurance related service activities without a license from the Saudi Central Bank shall be punished by a fine of no more than two million Saudi riyals and imprisonment for a period not exceeding four years, or by either.
	2.	Subject to Paragraph (1) of this Article, anyone who violates any of the provisions of this Law shall be punished by a fine of no more than two million Saudi riyals. In case of continuation of violation, a fine of no more than (10,000) Saudi riyals shall be imposed for each day the violation continues.
	3.	The decision issued for the penalty to be imposed may include a statement for the publication of the summary of the decision at the expense of the violator in a local newspapers or in any other appropriate channel; depending on the type, gravity and effect of the violation committed. Decisions shall only be published after being final.

Article 22

	1.	An Appeal Committee shall be formed of not less than three consultants, working full-time if possible, who are specialized and knowledgeable about the jurisprudence of transactions and insurance. The Committee is responsible for looking into grievances raised by concerned parties against the rulings of the Committees set forth in Article (20) of this Law, and its decisions shall be final and not open to appeal.
	2.	The chairman and members of the Appeal Committee shall be appointed by a royal order. Their membership shall be for a three- year renewable term.
	3.	Rules and regulation governing the business of the Committees set forth in this Law and governing prosecution before these Committees shall be issued by the Council of Ministers.
	4.	Remuneration of members of the Committees set forth in this Law shall be determined by the Minister of Finance.

Article 23
The implementing regulation of this Law shall be issued by a decision of the Minister of Finance, shall be published within sixty days from the date of publication of this Law, and shall come into effect on the date of the enforcement of this Law.

Article 24
Subject to what is stated in Article One of this Law whatever is not provided for therein shall be governed by the Companies Law to the extent permitted by the nature of such type of companies.

Article 25
This Law shall be published in the Official Gazette and shall come into effect after ninety days from the date of its publication.

Actuarial Work Rules for Insurance
The Saudi Arabian Monetary Authority has issued these Rules according to the Governor’s decision number (441/186) dated 06/07/1441H, to replace the Actuarial Work Regulation for Insurance and/or Reinsurance Companies issued according to the Governor’s Decision number (72/437) dated 25/03/1437H, based on the powers vested to SAMA by the Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003), and its Implementing Regulation issued by the Decision of the Minister of Finance No. (1/596) dated 01/03/1425H (corresponding to 20/04/2004).

Introduction and Definitions

Article 1
These Rules shall be complied with in conjunction with the Cooperative Insurance Control Law and its Implementing Regulation and SAMA’s Instructions.

Article 2

Definitions: the following terms and phrases, wherever mentioned herein, shall have the meaning assigned thereto, unless the context otherwise requires:

1.	SAMA: Saudi Arabian Monetary Authority.
2.	The Law: the Cooperative Insurance Companies Control Law.
3.	Implementing Regulation: the Implementing Regulation of the Cooperative Insurance Companies Control Law.
4.	Kingdom: the Kingdom of Saudi Arabia.
5.	Rules: Actuarial Work Rules for Insurance.
6.	Person: A natural person or juristic entity.
7.	Insurance: Mechanism of contractually shifting burdens of pure risks by pooling them.
8.	Reinsurance: Transfer of the Insured’s risk from the Insurance Company to the Reinsurance Company and to indemnify the Insurance Company by the Reinsurance Company for any payments made to the Insured policyholder against damages or loss.
9.	Insurance Company: A company that accepts Insurance contracts directly from Insured(s).
10.	Reinsurance Company: An Insurance or Reinsurance Company that accepts Insurance contracts from another Insurance Company.
11.	Insured: A natural person or juristic entity, which has entered into an Insurance contract with an Insurance Company.
12.	Beneficiary: A natural person or juristic entity, to whom the benefit(s) under the Insurance policy is assigned as a result of a covered loss.
13.	Retention: The amount of risk kept by an Insurance company in its own books, in comparison with Insurance risks ceded to a Reinsurance company.
14.	Technical Provisions (Reserves): Insurance liabilities i.e. the value set aside to cover expected losses arising on a book of Insurance policies and its financial obligations.
15.	Company: A company conducting Insurance and/or Reinsurance activities that has been approved by SAMA to conduct such business.
16.	Actuary: Person who conducts various statistical and probability theories whereby services are priced; liabilities are assessed and provisions calculated.
17.	Actuarial Candidate: A natural person who either holds an actuarial degree or is actively studying for actuarial examinations set by an Actuarial Association.
18.	Associate Actuary: A natural person who is qualified as an Associate member of an Actuarial Association.
19.	Qualified Actuary: A natural person who is qualified as a Fellow of an Actuarial Association.
20.	Appointed Actuary: The Qualified Actuary who is appointed by the Company to undertake the responsibilities specified in these Rules and the Implementing Regulation and SAMA’s instructions.
21.	Actuarial Function: The department of a Company that consists of one or more Qualified Actuaries, Associate Actuaries and Actuarial Candidates and other natural persons to assist and support the actuarial work of the Company as required in these Rules.
22.	Actuarial Services: The rendering of advice, recommendations, findings, and opinions by Appointed Actuaries to Companies in connection with these Rules.
23.	Actuarial Services Provider: A juristic person that provides Actuarial Services in accordance with these Rules, employing Qualified Actuaries who may be permitted to act as an Appointed Actuary in accordance with these s Rules
24.	Actuarial Association: An accepted association or organization by SAMA of Qualified and Associate Actuaries and Actuarial Candidates which is a member of the International Actuarial Association, admitting its members through a program of professional examinations.
25.	Insurance Contract Assets and Liabilities: For the purposes of these Rules, the assets and liabilities in accordance with applicable financial reporting standards in the Kingdom.
26.	Peer Review: Reviewing the work of an Appointed Actuary for the purposes of these Rules to ensure it complies with these Rules and the professional standards of the Actuarial Association of which the Appointed Actuary is a member.
27.	SAMA’s Instructions: Regulations, rules, instructions and circulars issued by SAMA.
28.	Senior Management: The Managing Director, Chief Executive Officer, General Manager, their deputies, Chief Financial Officer, Managers of key departments, officers of risk management, internal audit, and compliance functions, and similar positions in the financial institution, in addition to incumbents of any other positions determined by SAMA, excluding only for the purpose of these Rules, the Head of the Actuarial Function.
29.	Technical Price: The price for an insurance policy determined by the Appointed Actuary using the actuarial basis applicable at the time of issuing/ renewing the policy.

Scope

Article 3
These Rules apply to Companies, their Boards of Directors and Senior Management, Appointed Actuaries or those whom are entrusted to carry out the work on their behalf, Heads and staff of Actuarial Function and Actuarial Services Providers.

Objectives

Article 4

The objectives of these Rules are to regulate the following:

1.	Minimum standards for the licensing of Actuarial Services Providers.
2.	Minimum standards of actuarial work within the Kingdom.
3.	Minimum standards for the role and responsibilities of Appointed Actuaries, and procedures for their appointment.
4.	Minimum standards for the Actuarial Function of Insurance and/or Reinsurance companies within the Kingdom, and where relevant, the Head of Actuarial Function.
5.	Responsibilities of the Company, Board of Directors and Senior Management in respect of the Appointed Actuary and Actuarial Function’s work.

Compliance Measures

Article 5
In conjunction with the provisions of the Law and its Implementing Regulation, no Person shall act as an Appointed Actuary or Head of Actuarial Function or act as an Actuarial Services Provider in the Kingdom unless the Company or Actuarial Services Provider obtains SAMA’s prior statement of non-objection.

Article 6

1.	Companies, Appointed Actuaries and Actuarial Service Providers must establish appropriate written internal controls and procedures to ensure and monitor their compliance with these Rules.
2.	These internal controls and procedures should ensure that all required tasks are carried out and reports submitted to SAMA by prescribed deadlines.
3.	This does not replace the professional standards of the Appointed Actuary’s Actuarial Association.
4.	Companies, Appointed Actuaries and Actuarial Service Providers must maintain adequate records that demonstrate their compliance with these Rules.

Article 7
The records maintained by the Company to demonstrate compliance with these Rules, include but not limited to documents indicating the appointment or change of Appointed Actuaries and Heads of Actuarial Function, agreements with Appointed Actuaries clarifying their roles and responsibilities and details of qualifications and experience of Appointed Actuaries and Heads of Actuarial Function.

Licensing of Actuarial Services Providers

Article 8
An Actuarial Services Provider licensed in the Kingdom, must meet the requirements of SAMA’s Instructions before commencing activities subject to these Rules.

Article 9
If the Appointed Actuary is not licensed in the Kingdom, the Appointed Actuary has to be an employee, director or partner of an Actuarial Service Provider and the Company must provide required information to obtain SAMA’s statement of non-objection.

Article 10

All Appointed Actuaries who are not Company employees must, either;

1.	Be licensed as an Actuarial Service Provider under Article (8) of these Rules or be a partner, director or employee of an Actuarial Service Provider licensed under Article (8) of these Rules, or be licensed as Qualified Actuary in the Kingdom, or;
2.	Be licensed or permitted to provide services of an actuarial nature outside the Kingdom under Article (9) of these Rules.

Requirements and Procedures to Appoint and Terminate the Appointed Actuary and Minimum Requirements for the Actuarial Function within Companies

Article 11
The Appointed Actuary appointment requirements:
The Company shall, after obtaining SAMA`s statement of non-objection, appoint a Qualified Actuary to act as its Appointed Actuary who meets the requirements of these Rules and SAMA’s Instructions and has adequate experience in the types of business written by the Company, being at least a Fellow of an Actuarial Association with relevant post-qualification experience.

Article 12
A Company must take steps through its contract with its Appointed Actuary to ensure that the Company, its Board of Directors and Senior Management can consult the Appointed Actuary as needed on matters relating to his or her responsibilities in accordance with these Rules throughout the year.

Article 13
The Appointed Actuary shall not hold any position which may conflict with their role as Appointed Actuary, including a member on the Board of Directors, Senior Management or Chief Executive Officer in the Company or related Company or any other Insurance and/or Reinsurance Company in the Kingdom.

Article 14
Members of the Board of Directors and the Chief Executive Officer of the Company shall not act as the Appointed Actuary to the Company nor as a member of its Actuarial Function .

Article 15
Any non-Saudi Actuary works with a Company or Actuarial Service Provider in the Kingdom shall obtain SAMA’s statement of non-objection.

Article 16
Minimum Requirements of Actuarial Function within Companies:
The Company shall establish an Actuarial Function commensurate with the scale and complexity of its business, consisting of Actuaries and other individuals as prescribed in the Appendix (1) of Establishing the Actuarial Function within the Re/Insurance Company, to ensure compliance with SAMA's requirements in respect of Insurance Contract Assets and Liabilities, Technical Prices, monitoring the adequacy of premiums, experience studies, capital adequacy, Reinsurance and quantitative aspects of risk management, and to support actuarial works of the Company.

Article 17
The Company shall facilitate the Actuarial Function in fulfilling a significant role in a Company’s systems of financial management, risk management and internal control and take steps to ensure that the Actuarial Function is properly authorized and staffed commensurate with the sound operation of the Company and the safeguarding of the interests of its policyholders and Beneficiaries.

Article 18
For the purpose of implementing these Rules, the Appointed Actuary and Head of the Actuarial Function shall liaise with the Board of Directors, Senior Management and the Company’s internal and external auditors and direct the activities of the Actuarial Function, including providing oversight of the provision of training and professional development for the Actuarial Function.

Article 19
Procedure to Appoint and termination of an Appointed Actuary and/or Head of Actuarial Function:
Prior to seeking SAMA’s statement of non-objection to the appointment of the Appointed Actuary and Head of Actuarial Function, the Company’s Senior Management must satisfy itself that the proposed Appointed Actuary and Head of Actuarial Function are experienced in the lines of Insurance and or Reinsurance transacted by the Company, and are fit and proper and meet the requirements of SAMA’s Instructions, making a recommendation to the Board of Directors accordingly and providing SAMA with evidence that the requirements of SAMA’s Instructions are met.

Article 20
The contract between a Company and its Appointed Actuary must ensure that the Company has sufficient notice of any intention of the Appointed Actuary to terminate his or her contractual relationship with the Company through the use of an appropriate notice period in order to enable the Company to fulfil its obligations under these Rules.

Article 21
A Company must inform SAMA of any potential future change in its Appointed Actuary of which it becomes aware at least (60) calendar days ahead of such change taking effect.

Article 22
A Company shall certify to SAMA each year by a date to be set by SAMA’s Instructions that the Company have considered whether the Appointed Actuary remains a fit and proper person and has no conflicts of interest in order to hold the role of Appointed Actuary for the forthcoming calendar year.

Article 23
SAMA may require a Company to appoint an appropriately experienced Qualified Actuary who is not the Company’s Appointed Actuary or appoint an appropriately experienced Qualified Actuary directly to produce a report on specified matters on a case by case basis at the expense of the Company to which it relates.

Article 24

Termination of the Appointed Actuary:

1.	A Company must inform SAMA of any resignation, dismissal, cancellation or termination of its Appointed Actuary and the reasons for this within (5) calendar days of it taking effect.
2.	If the Appointed Actuary is an employee of the Company, the role of the Appointed Actuary at the Company shall end in any of the following cases:
	a.	Resignation or dismissal of the Appointed Actuary.
	b.	Cancellation or termination of the contract governing the employment the Appointed Actuary.
3.	If the Appointed Actuary is not an employee of the Company the role of the Appointed Actuary shall end in any of the following cases:
	a.	Resignation or dismissal of the Appointed Actuary by the Actuarial Services Provider in the Kingdom of which they are a partner, director or employee. In case of dismissal SAMA shall be notified of the reason(s) for the dismissal by the Actuarial Services Provider within (5) calendar days of it taking effect, and where the Actuarial Service Provider is outside the Kingdom, the Company must notify SAMA within (5) calendar days of it taking its effect.
	b.	Upon the expiry, cancellation or termination of the contract governing the provision of Actuarial Services.

Article 25
If SAMA finds that an Appointed Actuary is unfit or incapable of undertaking his or her responsibilities, SAMA may notify the Company to replace the Appointed Actuary with another competent Qualified Actuary, who can better fulfil the role of the Appointed Actuary. The role of the Appointed Actuary will end if SAMA notifies the Company to replace him or her.

Article 26
If a Company becomes aware that its Appointed Actuary wishes to resign from his or her position, the Company must commence the procedures to appoint a replacement immediately, and such procedures must reasonably take into account the time required by SAMA to issue or not as the case may be a statement of non-objection for the replacement Appointed Actuary, such that at no time is the Company without an Appointed Actuary.

Article 27
In case the Company fails to appoint a replacement Qualified Actuary to act as its Appointed Actuary, SAMA shall appoint an Appointed Actuary at the Company's expense if considered appropriate on a case by case basis.

Article 28
A Company must make appropriate provisions in its contract with its Appointed Actuary such that on prior to ceasing to hold the role of the Appointed Actuary, the former Appointed Actuary must provide all information and explanations as the successor Appointed Actuary, Senior Management and Board of Directors of the Company may reasonably require, at the Company’s expense, within no more than (30) calendar days of appointment of the successor Appointed Actuary.

Article 29
Following appointment of a replacement Appointed Actuary he or she shall obtain all required information and explanations from the Company and its previous Appointed Actuary, and the Company shall take all reasonable steps to facilitate the discharge of this responsibility within no more than (30) calendar days of appointment of the replacement Appointed Actuary.

Article 30
On termination or cessation of office as Appointed Actuary, the Appointed Actuary shall notify the Board of Directors and SAMA within (10) calendar days of whether there are any disagreements or matters associated with their termination or ceasing to hold office that, in their professional opinion, SAMA and the board should be aware of.

Article 31
The Company may inform the Actuarial Association of its Appointed Actuary of any observations on the proficiency of the Appointed Actuary.

Role and Responsibilities of the Appointed Actuary

Article 32
For the purpose of providing unbiased and objective advice in accordance with these Rules, the Appointed Actuary shall act in good faith, honestly and reasonably, exercise due care and diligence and independent judgement in the best interests of the Company and its policyholders, putting the interests of the Company and its policyholders ahead of any personal interests and avoiding conflicts of interest with the exercise of his or her responsibilities.

Article 33

The Appointed Actuary shall:

1.	Perform the work entrusted to them in accordance with actuarial principles and standards issued by the Actuarial Association of which they are a member and be accountable to that Actuarial Association as regards compliance with that Actuarial Association’s professional standards as well as to SAMA as regards compliance with these Rules and SAMA’s Instructions.
2.	Perform their duties with honesty, integrity and competence, avoiding conflicts of interest and providing unbiased and objective advice, and shall not conceal any facts relating to the Company's financial or technical position or knowingly provide incorrect information.
3.	Not disclose the Company's confidential information, or information obtained during the performance of his or her work while he or she is fulfilling his or her responsibilities or after its completion except that this disclosure is to SAMA, or an application of relevant regulations or SAMA’s Instructions.
4.	Review and take responsibility for all work carried out on their behalf.
5.	Keep records of their work subject to strict data confidentiality, organized according to their Actuarial Association’s professional standards. The records shall include the copies of the documents that must be provided to the Company and to SAMA, and the base data from which the documents have been derived and all supporting calculations.
6.	Where the Appointed Actuary is not an employee of the Company, the records referred to in Item )5( above must be held within the Company and retained by the Company for at least ten years within the Company after the date of the report to which the records or documentation relates, and must be accessible only to the Appointed Actuary and his or her delegates, the Company and SAMA.
7.	Perform Actuarial Services where competent and appropriately experienced to do so.
8.	Ensure consistency of their work with applicable financial reporting standards in the Kingdom.
9.	Advise on any other matters as instructed by the Board of Directors and Senior Management, provided that this does not conflict with his or her responsibilities as set out in these Rules and SAMA’s Instructions.

Article 34

In addition to the roles and responsibilities set out in these Rules, the Appointed Actuary of a Company authorized to transact Protection and Savings insurance business shall undertake the following:

1.	Perform a profit test of the adequacy of premium rates at the introduction of new products and whenever it is proposed that premium rates shall be revised, and advise on Technical Prices.
2.	Advise on the terms and conditions of insurance policies, including the fairness of expenses charged and investment returns allocated to policyholders.
3.	Determine and ensure the adequacy of insurance contract Assets and Liabilities including Mathematical Reserves, based on appropriate experience studies.
4.	Advise on the determination of the allocation of surplus, profits or bonuses to the with-profits Protection and Savings insurance policyholders.

Article 35
The Appointed Actuary shall have the right to access the board papers, accounting books and other records and documents, business plans, supporting analyses and schedules deemed necessary for the carrying out of their duties and be entitled to obtain from the Board of Directors and Senior Management of the Company the information and explanations the Appointed Actuary deems necessary, subject to appropriate controls to maintain the confidentiality of the Company’s information by the Appointed Actuary, and all those who assist the Appointed Actuary in the discharge of his or her responsibilities.

Role and Responsibilities of the Board of Directors and Senior Management as Regards the Appointed

Article 36

The Board of Directors and Senior Management of the Company must ensure that the responsibilities of the Appointed Actuary can be carried out without delay. This includes:

1.	Providing the Appointed Actuary with direct access to the Board of Directors and Senior Management and internal and external auditors of the Company.
2.	Providing the Appointed Actuary with access to such information and explanations as needed to comply with these Rules.
3.	Responding to requests for information from the Appointed Actuary in an accurate, comprehensive and timely manner.
4.	Considering and taking such actions as they consider appropriate based on the recommendations included in all reports provided by the Appointed Actuary.
5.	Ensure the effectiveness, adequacy and objectivity of the Appointed Actuary, for instance, ensuring the appropriate performance of his role, and the adequacy and effectiveness of the internal procedures and systems, technical program used, and human resources.

Article 37
If the Appointed Actuary is unable to obtain such information, explanations and resources from the Board of Directors and Senior Management as they reasonably require to carry out their responsibilities the Appointed Actuary shall report the matter to SAMA if appropriate action is not taken within (10) working days of reporting such matter to the Board of Directors in writing.

Reporting by the Appointed Actuary

Article 38
The Appointed Actuary must ensure that each actuarial report they produce in accordance with these Rules and SAMA’s Instructions is clear, comprehensive and presented by him or her in a manner which adequately explains and gives sufficient prominence to issues and developments which have material implications for the Company, or the interests of its policyholders or Beneficiaries, so that another Qualified Actuary can follow the report and come to a consistent conclusion.

Article 39

Each actuarial report produced in accordance with these Rules and SAMA’s Instructions should, as a minimum:

1.	Contain an executive summary setting out its results and key findings.
2.	Set out in an introduction the purpose of the report, the credentials of the Appointed Actuary, and a description of the subject business and the risks this gives rise to, relevant summary information on the Company’s system of risk management, and any other relevant background information in the judgement of the Appointed Actuary.
3.	Contain a clear statement that the report is made by an individual acting in a formal capacity as the Appointed Actuary.
4.	State the actuarial guidance and financial reporting standards that are being followed.
5.	Set out any reliances and limitations including commentary on materiality, areas of uncertainty and any restrictions that the Company or any other party has imposed that prevents full access to the information required, so that a suitably informed reader can form a view on the weight to be attached to the reported findings.
6.	Any reliance on an external source should be cited.
7.	Refer to the results of the previous report on the same subject matter explaining key differences from the results previously reported, including providing appropriate details of all key changes with regard to data, methodology, assumptions and results.
8.	Contain an explanation of the data received and checks performed on the data to check its veracity and comprehensiveness. Any data-specific limitations should be listed.
9.	Explain the approach and methodology adopted including an explanation of the choice of methodology and assumptions and an explanation of why these are considered appropriate, addressing both the subject matter of the report and its results, and any specific matters that have affected the approach to the analysis.
10.	Summarize and highlight any changes to the methodology and assumptions from the previous report, and the reasons for such changes should be fully explained to supplement the summary of changes provided at (7) above.
11.	Provide evidence of sufficient analysis and details of calculations (including Appendices) together with the calculations and other workings to enable a suitably informed reader to reproduce the analysis in order to check the results. These calculations should be consistent with current financial reporting standards in the Kingdom where applicable.
12.	Set out results and conclusions clearly and comprehensively including any required explanations and commentary.
13.	Explain the scope of the Peer Review process and the identity and credentials of the peer reviewer and their conclusions.
14.	Set out a glossary of terms used that may not be clear to the reader.
15.	Disclose any other relevant matters.

Article 40
The Appointed Actuary shall comply with the Peer Review requirements of their Actuarial Association in carrying out their responsibilities in accordance with these Rules and SAMA’s instructions, having satisfied themselves that the peer reviewer is independent of the subject matter to be reviewed and appropriately qualified and experienced.

Article 41

1.	The Appointed Actuary must take appropriate steps to effectively engage the Board of Directors and Senior Management in the findings of his or her reports, presenting and discussing findings directly with the Board of Directors and with the Audit and/or Risk Committee and, where relevant, the Company’s internal and external auditors.
2.	Communication between the Appointed Actuary and the Senior Management and Board of Directors on actuarial matters shall be timely and the method of communication must be appropriate, having regard to the purpose and significance of the subject matter.

Article 42
The Appointed Actuary must take reasonable steps to ensure that any report or communication with which he or she is associated is effective, not misleading and cannot reasonably be misinterpreted. The technical components of actuarial reports shall be presented in a manner that can be understood and acted upon by a suitably informed reader to support effective and informed decision-making by the Board of Directors and Senior Management.

Article 43

The Appointed Actuary shall report on an urgent basis (known as an Urgent Interim Report) directly to the Company’s Board of Directors and the Compliance Function in the Company in the following cases, notwithstanding that the Appointed Actuary may not have completed their analysis and investigations:

1.	If there are immediate or future threats facing the Company that may significantly adversely affect it, including but not limited to the following:
	a.	Solvency
	b.	Obligations of Reinsurance Companies and the Company's obligations to its Reinsurance Companies
	c.	Risk Retention levels
	d.	Profitability of the Company's products
	e.	Pricing of the Company's products
	f.	Adequacy of Insurance contract liabilities.
2.	If the Company has evidently breached the provisions of the Law and its Implementing Regulation or these Rules or SAMA’s Instructions about the Company’s financial position, Insurance Contract Assets and Liabilities (including where relevant Technical Provisions), or any matter that may affect the interests of the policyholders or the Beneficiaries of Insurance policies or future policyholders or future Beneficiaries of Insurance policies.
3.	If the Company does not allow the Appointed Actuary to perform the duties and responsibilities assigned to them under the Law and its Implementing Regulation, these Rules and SAMA’s Instructions.

Article 44
The Board of Directors shall examine any Urgent Interim Report and recommend and implement corrective actions, and forward such measures and all related information on actions taken and planned to the Appointed Actuary and SAMA no later than (10) working days of receiving any Urgent Interim Report.

Article 45
If the Appointed Actuary is not reasonably satisfied with the response of the Board of Directors to any Urgent Interim Report they shall send a copy of their report to SAMA within (15) working days of its issue.

Article 46
SAMA may provide observations and questions on any actuarial reports that are submitted by an Appointed Actuary and such actuarial reports must be resubmitted to address any such observations and questions raised by SAMA.

The Appointed Actuary’s Responsibilities in Respect of the Data

Article 47

1.	The Appointed Actuary must take all reasonable steps to ensure the consistency, accuracy and completeness of the data used in their analysis. All reports required by these Rules and SAMA’s instructions should contain, as a minimum, the following:
	a.	Confirmation that the available data allows the desired analysis to be completed in the Appointed Actuary’s professional judgement and with due regard to professional standards.
	b.	Disclosure of known material data limitations and their implications, and how allowance has been made for the data limitations in the results presented and analysis performed.
	c.	A full description of the data that was used.
	d.	A full description of all data validations carried out.
	e.	The precise period of investigation that the data is derived from must be stated.
	f.	Reasonableness checks against data in the most recent prior report should be described.
	g.	An explanation of any adjustments or filtering of the raw data, and the impact estimated.
2.	An Appointed Actuary’s report shall not include caveats that seek to place full reliance on others for data quality. The Appointed Actuary shall carry out sufficient checks to satisfy himself or herself as to the results of the report presented.
3.	Data limitations are to be remediated by the Company in full in the period in which they are identified. Where full remediation is not possible the timing for remediation is to be estimated by the Appointed Actuary and reported in the current report immediately following the identification of the data limitations, appropriate provision made to account for such data limitations in the subject report and progress reported in all future relevant reports until such data limitations are remediated and the provisions for data limitations are released.

Data Confidentiality

Article 48

Companies must establish a documented code of conduct, internal policies, procedures and controls and sufficient safeguards to ensure the confidentiality of all data within the scope of these Rules, whether in written, electronic, or other digital form, and to monitor and ensure compliance with that code of conduct and applicable data privacy or confidentiality obligations.

As a minimum, the code of conduct, internal policies, procedures and controls must address:

1.	The physical, electronic and cyber security of data:
	a.	Within the Company,
	b.	When data is being exchanged and reports transmitted to and from the Appointed Actuary, where the Appointed Actuary is not an employee of the Company,
	c.	Held by the Appointed Actuary, where the Appointed Actuary is not an employee of the Company, and
	d.	Reports being transmitted to SAMA.
2.	Whether data may be transmitted outside the Kingdom, and what additional safeguards are required if this is the case (such as encryption or requiring Actuarial Services to be carried out on the Company’s premises and using its information technology systems).
3.	Compliance with the Company’s code of conduct and the effectiveness of controls over the confidentiality of data within the scope of these Rules must be tested at least annually.

Article 49
The Company, the Appointed Actuary and the Actuarial Service Provider shall comply with all relevant data confidentiality and protection laws and regulations of the Kingdom.

The Appointed Actuary’s Role in Respect of Reserving

Article 50

Annually and for each reporting period as specified by SAMA the Appointed Actuary shall:

1.	Determine and recommend to the Board of Directors and Senior Management the Company's Insurance Contract Assets and Liabilities (including where relevant Technical Provisions), using appropriate methodologies and assumptions for their determination, consistent with current financial reporting standards applicable in the Kingdom.
2.	Perform actual versus expected analysis by comparing actual experience with previous relevant estimates of claims and other liabilities where relevant.
3.	Prepare the appropriate reports in accordance with SAMA instructions.
4.	In respect of Protection and Savings insurance business,:
	a.	Determine and ensure the adequacy of the Insurance Contract Assets and Liabilities (including where relevant) Mathematical Reserves).
	b.	Advise on the determination of the allocation of surplus, profits or bonuses to the policyholders.

The Appointed Actuary’s Role in Respect of Pricing and Pricing Adequacy

Article 51

The Appointed Actuary shall, as a minimum, in respect of every Company that is an Insurer:

1.	Investigate, advise and report to Senior Management, the Board of Directors and to SAMA in the form of a Pricing Report at least annually on the Technical Pricing of the risks in the insurance company’s Medical Expense, Motor and Protection and Savings products and such other classes of business as are required by SAMA’s instructions; and,
2.	In respect of Protection and Savings Insurance business:
	a.	Perform a profit test of the premium rates.
	b.	Review and advise on product development and design, including the terms and conditions of Insurance contracts and pricing, along with the estimation of the capital required to underwrite the products
3.	Report to Senior Management, the Board of Directors and to SAMA on the above in accordance with SAMA’s Instructions to be known as the Pricing Report/s and Pricing Adequacy Report/s and as per the Board of Directors’ and Senior Management’s instructions.

Article 52

1.	A Company and its Appointed Actuary should derive Technical Prices using the Company’s own experience where this information is available and reliable.
2.	In the absence of the Company’s own experience, for example when entering a new line of business, Technical Prices may be developed from other sources, but appropriate allowance should be made for any differences between the Company’s data and the source from which the information has been derived.

Article 53
The Appointed Actuary of an Insurance Company shall submit such periodic pricing adequacy reports, comparing actual selling prices for its Insurance contracts with the relevant Technical Prices, to SAMA, the Company’s Senior Management, Board of Directors, in respect of its Medical Expense and Motor classes of business, and such other classes of business as are required by SAMA’s Instructions.

Article 54
SAMA may require an Insurance Company to submit to SAMA a supplementary pricing report or pricing adequacy report from its Appointed Actuary in such form and at such timing as it prescribes on a case by case basis at the expense of the Insurance Company.

Article 55
SAMA may require a Reinsurance Company to submit to SAMA such information on the Technical Pricing of the risks it accepts and retains, as SAMA shall from time to time prescribe.

The Appointed Actuary’s Role in Assessing Solvency and Capital

Article 56

1.	The Appointed Actuary shall investigate and provide advice to the Company on its current solvency position and the adequacy of the capital that it holds by projecting the Company’s solvency position into the future under varying assumptions in order to assess its financial strength and identify the major risk factors affecting the Company.
2.	The Appointed Actuary shall investigate and provide advice to the Company on its prospective solvency position by conducting stress tests and scenario analysis under various assumptions and performing capital adequacy assessments, evaluating the relative impact of the output from such tests and analysis on the Company’s assets, liabilities, and actual and future capital levels and business plans, and shall investigate and advise on the development and use of models for these purposes. These investigations should be consistent with current financial reporting standards applicable in the Kingdom and take into consideration any of SAMA’s Instructions issued from time to time.
3.	The results of these investigations are to be reported to Senior Management, the Board of Directors and SAMA in a form and at dates as prescribed by SAMA.

The Appointed Actuary’s Role in Risk Management

Article 57

The Appointed Actuary shall:

1.	Coordinate with the Company’s risk management officers on estimating the impact of material risks and identifying appropriate mitigation techniques for those risks and provide input into SAMA’s risk management requirements.
2.	In respect of an Insurance Company, assess the appropriateness of Reinsurance arrangements and risk Retention levels for each line of business having regard to the Company’s risk appetite, making recommendations to Senior Management and the Board of Directors in a form and at dates as prescribed by SAMA.
3.	In respect of a Reinsurance Company, assess the appropriateness of Retrocession arrangements and risk Retention levels for each line of business having regard to the Company’s risk appetite, making recommendations to Senior Management and the Board of Directors in a form and at dates as prescribed by SAMA.
4.	Coordinate with the Investment Committee and investment manager to provide recommendations to the Company’s Senior Management and Board of Directors regarding the Company’s investment policy and asset liability management strategy, keeping in view the nature and timing of Insurance Contract Assets and Liabilities and the availability of appropriate assets in a form and at dates as prescribed by SAMA.

Article 58

1.	The Appointed Actuary of an Insurance Company shall submit a Reinsurance report to the Company’s Senior Management, Board of Directors and SAMA. The report shall be submitted in a form and at dates to be prescribed by SAMA’s instructions
2.	This report shall assess the appropriateness of Reinsurance arrangements and risk Retention levels for each line of business having regard to the Company’s risk appetite, capital adequacy and the total exposure currently underwritten and expected to be underwritten in the following financial year and provide observations on risk Retention levels, considering:
	a.	Profit sharing mechanisms or variable commissions.
	b.	Loss sharing mechanisms.
	c.	Any caps on the Reinsurance Companies’ total exposure under Reinsurance treaties.
	d.	Any caps on the Reinsurance Companies’ exposure to single events, incidents or claims.
	e.	Any swing rates where Reinsurance premiums are adjusted based on the results of the Reinsurance.
	f.	The possible impacts of reinstatements or aggregate deductibles on excess of loss treaties.
	g.	How Reinsurance arrangements are expected to operate under stress scenarios.
3.	The Appointed Actuary shall review and comment on the effectiveness of the Company’s procedures to assess whether or not any Reinsurance contracts transfer significant Insurance risk to the Reinsurance Company, particularly in conjunction with any side letters or other arrangements, and report accordingly.

Article 59

1.	The Appointed Actuary of a Company that is a Reinsurance Company may be required to submit a Retrocession report to the Company’s Senior Management, Board of Directors and SAMA in a form and at dates to be specified by SAMA covering as a minimum the appropriateness of Retrocession arrangements and risk retention levels for each line of business having regard to the Company’s risk appetite, capital adequacy and the total exposure currently underwritten and expected to be underwritten in the following financial year and providing observations on the Reinsurance Company’s risk Retention levels.
2.	The Appointed Actuary shall review and comment on the effectiveness of the Company’s procedures to assess whether or not any Reinsurance contracts issued or Retrocession arrangements entered into transfer significant Insurance risk, particularly in conjunction with any side letters or other arrangements, and report accordingly.

Article 60

1.	The Appointed Actuary of a Company shall submit an investment and asset liability management report to the Company’s Senior Management, Board of Directors and SAMA in a form and at dates to be prescribed by SAMA.
2.	This report shall assess the suitability of the Company’s investment policy and asset liability management strategy, having regard to the total exposure currently underwritten and expected to be underwritten in the following financial year, addressing the nature and timing of Insurance Contract Assets and Liabilities and the availability of appropriate assets, coordinating with the Investment Committee and investment manager for the purposes of its production.

The Appointed Actuary’s Role in Performing Experience Studies

Article 61
The Appointed Actuary shall carry out such experience studies as are prescribed by SAMA’s Instructions addressing, as a minimum, expense analysis and, for Companies transacting Protection and Savings Insurance, persistency, mortality experience and, where relevant, morbidity experience, reporting to SAMA in accordance with SAMA’s Instructions.

Article 62

The Appointed Actuary should report on expenses, drawing on experience to date and leading professional practice such as activitybased cost analysis, sufficient to support the assumptions and related Insurance Contract Assets and Liabilities in accordance with financial reporting standards applicable in the Kingdom which may, for example, include:

1.	Premium deficiency analysis for all general Insurance products and short term Protection and Savings insurance.
2.	Analysis of unallocated loss adjustment expenses.
3.	Renewal expense assumptions.
4.	Insurance acquisition cash flows.
5.	Any provisions for expense overruns for Protection and Savings business. Such provisions may only be adopted for the first three years’ valuations after the Company commences writing Protection and Savings business except with prior statement of nonobjection from SAMA.

Article 63
The Appointed Actuary should analyze and report on the persistency rates of all long-term Protection and Savings products, analyzing the persistency and lapse experience of each separate distinct product type as compared with the assumptions previously made, in a form and at a frequency to be determined by way of SAMA’s Instructions.

Article 64
The Appointed Actuary should analyze and report on the mortality experience for all Protection and Savings products, analyzing the mortality experience of each separate distinct product type as compared with the assumptions previously made, in a form and at a frequency to be determined by way of SAMA’s Instructions.

Article 65
The Appointed Actuary should analyse and report on the morbidity experience for all Protection and Savings products where benefits, including waivers of premium, are determined based on morbidity experience, analysing the morbidity experience of each separate distinct product type as compared with the assumptions previously made, in a form and at a frequency to be determined by way of SAMA’s Instructions.

Non-Compliance

Article 66
Non-compliance with the requirements set forth in these Rules will be deemed a breach of the Law and its Implementing Regulation and licensing conditions or SAMA’s statement of non-objection and may subject Companies and/or Appointed Actuaries or Actuarial Services Providers to regulatory actions.

Article 67
In the case of non-compliance by the Appointed Actuary with the requirements set forth in the Law and its Implementing Regulation, these Rules, or the Actuarial Association’s professional code of conduct and technical standards of practice, the Company shall inform its Board of Directors and SAMA in this regard within 24 hours of becoming aware of the non-compliance, and provide SAMA with the details of actions taken within (10) working days from the date of discovering the violation.

Closing Provisions

Article 68
Any disputes or conflicts arising in respect of the contract between the Company and the Appointed Actuary or the Actuarial Service Provider, or in respect of the implementation of these Rules, are to be subject to the Laws and regulations of the Kingdom.

Appendix (1)

Provision No.	Instructions of Establishing the Actuarial Function within the Re/Insurance Company
Taking into consideration Article (16) of the Actuarial Work Rules for Insurance and/or Reinsurance Companies, the Company shall establish an Actuarial Function commensurate with the scale and complexity of its business, within six months of the issuance the Rules, taking into account all of the following:
1	The actuarial function shall constitute of at least three (3) Saudi Actuaries within one year of the issuance of the Rules .
2	The Company shall appoint internal Qualified Actuary within two years of the date of issuance of the Rules.
3	The Company must appoint an internal Qualified Actuary who is Saudi within seven years of the issuance of the Rules.
4	The Actuarial Function shall be headed by a sufficiently experienced natural person employed by the Company to fulfil the role of Head of the Actuarial Function after obtaining SAMA’s statement of nonobjection.
5	The head of the Actuarial Function shall comply with minimum standards prescribed by SAMA.
6	The Head of the Actuarial Function shall report directly to the Chief Executive Officer of the Company.
7	The company must update its code of governance to reflect the role and responsibilities of the Actuarial Function.
8	The Board of Directors and Senior Management of the Company must provide the Actuarial Function with sufficient resources commensurate with the scale and complexity of the Company’s business, including sufficient human resources as well as access to information technology and other appropriate systems, training and professional development.
9	The Company shall issue a training and development policy for professional actuarial certifications, to ensure that Saudi Actuarial Candidates obtain the fellowship of an Actuarial Association within a reasonable period, and submit the policy to SAMA within six months of the issuance of these Rules.
10	The Company shall provide SAMA with an annual report on the Actuarial Function that includes as a minimum the followings:
	a.	The training and development policy referred to in Provision (9) above indicating what has been applied within the giving period.
	b.	Number of Actuaries and their experiences according to the classification of these Rules.
	c.	Expansion plan of the Actuarial Function in regard to employment for the next 5 years taking in consideration the scale and complexity of actuarial work of the Company.
	d.	Number of actuarial examinations taken and percentage of passes.
	e.	Knowledge transfer activities conducted by the Appointed Actuary within the given period.

Insurance Intermediaries Regulation

Part 1: Introduction

Purpose:

1-	This regulation presents the general principles and minimum standards that should be met by insurance agents and (re)insurance brokers when dealing with insurance companies and their existing and potential clients.
2-	The objective of this regulation is to promote appropriate standards in the business of insurance services provision.
3-	This regulation must be read in conjunction with the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations, as well as Saudi Central Bank’s Market Code of Conduct and any other regulation issued by Saudi Central Bank.

Definitions

4-	The term “Intermediaries” in this Regulation is intended to include insurance agents and (re)insurance brokers.
	An Insurance agent is defined as a juristic entity that for compensation represents the insurance company to solicit, procure and negotiate insurance contract.
	An Insurance broker is defined as a juristic entity that for compensation negotiates with the insurance company in order to conduct insurance services for policyholders.
	A Reinsurance broker is defined as a juristic entity that negotiates contracts of reinsurance between an insurance company and a reinsurance company on behalf of the insurance company, receiving commission for placement and other services rendered from the reinsurance company.
	The term “Clients” is defined as the existing and potential recipients who request or acquire an insurance product or service.
	The rest of terms which are not mentioned above and used in this regulation shall have the same meaning as per article one of the Implementing Regulations.

Compliance Measures:

5-	Intermediaries must establish appropriate internal controls and procedures to ensure and monitor compliance with this regulation, including controls and procedures of their contracts with insurance companies, with other insurance service providers and with Clients.
6-	Intermediaries must maintain adequate records to demonstrate compliance with this regulation, including, but not limited to, compliance reports, policy records, claims records and complaints records.

Non-Compliance:

Non-compliance with the conditions and requirements set forth in this regulation will be deemed a breach of the Law on Supervision of Cooperative Insurance Companies and its Implementing Regulations and licensing conditions and may subject Intermediaries to enforcement action.

Part 2: Rules of professional conduct.

8-	Intermediaries shall comply with the rules of professional conduct by fulfilling the following requirements:
	a)	Act in an honest, transparent and fair manner, and fulfill all of their obligations towards Clients and insurance and reinsurance companies, as stipulated by Saudi Arabian laws and regulations. Where these obligations have not been fully codified, intermediaries should abide by internationally accepted best practices.
	b)	Act within reasonable competence when dealing with Clients and insurance and reinsurance companies. For this purpose, competence shall be acquired through training, experience, and consulting with experts when needed.
	c)	Keep the employees’ skills and knowledge about the insurance business up-to-date and be informed of the products and services available on the market.
	d)	Take reasonable care in maintaining adequate managerial, financial, operational, and human resources to carry out their business and serve Clients.
	e)	Communicate all relevant information including coverage details, conditions, exceptions and restrictions of the insurance policy to Clients in a timely manner, and ensure that Clients are aware of the commitment they are about to make to enable them to make a suitable decision.
	f)	Take reasonable measures to ensure the accuracy and clarity of the information provided to and from Clients and make such information available in writing.
	g)	Treat all data and information acquired about the insurance company and Clients with utmost confidentiality, and take appropriate measures to maintain the secrecy of confidential documents in their possession. This means that the data:
	-	Must be obtained and used only for specified and lawful purposes.
	-	Must be kept secure and up-to-date.
	-	Must commit to provide data about insurance coverage to Clients upon their written request.
	-	Must not be disclosed to any third party without prior authorization from Saudi Central Bank, with the exception of the companies’ external auditors.
	h)	Must not motivate Clients to revoke a valid insurance policy, and must not motivate Clients to refuse a quotation given by a competitor using false or unfair evaluation in order to merely increase commissions.
	i)	Ensure that Clients fully understand the services provided by the Intermediaries and the nature of the relationship between both parties.
	j)	Notify the insurance company of any information or documents related to Clients which might affect the decision of the insurance company to provide the coverage and at which rates and conditions.
	k)	Immediately notify Clients about the acceptance or rejection of the coverage by the insurance company.
	l)	Explain to Clients the mechanism of paying the insurance premiums and any other additional proceeds the insurance company is entitled to.
9-	In addition to the general rules, brokers shall comply with the following:
	a)	Take reasonable measures to identify and address conflict of interest to ensure fair treatment to all Clients. Where conflict of interest arises, brokers must not unfairly place their interests above those of their clients.
	b)	Present to each client a comparison between the prices and coverage of insurance policies tailored to the client’s needs and offered by different insurance companies, then recommend an insurance policy and explain to the client the reason for choosing it and the conditions, benefits, and exclusions it includes.
	c)	Do not favor companies they are associated with.
	d)	Do not choose or recommend insurance coverage from an insurance company based on the commissions granted to the broker.

Part 3: Requirements for Opening Branches

10-	Brokers shall not have more than one branch in each province in the Kingdom, and shall not exceed a total of five branches within the Kingdom.
11-	Agents shall have a maximum of five branches when their capital is of SR 500,000. Agents must increase their capital by SR 100,000 for every additional branch.
12-	Agents must obtain the approval of the represented insurance company for their branch expansion plan. Insurance companies, in turn, must regularly oversee and review the operations of these branches, and are held accountable in case of the agent’s non-compliance with the professional standards, requirements and criteria set forth in this regulation.
13-	In addition, Intermediaries looking to open new branches must meet the following requirements:
	a)	Obtain Saudi Central Bank’s approval for the location of the new branch.
	b)	Provide Saudi Central Bank with a list of addresses of all branches to be opened, the names of the employees that will work at these branches, their qualifications, and experience.
	c)	Provide Saudi Central Bank with the objectives and reasons behind opening the new branch.
	d)	Complete all regulatory licenses, records, and certifications required to open a new branch, e.g., license from the municipality, the Civil Defense, the Ministry of Commerce and Industry and any other licenses required.
	e)	Meet the Saudization requirements, stipulated in the Implementing Regulations, in each branch.
	f)	Have an information system at the branch that is connected to the intermediary’s IT system.
	g)	Have internal control measures to oversee the operations of each branch.
	h)	Have an adequate and secure system to retain money at the branch.
	i)	Have a system to document and maintain data related to the insurance policies underwritten by the branch, e.g., policyholders’ names, addresses, as well as, insurance policies’ dates, durations, premium rates and conditions.
	j)	Ensure that branch employees possess adequate qualifications to deal with, combat, and report financial crimes.
	k)	Ensure that the branch customer service employees apply the required customer due diligence in knowing their clients.

Part 4: Requirements for Bancassurance activities

14-

Bancassurance activities must be conducted through licensed insurance agents, i.e., Bancassurance agents, which are subject to all applicable regulations thereof.

15-	The Bancassurance agency and the bank must sign a distribution agreement. Prior approval on the distribution agreements must be obtained from Saudi Central Bank. The agreement must include but is not limited to:
	a)	Insurance products to be marketed.
	b)	Allocation of expenses to the agency.
	c)	Trainings of bank staff.
	d)	Cash collection procedures.
16-	The Bancassurance agency should submit a request to Saudi Central Bank for obtaining an approval on its insurance products that will be sold in Banks.
17-	The bancassurance agency must obtain Saudi Central Bank’s approval before introducing an approved insurance product to any new bank branch.
18-	Insurance products must be sold and marketed independently from banking products, as such:
	a)	Insurance products must not be marketed or sold by staff involved in selling or marketing banking products.
	b)	Insurance products must not be bundled with banking products for marketing and selling purposes.
19-	All bank staff involved in selling insurance products must pass the Insurance Foundation Certificate Exam.
20-	The Bancassurance agency must submit to Saudi Central Bank, on a yearly basis, a training plan for the Bank’s staff involved in selling insurance products. The plan should cover as a minimum the following:
	a)	Selling techniques trainings.
	b)	Product specific trainings.
	c)	Anti-money laundering and combating terrorism finance.
	d)	Applicable laws and regulations.
21-	The Bancassurance agency must appoint a Bancassurance supervisor. The roles and responsibilities of the supervisor should include as a minimum:
	a)	Supervise Bancassurance sales activities in bank branches by conducting regular visits to branches.
	b)	Conduct ongoing trainings to bank staff on insurance products and sales.
	c)	Put in place all the proper controls, and validation to ensure delivery of insurance products in an honest, transparent and fair manner.
22-	The bancassurance agency is fully responsible to:
	a)	Ensure compliance with controls, policies and procedures in bank branches in order to sell insurance products in an honest, transparent, and fair manner.
	b)	Ensure that the insurance company’s copy of client records is delivered securely and in a timely manner
	c)	Prepare and review monitoring reports for the bancassurance activities.
	d)	Follow up on cash collection.

Part 5: Requirements for Dealing With Insurance and Reinsurance Companies.

Section A: General Requirements

Documentation:

23-	Intermediaries shall document in books and records all data, information and documents related to the business they conduct with (re)insurance companies and policyholders including the following:
	a)	Name and address of the represented party:
	-	Insurance company in the case of an agent and reinsurance broker.
	-	Client in the case of a broker.
	b)	A copy of the agreement executed with the represented party:
	-	Agency agreement in the case of an agent.
	-	Broker client agreement in the case of a broker.
	c)	Copy of Clients’ insurance policies.
	d)	Business related memorandums and correspondences.
	e)	Insurance proposal forms received on behalf of insurance companies.
	f)	Clients names as well as the date of issuance of the insurance policy and the collection of premiums.
	g)	Book keeping related to premiums received or claims paid or any other financial transaction related to the insurance business.
	h)	Bank accounts related to the insurance business.
24-	Intermediaries shall keep the books and records for a period of no less than ten years from the date of termination or end of the concerned insurance policy.

Premium Collection and Segregation of Accounts:

25-	Insurance companies are considered to have received the premiums once the premiums are received by their agents.
26-	Intermediaries must ensure the security of clients’ assets held on their behalf. Any premiums collected by Intermediaries must be either placed in a separate bank account (the premium account) that has been established for that purpose, or passed directly to the insurance company. Cash payments must generate a receipt to the client and must go immediately into the premium account.
27-	Intermediaries must not treat the premiums account as their own in any sense; in particular, as security for any loan.
28-	Intermediaries shall remit all the premiums collected from insurance contracts concluded on behalf of the insurance company, to the insurance company's account in a period not exceeding 7 working days from the date of collection from Clients, as well as, providing the insurance company with a detailed report of these premiums.
29-	The intermediary is responsible to carry out all necessary efforts to collect premiums from policyholders. In case the policyholder fails to pay, the intermediary must immediately notify the insurance company.

Agreements Between Intermediaries and Insurance Companies:

30-	The agency or brokerage agreement concluded between the intermediary and the insurance company shall determine the rights and obligations of each of them, including the following:
	a)	Type and classes of insurance in which the intermediary is allowed to practice the insurance business.
	b)	Duration of the agreement and possible causes of termination.
	c)	Means for calculating the commission of Intermediaries for the service provided.
	d)	The limit per insurance policy that the agent is allowed to sell.
	e)	The standards to be followed and complied with by the intermediary.
	f)	The rights of the insurance company to review the intermediary’s books and records related to its accounts.

Section B: Requirements for agents

Obligations of an Agent Towards the Represented Insurance Company:

31-	Agents shall:
	a)	Note on all official papers, correspondences and documents their license number, as well as the name of the represented insurance company.
	b)	Comply with the insurance policy limits that they are authorized to sell as set in the contract binding the agent to the represented insurance company.
	c)	Not represent more than one insurance company without obtaining the prior approval of Saudi Central Bank.
	d)	Provide to the insurance company their compliance and internal control manuals if requested to do so.
	e)	Obtain the approval of Saudi Central Bank for any changes occurring on the agency agreement with the represented insurance company.
32-	Agents must request Saudi Central Bank’s prior approval to terminate the agency agreement with a represented insurance company and sign a new agency agreement to represent another insurance company. To request such approval, agents must provide Saudi Central Bank with:
	a)	Reasons for terminating the agency agreement with the current insurance company.
	b)	Insurance company that the agent plans to sign an agreement with and a draft of the agency agreement.
	c)	Commissions rates to be received from the insurance company.
33-	After obtaining Saudi Central Bank’s approval to terminate the agency agreement, the agent shall:
	a)	Sign a financial settlement of accounts with the current insurance company.
	b)	Inform the public of ceasing the agreement through announcements in local newspapers.
	c)	Stop selling insurance products for a transitory period of 60 days and take all necessary measures to terminate the association with the insurance company, including: removing the company’s signboards from its branches, delivering sales registers, and names of users and passwords of electronic systems related to the company and settle all pending financial matters between both parties.

Section C: Requirements for Brokers

Obligations of a Broker Towards the Insurance Company:

34-	Brokers shall:
	a)	Note their license number on all papers, correspondences and documents.
	b)	Provide the insurance company with information that enables it to assess the risk to be insured or renew its insurance with the knowledge and approval of Clients.
	c)	Be knowledgeable about insurance markets, insurance law and prevailing regulations, and follow-up on the developments occurring therein.
	d)	Provide assistance in negotiations between the insurance company and Clients concerning claims arising from the risk insured.
	h)	Obtain written approval from Saudi Central Bank prior to placing risks with foreign insurance companies to cover risks that cannot be covered through a licensed company in the Kingdom.

Part 6: Requirements for Dealing With Policyholders.

Section A : Pre-Sale Client Contact

Advertising:

35-	Intermediaries shall:
	a)	Ensure that advertisements are not misleading, over-stated or offensive.
	b)	Ensure in the case of an insurance broker that advertisements are not restricted to the policies of one insurance company.
	c)	Ensure that advertisements neither contain anything which is in breach of the law nor omit anything which the law requires.
	d)	Ensure that advertisements do not abuse the trust of Clients or exploit their lack of experience or knowledge.
	e)	Proper written approval should be obtained from the relevant insurance company if the advertisement has any reference to that insurance company.

Advice:

36-	Intermediaries shall provide advice on the matters within their field of expertise and seek or recommend specialists if necessary.
37-	Insurance brokers shall provide advice, technical consultation and the most suitable policy conditions and prices for Clients by contacting a number of insurance companies.

Client Service:
38- Intermediaries shall:

a) Understand the terms and conditions of all policies offered to Clients.

b) Understand Clients’ profile, coverage needs, and appetite for risk.

Legal Requirements:

39-	Intermediaries shall ensure that any documents issued comply with all statutory and regulatory requirements.
40-	Brokers shall obtain a written approval to represent Clients with the (re)insurance company.

Documentation:

41-	Intermediaries shall:
	a)	Ensure that all written terms and conditions are fair in substance and that the Clients' rights and responsibilities are set out, clearly and in plain and understandable language.
	b)	Send policy documentation to Clients without avoidable delay.
	c)	Send a written advice along with the policy documentation stressing on the importance of reading it carefully.
	d)	Ensure that instruction letters, policies and renewal documents contain details of complaints handling procedures.

Reinsurance:

42-	Reinsurance brokers shall:
	a)	Maintain proper records of the insurance company's business to be used by reinsurance companies.
	b)	Render advice based on knowledge of the reinsurance coverage available in the reinsurance markets.
	c)	Maintain a database with the ratings of (re)insurance companies.
	d)	Select and recommend a (re)insurance company or a group of (re)insurance companies.
	e)	Assist in the update of (re)insurance contracts.
	f)	Exercise due care and diligence with the selection of (re)insurance companies taking into consideration their respective ratings.

Section B: Sale of Insurance Products and Services

Sales Practices:

43-	Intermediaries shall:
	a)	Ensure Clients understand the type of service being offered.
	b)	Ensure that the policy proposed is suitable for the Clients’ needs.
	c)	Provide Clients with comparisons in terms of price, coverage and services offered when choice among several products is available.
	d)	Notify Clients promptly if unable to obtain the requested insurance.
	e)	State the period for which the quotation remains valid if the proposed contract is not entered into immediately.
	f)	Explain to Clients their obligation to notify claims promptly and to disclose all material facts relevant to the coverage.

Information Furnishing:

44-	Intermediaries shall:
	a)	Request Clients to make true, fair and complete disclosure and ensure that the consequences of non-disclosure of information and inaccuracies are pointed out to clients.
	b)	Avoid influencing and pressuring Clients and make it clear that all the answers or statements given are his/ her own responsibility.
	c)	Require Clients to carefully check the information given in the documents.
	d)	Explain to Clients the importance of disclosing all subsequent changes that might affect the coverage throughout the duration of the policy.
	e)	Disclose on behalf of Clients all material facts within their knowledge and give a fair presentation of the risk profile of Clients to the insurance company.

Contract Explanation:

45-	Intermediaries shall:
	a)	Explain all the essential provisions of the coverage provided by the policy to Clients.
	b)	Quote terms exactly as provided by the insurance company.
	c)	Draw attention to any warranty imposed under the policy, major or unusual restrictions, exclusions, and explain how the contract may be cancelled.
	d)	Provide a list of insurance companies participating in the coverage and advice of any subsequent changes thereafter. (Applicable for brokers only)

Remuneration:

46-	Intermediaries must obtain Saudi Central Bank’s approval to receive a commission rate that exceeds the rates specified in Appendix A (Maximum Commission Rates Permitted) of this regulation.
47-	Intermediaries shall:
	a)	Disclose to Clients the amount of proceeds and commissions they are receiving for the policy being contracted by Clients.
	b)	Inform Clients in writing of any additional fees or charges for any related services.
48-	(Re)insurance brokers who have established a business relationship with an insurance company and have identified potential clients are entitled to receive their commission proportionally to the paid premiums once the contract is entered into. Any attempt by the insurance company to bypass the broker and deal with the client directly is considered an act of unauthorized disintermediation and is strictly prohibited. Such act should be reported to Saudi Central Bank directly with supporting evidence.

Section C: Post-Sale Client Servicing

Data Confidentiality:

49-	Intermediaries shall:
	a)	Ensure that Clients data and confidential documents are stored safely with restricted access.
	b)	Ensure that Clients data is transferred only to relevant stakeholders (e.g., insurance companies, Intermediaries’ auditors).

Client Notification:

50-	Intermediaries shall:
	a)	Promptly notify Clients, using a written confirmation that the insurance contract has been entered into.
	b)	Notify Clients with the changes made to the terms and conditions of an insurance contract and give reasonable notice before any change takes effect.
	c)	Inform Clients of any termination of coverage or potential problems within the duration of policy coverage.

Policy Renewal:

51-	Intermediaries shall:
	a)	Ensure that renewal notices include Clients’ duties to disclose changes affecting the policy, which have occurred since the policy inception or the last renewal date.
	b)	Ensure that renewal notices contain a requirement for keeping records, including copies of letters, of all information supplied to the insurance company for the purpose of renewal of the contract.
	c)	Ensure that Clients are aware of the expiry date of the insurance contract even if no further coverage is granted.
	d)	Ensure that Clients receive insurance company's renewal invitations well in time before the expiry date.

Claims Handling:

52-	Intermediaries are not allowed to approve and settle claims but shall:
	a)	Respond to claims filing in a prompt manner.
	b)	Provide claims forms showing all the information or steps required by Clients to file a claim.
	c)	Provide adequate guidance to Clients in filing the claim and information on the claims handling process.
	d)	Acknowledge to Clients the receipt of the claim and any missing information and documents within seven (7) calendar days from the reception of the claim application form.
	e)	Inform Clients of the progress of filed claims, at least every fifteen (15) working days.
	f)	Notify Clients in writing of the claim acceptance or refusal.
	g)	Explain the complaints and disputes process if the settlement is not accepted by Clients.
53-	Intermediaries must transfer claims amounts to policyholders within a period of 3 working days from the date of receipt from insurance companies.

Client Complaints:

54-	Intermediaries shall:
	a)	Accept complaints either by phone or in writing (e.g., letters, emails, and fax).
	b)	Explain the procedures to be followed when filing a complaint.
	c)	Provide Clients with the contact reference to follow up on the filed complaint.
	d)	Inform Clients on the progress of the filed complaint.
	e)	Respond to policyholder’s complaints within fifteen 15 calendar days from the reception of correspondence.
	f)	Have in place an electronic system for recording and monitoring complaints.

Financial Reporting:
55- Intermediaries shall complete and submit the set of intermediaries’ financial reporting forms to Saudi Central Bank according to the financial reporting forms guidelines.

Appendix A: Maximum Commission Rates Permitted

Classes of Business	Commission Rate
Accident & Liability Insurance	15%
Personal Accident	15%
Work Related	15%
Employer's Liability	15%
Third Party Liability	15%
General Liability	15%
Product Liability	15%
Medical Liability	15%
Professional Liability	15%
Theft & Burglary	15%
Fidelity	15%
Safe Burglary	15%
Any Other Liability	15%
Motor Insurance - Compulsory	2%*
Motor Insurance - Compulsory + Others	15%
Property Insurance	15%
Fire Insurance	15%
Marine Insurance - Hull	15%
Marine Insurance - Cargo	15%
Aviation Insurance	15%
Energy Insurance	15%
Engineering Insurance	15%
Other General Insurance Classes	15%
Health Insurance - Compulsory	8%
Health Insurance - Compulsory + Other	10%
Protection Insurance	15%
Protection & Savings Insurance	15%
Other Protection & Savings Insurance	15%

FATCA Updated Instructions on TIN
This circular is currently available only in Arabic, please click here to read the Arabic version.

IFCE update
This section is currently available only in Arabic, please click here to read the Arabic version.

Follow Up Motor Insurance Pricing and Underwriting Instructions 2018
This section is currently available only in Arabic, please click here to read the Arabic version.

Motor Insurance – Pricing & Underwriting Instructions 2018
This section is currently available only in Arabic, please click here to read the Arabic version.

Quarterly Reserves

Based on Article (11) of the Law on Supervision of Cooperative Insurance Companies, which grants SAMA the right to require insurance and/or reinsurance companies to provide it with any information its sees necessary to realize the objective of the law.
SAMA requires each insurance and/or reinsurance company to submit, going forward, the results of its quarterly reserving exercise in the attached format ("reserving template”) in order to assess the adequacy of technical reserves held by insurance and/or reinsurance companies in quarterly financial statements. The reserving template must be submitted for every quarter, except for Q4 when a separate detailed template will be required.
Below is the submission schedule for the above information:
	-	Q1 reserving template will be due by 30^th April.
	-	Q2 reserving template will be due by 31^st July (for year 2018. this is extended to 30^th Aug).
	-	Q3 reserving template will be due by 31^st October.
SAMA requires strict adherence to the instructions contained within the reserving template.
SAMA may update the above reserving template from time to time, in which case a revised template will be shared in advance of the due date.

Medical Expenses Insurance, Pricing Adequacy Report 2017

With reference to SAMA Circular "Medical Expenses Insurance - Actuarial Pricing 2017", dated 14 Aug 2017, SAMA requires all insurance companies writing Medical Expenses Insurance business to submit a 'Pricing Adequacy Report', as mentioned in Clause 3 ("Discretionary Reductions in Premium for specific quotations") of the above circular.
At a minimum, the report should meet the following requirements:
	•	The analysis should cover all policies issued/renewed during the year 2017 with the policy effective date in 2017.
	•	Companies must provide the Appointed Actuary with all data or other information required by the Actuary in order to produce the report. Data must be provided in the format required by the Actuary.
	•	Any deficiencies in the data used for the analysis should be clearly mentioned in the report.
	•	It is expected that each insurance company will be able to carry out this analysis at a level of granularity aligned with the Appointed Actuary's pricing analysis. For the purpose of this report though, it is also acceptable to produce the results of the above analysis at an aggregate level aligned with the segments used by the Appointed Actuary for Claims Reserving.
	•	For each segment analysed, the report should mention the 'selling price' and the 'technical price' at an aggregate level for that segment, where 'technical price' is defined as the price determined using the actuarial basis applicable at the time of issuing/renewing the policy. Both prices should include the same components, i.e. risk premium, commissions, expenses, profit margin, etc. in order to avoid any distortions to the comparison made.
	•	Assumptions (if any) used in the above analysis should be clearly mentioned in the report, along with their justification.
	•	The report should be signed jointly by the Chief Underwriting Officer (or equivalent) and the Appointed Actuary.
SAMA expects that the above report, excluding any appendices, will not exceed five pages. The Excel template attached as Appendix 1 should be submitted along with the report.
The above report and Excel template should be submitted to SAMA by 25^th January 2018.

Principles to be Applied to the Regulation of Branches of Foreign Insurance Companies Established in Saudi Arabia

This working document sets out the approach that will be applied to the regulation of branches of foreign insurance companies wishing to operate in Saudi Arabia. The overall approach that will be taken is that there should be a level playing field, between branches of foreign insurance companies and locally incorporated public joint stock companies. Saudi Central Bank is requesting from interested foreign insurance companies who are seeking to operate as a branch in Saudi Arabia a written response/comments to this consultation document within 60 days of its publication on its website. The written response should be sent to Saudi Central Bank and should be addressed to: Mr. Mohammad Al Shayea, Director of Banking Inspections, Insurance, and Financial Leasing.
1.	New regulations that will amend the Implementing Regulations will be prepared. The new regulations and Saudi Central Bank circulars will have the effect of implementing the approach that Saudi Arabia will apply to branches of foreign insurance companies that is set out in this document and will cover the full details of the regulatory regime that will apply.
2.	Saudi Central Bank will assess whether an applicant that is a foreign insurance company will as a whole satisfy, and continue to satisfy, the conditions for authorization. Saudi Central Bank will assess the circumstances of the company as a whole and not just those of any proposed branch in Saudi Arabia. In making its assessment, Saudi Central Bank will take into account all relevant matters, including the nature and extent of the regulation and supervision to which the applicant is subject in its home country and whether the company as a whole meets Saudi Central Bank solvency requirements. Saudi Central Bank will seek to liaise with any home country supervisory authority and will take into account any information received from it with respect to the applicant, including the adequacy of the applicant’s resources and the applicant’s suitability for authorization, having regard to the need to ensure that the applicant’s affairs are conducted soundly and prudently. Saudi Central Bank will not authorize a foreign insurance company to operate an insurance branch in Saudi Arabia without:
	2.1	Confirmation from the home supervisory authority that the applicant is authorised to carry on the types of insurance business proposed in its home country.
	2.2	Confirmation from the home supervisory authority that the applicant has been writing the same lines of business in its home country for the past five years.
	2.3	Confirmation from the home supervisory authority that the applicant is solvent and meets all the regulatory requirements in the home jurisdiction.
	2.4	Confirmation by Saudi Central Bank that the foreign insurance company meets the capital and solvency requirements that would apply if the company were based in Saudi Arabia.
	2.5	Confirmation that the branch will possess assets in excess of liabilities in respect of business written in Saudi Arabia amounting to at least SR 100m for an insurer and SR 200m for a reinsurer. When assessing the net assets in Saudi Arabia in respect of the business written in Saudi Arabia, the technical provisions, asset values and admissibility of assets will be determined in accordance with the Implementing Regulations. The net assets of the Saudi Arabian branch should not be used to cover solvency requirements of business written outside Saudi Arabia.
	2.6	The total invested assets of the branch shall be held by a Saudi licensed bank as custodian.
	2.7	Confirmation that the branch will make a statutory deposit of SR 10m for an insurer or SR 20m for a reinsurer, which may be part of the net assets referred to in paragraph 2.5 above. Where Saudi Central Bank concludes that the risk profile of the applicant’s business warrants it, the statutory deposit may be increased up to a maximum of SR 15m for an insurer or SR 30m for a reinsurer. The branch shall place the statutory deposit amount, within three (3) months of the date of issuing the license, in a bank designated by Saudi Central Bank. The Agency shall invest the statutory deposit and shall be entitled to its earnings.
	2.8	Confirmation that the branch in Saudi Arabia will operate in accordance with the Cooperative Insurance Law and its implementing regulations.
	2.9	Confirmation that the branch in Saudi Arabia will not engage in any activities other than insurance and reinsurance activities for which it is authorised by Saudi Central Bank.
3.	Saudi Central Bank will not authorize a branch of a foreign insurance company or a branch of a foreign reinsurance company to operate in Saudi Arabia unless:
	3.1	It maintains a presence and premises in the Kingdom appropriate to the nature and scale of its activities in Saudi Arabia.
	3.2	It establishes appropriate management and accounting procedures in Saudi Arabia, which will enable the preparation of its accounts concerning its business, carried on in Saudi Arabia and keep in Saudi Arabia all the necessary records for this business.
	3.3	It designates the General Manager for the branch, who is resident in Saudi Arabia, authorised to act generally, and to accept service of any document, on behalf of the applicant company.
	3.4	All managerial roles defined by the Implementing Regulations and Saudi Central Bank are carried out by designated individuals resident in Saudi Arabia.
	3.5	The General Manager for the branch, controllers and managers of the applicant company are fit and proper persons.
4.	A foreign insurance company wishing to obtain a licence to operate an insurance branch in Saudi Arabia must make an application to Saudi Central Bank which contains information similar to that required under Article 4 of the Implementing Regulations. The information should be in respect of the business as a whole for paragraphs 1 to 4 and the Saudi operation for paragraphs 4 to 7 of the First part of Article 4. The bank guarantee in paragraph 8 of the First part of Article 4 must cover the excess assets referred to in paragraph 2.5 above.
5.	In addition to the information required under paragraph 4 above, a foreign insurance company wishing to obtain a licence to operate an insurance branch in Saudi Arabia must also supply the following:
	5.1	A projection of world-wide premium income both gross and net of reinsurance ceded in each of the first five financial years following authorisation and broken down between Saudi Arabia and elsewhere.
	5.2	A summary of the risks the company will underwrite outside Saudi Arabia.
	5.3	A summary of the reinsurance arrangements for the business of the company written outside Saudi Arabia including the company's maximum retention per risk or event after all reinsurance ceded and the names of the principal reinsurers.
	5.4	A statement showing the current margin of solvency of the company (after application of valuation regulations), the margin of solvency required and how both have been calculated on both a home country and Saudi Central Bank basis.
	5.5	Balance sheets and profit and loss accounts of the company for each of the last five financial years.
6.	In deciding whether to authorize a branch of a foreign insurance company in Saudi Arabia, Saudi Central Bank will pay close regard to the company's activities elsewhere and how these activities are regulated. Saudi Central Bank may consider reports produced by the IMF/World Bank, such as their Financial Sector Assessment Program (FSAP) for any particular territory. If the applicant is not regulated elsewhere (e.g. some countries do not regulate reinsurance firms) or if the applicant is regulated in a jurisdiction not substantially compliant with IAIS Core Principles or FATF standards, then the application can only be considered after exhaustive enquiries into the firm’s shareholders, management structure and financial position. Saudi Central Bank will need an assurance that it may exchange and share relevant supervisory information with the home supervisory authority.
7.	Where a foreign insurance company operates an insurance branch in Saudi Arabia, a minimum of 10% of the net surplus arising from the business written in Saudi Arabia must be distributed to the policyholders directly, or in the form of reduction in premiums for the next year.
8.	Where a foreign insurance company operates an insurance branch in Saudi Arabia, 20% of the net shareholders’ income in respect of the branch, determined in accordance with Article 70 of the Implementing Regulations, shall be set aside to increase the excess assets of the branch in respect of the business written in Saudi Arabia until the excess assets amount to SR 200m for an insurer and SR 400m for a reinsurer. When assessing the net assets in Saudi Arabia in respect of the business written in Saudi Arabia for the purpose of meeting this requirement, the technical provisions, asset values and admissibility of assets will be determined in accordance with the Implementing Regulations in respect of the business written in Saudi Arabia. The assets of the Saudi Arabian branch should not be used to cover solvency requirements of business written outside Saudi Arabia as in paragraph 2.5 above.
9.	Where a foreign insurance company operates an insurance branch in Saudi Arabia, it shall invest its assets matching its liabilities (including technical provisions) in respect of business written in Saudi Arabia in accordance with Articles 59 to 63 of the Implementing Regulations.
10.	Where a foreign insurance company operates an insurance branch in Saudi Arabia, it shall comply with Article 40 of the Implementing Regulations in respect of its reinsurance arrangements in respect of business written in Saudi Arabia.
11.	The Saudi Central Bank fee of 0.5% of total underwritten premiums under Article 36 of the Implementing Regulations will be levied only in respect of business written in the Saudi Arabian branch.

Accuracy of Claims Experience Data

Further to SAMA’s circular # 122 on 'Medical Expenses Insurance - Actuarial Pricing 2017’, it has been brought to SAMA’s attention that the claims experience data being provided by insurance companies (or on their behalf by Third Party Administrators) to policyholders is sometimes not consistent with the actual claims experience. SAMA considers this as inappropriate and anti-competitive, and where it becomes aware of such instances, SAMA will be taking vigorous action against such companies.
In order to promote accuracy of the above claims experience data, each company must adhere to the following procedures:
	1.	The Company’s hierarchy for signing off on the Claims Experience Form (attached) should be clearly documented and approved by the Company management.
	2.	The Internal Audit function must carry out a quarterly assessment of the accuracy of the Claims Experience Forms provided by the Company to policyholders. The findings of the Internal Audit must be properly documented, and must be submitted to the Company management.
	3.	SAMA will perform spot-checks to assess the accuracy of the Claims Experience Forms provided by the Company to policyholders. During these visits, the findings of the Internal Audit must be made available to SAMA’s inspection team.
	4.	SAMA expects that the Company will introduce measures to automate the completion of the Claims Experience Form in order to reduce the risk of errors or omissions.

FSB Document: Principles for an Effective Risk Appetite Framework

The Financial Stability Board (FSB) published the above document on November 18, 2013. The document sets out key elements for an effective risk appetite framework, an effective risk appetite statement, risk limits, and defining the roles and responsibilities of the board of directors and senior management in establishing the approved risk appetite statement. The document can be obtained from FSB website: financialstabiIityboard.org.

By January 1, 2017, each insurance company shall have met the standard represented by the above document. In addition, each insurance company has to submit progress reports to SAMA on July 1, 2016 and October 1, 2016 respectively.

Collecting and Recording Vital Characteristics Data for Non-Employees of the Company
This circular is currently available only in Arabic, please click here to read the Arabic version.

Underwriting Instructions of Motor Insurance 2016
This section is currently available only in Arabic, please click here to read the Arabic version.

Medical Expenses Insurance - Pricing Adequacy Report

With reference to SAMA Circular number (122) ‘Medical Expenses Insurance- Actuarial Pricing 2017’ dated 14 August 2017 and to SAMA Circular number (142) ‘Medical Expense Insurance - Pricing Adequacy Report 2017’ dated 14 December 2017, wherein SAMA required all insurance companies writing Medical Insurance Business to submit a ‘Pricing Adequacy Report’ for the business written in year 2017. Going forward, SAMA requires each insurance company to submit a 'Pricing Adequacy Report' at least twice every year.
The first pricing adequacy report for the year to cover the period from 1st January to 30th June and will be due by 15^th Aug. The second pricing adequacy report for the year to cover the period from 1^st January to 31^st December and will be due by 25^th January of the following year.
At a minimum, the report should meet the following requirements:
	•	The analysis must cover all policies issued/renewed during the period covered in the year with the policy effective date in that year.
	•	Companies must provide the Appointed Actuary with all data and relevant information required by the Actuary in order to produce the report. Data must be provided in the format required by the Actuary.
	•	In his report, the Appointed Actuary must highlight if any data deficiencies were observed, discussions held with the Company management to address those deficiencies, remedial action taken or planned to be taken in the future along with clear timelines.
	•	The granularity of analysis must be commensurate with the nature of business written by each company. At a minimum, the policies underwritten shall be segmented as follows:
		○	Experience-rated Group business
		○	Book-rated Group business (including SMEs)
		○	Family (including parents and newly-wed couples)
		○	Domestic workers (driver, maid, etc.)
		○	Visitors’ visa
		○	Others
	•	For the purpose of this report, ‘technical price’ is defined as the price for a policy determined using the actuarial basis applicable at the time of issuing/renewing the policy, whereas ‘selling price’ represents the actual price at which the policy is sold. Both prices must include the same components, i.e. risk premium, commissions, expenses, profit margin, etc. in order to avoid any distortions to the comparison made.
	•	Assumptions (if any) used in the above analysis should be clearly mentioned in the report, along with their justification.
	•	The report should be signed jointly by the Chief Underwriting Officer (or equivalent) and the Appointed Actuary.
The Excel template attached at Appendix 1 to this Circular must be submitted along with the above reports. SAMA may update the template from time to time and share the updated template in advance of the deadline.
Moreover, since SAMA will require periodic submission of the pricing adequacy reports, it is expected that each company will automate the production of future reports in order to minimize the time and effort required for submission.

Actuarial Report on Appropriateness of Reinsurance/Retrocession Arrangements and Risk Retention Levels

With reference to Actuarial Work Rules for Insurance, Article 58 and Article 59, this circular contains instructions for the insurance company “Company” for submission of annual reinsurance report, hereinafter called “Report”. Where the Company writes inwards reinsurance business, all references to insurance and reinsurance in these instructions shall be deemed to read as reinsurance and retrocession respectively.
Purpose
The purpose of the Report is for the Appointed Actuary to:
	-	Enable the Company management and the Board of Directors to make informed decision on the Company’s reinsurance arrangements
	-	Assess the appropriateness of existing reinsurance treaty (“Treaty”) arrangements of the Company, of existing risk retention levels under each line of business, of Treaty features (e.g., profit sharing mechanisms, variable commission, loss sharing mechanisms, etc.), using sound actuarial techniques
	-	Make clear recommendations to the Company management and the Board of Directors on the improvements required to be made to the Treaty type, retention levels, and/or Treaty features, with due regard to the Company’s risk appetite, capital adequacy and exposures underwritten
	-	Comment on the effectiveness of the Company’s procedures to assess whether or not any Treaty transfers significant insurance risk to the reinsurer
Report
The Report shall comprise the following sections, at a minimum:
	1.	Data
		This shall include, at a minimum, the following:
			a)	Current Treaty arrangement for each line of business
			b)	Historical reinsurance performance under both Treaty and Facultative arrangements
			c)	Gross exposures currently underwritten and that expected to be underwritten next year
			d)	Existing panel of reinsurers, their ratings, Treaty share, and ceded reserves
			e)	Results of data reconciliation performed
	2.	Methodology
		This shall include, at a minimum, the following:
			a)	Detailed description of methodologies used for each line of business, each treaty type, and each Treaty layer where non-proportional, including
				i.	Claim Distributions used for claims frequency, claims severity, and aggregate claims
				ii.	Goodness-of-fit tests performed
				iii.	Exposure curves used
			b)	Assumptions used, also identifying where those were based on external sources
			c)	Adjustments made to the above analysis due to issues (if any) identified in data reconciliation
			d)	Definition of ‘significant insurance risk’ and approach used to determine the effectiveness of the Company’s internal process for assessing whether or not any Treaty transfers significant insurance risk to the reinsurer
	3.	Results and Recommendations
		This shall include, at a minimum, the following:
			a)	Clear recommendation on the appropriate Treaty arrangement, including risk retention levels and Treaty features, in respect of each line of business
			b)	Detailed rationale supporting the above recommendation, also demonstrating consideration of the Company’s risk appetite, solvency position, and exposures underwritten at present and those expected to be written next year
			c)	Recommendations on improving the Company’s internal process for assessing whether or not any Treaty transfers significant insurance risk to the reinsurer
A reinsurance template (“Template”), designed to capture a summary of the above Report, shall also be filled by the Appointed Actuary. The Template is attached as Appendix 1.
Submission
The Report and the Template 'attached' must be submitted via RMS as well as via email.
For the purpose of this year submission only, the submission deadline will be postponed to 31st of October 2020, rather than 30th of September, which was instructed by SAMA; as per the issued circular dated 26/03/2020.
Scope of Actuarial Modelling
For this year only (2020), the scope of actuarial modelling has been reduced to cover i) at least 50% of reinsurance premium for the year 2020, or ii) a minimum of two lines of business, whichever is higher. To meet these criteria, the Appointed Actuary shall select the lines of business in agreement with Company management.
Board and Management Responsibilities
The Appointed Actuary must present his recommendations stated in the above Report to the Board of Directors within two (2) months of producing the Report, or before the Board's decision on next year's Treaty arrangements, whichever is earlier. The relevant minutes of the Board meeting, clearly identifying whether the Board accepted or rejected the above recommendations, in part or in full, must be submitted to SAMA within one month of holding the Board meeting.
For any clarifications, you may approach SAMA at IC.Tec@sama.gov.sa.
Appendix 1
Reinsurance Template (Attached)

Actuarial Report on Solvency and Capital

With reference to Article (56) of The Actuarial Work Rules for Insurance dated 06/07/1441H, wherein the Appointed Actuary shall investigate and provide advice to the insurance company on its solvency position and the adequacy of the capital that it holds.
This circular contains instructions for the insurance company “Company” for submission of the Solvency and Capital report, hereinafter called “Report”.

Purpose

The purpose of this report is for the Appointed Actuary to:
	1)	Enable the Company’s management and Board of Directors to understand the implications of the latest business plan on the future solvency position of the Company .
	2)	Determine significance of each risk faced by the Company through stress testing and scenario analysis, in order to facilitate informed decision-making by the Company management, its Board of Directors, and its various functions.
	3)	Make clear recommendations for consideration of the Company management and its Board of Directors to improve the Company’s risk profile, risk mitigation strategies, and its solvency position.

Report

The report shall comprise of the following three sections:
	A)	Business Plan and Projected Solvency Position
		This section shall consist of the following:
		1)	Historical and Projected Income Statement
		2)	Historical and Projected Balance Sheet
		3)	Historical and Projected Solvency Ratio
	B)	Stress Testing
		For each stress test listed in Appendix 1, this section shall consist of the following:
		1)	Data used, including reconciliations performed and deficiencies observed
		2)	Assumptions made
		3)	Results of the stress test
	C)	Scenario Analysis
		For each scenario listed in Appendix 1, this section shall consist of the following:
		1)	Data used, including reconciliations performed and deficiencies observed
		2)	Assumptions made
		3)	Results of the scenario test
The stress tests and scenario analysis mentioned in Appendix 1 are the minimum required. The Company is encouraged to run additional stress tests and scenario analysis relevant for its risk profile. The outcome of these additional stress tests and scenario analysis shall be clearly documented in the report.
A Capital and Solvency template (“Template”), designed to capture a summary of the above Report, shall also be filled by the Appointed Actuary. The Template is attached as Appendix 2.

Submission
The Report and the Template must be submitted via RMS as well as via email by 24 December 2020.

Presentation to the Board of Directors

The Appointed Actuary must present his recommendations stated in the above Report to the Board of Directors within two (2) months of producing the Report. The relevant extracts from the minutes of the Board meeting must be submitted to SAMA within one month of holding the Board meeting.

Appendix 1 – Specifications for Stress and Scenario Tests

Stress Tests
Risk	Sub risk	Change in solvency
Market	Interest rate	A 2% up and down stress on interest rate sensitive assets and liabilities; downward stress is subject to a floor of 0%
	Equity	Reduction in of equity values : 50% decrease in equities listed on Tadawal or equities listed in OECD countries 60% decrease in Other equities (including those listed on Nomu and unlisted equities)
	Property	A decrease of 25 % in the value of investments in real estate, taking account of all direct and indirect exposures to property prices.
	Currency	The maximum capital requirement of the following: scenario upward shock is an instantaneous rise in the value of 25% of the currency C against the local currency. The scenario downward shock is an instantaneous fall of 25% in the value of the currency C against the local currency
	Concentration	The scope of this risk sub-module extends to assets considered under the equity risk and interest rate risk, and excludes assets covered under the counterparty default risk; stress applies to the exposure value in each category in excess of the threshold; property assets excluded due to current regulatory limits and hence lack of materiality; exclude Government bonds from the scope of this stress
Counterparty Default	Type 1: Reinsurers & Banks	Captures the change in solvency ratio due to default of counterparties, including reinsurers, banks, brokers, agents, TPAs, policyholders, etc.
Counterparty Default	Type 2: Other Counterparties
Life Underwriting	Mortality	Increase of 15% in mortality rates for each age and each policy where the payment of benefits (either lump sum or multiple payments) is contingent on mortality risk
	Lapse	5 percentage point yearly increase/decrease (the decrease has a floor of 0%) in lapse rate over that assumed
	Expenses	Increase in future inflation rate compared to best estimate assumption, where the Inflation Rate increases by 1 percentage point per annum over that assumed
Non life Underwriting	Premium Risk	Increase in the projected net loss ratio, with low volatility lines of business experiencing 10% percentage points increase and high volatility lines experiencing 20% percentage points increase
Non life Underwriting	Reserves Risk	Short fall in the net reserves, with short tail lines experiencing 10% shortfall and long tail lines experiencing 20% shortfall

Scenario analysis
Scenario title	Scenario description
Health Pandemic	Health Insurance:
		2% of insureds are infected, of which
			- 10% of insureds require Hospitalization
			- 30% of insureds requiring Testing and Physician
	Consultation
		25% of insureds get vaccinated
	Protection & Savings Insurance:
		0.06% of insureds die (where policy terms do not exclude death due to pandemic)
Natural CAT - Flood, hail etc.	Cloudbursts over Jeddah city causing flooding affecting property and motor vehicles
Manmade CAT - Energy	Explosion and Fire in the oil refineries in the company's largest concentration of energy gross risk exposures (e.g. Ras Tanura) covered under a treaty (excluding facultative risks); consider both onshore and offshore exposures for identifying the largest concentration
Manmade CAT - Property	Consider a fire results in damage to the largest gross single property risk covered under a reinsurance treaty (excluding facultative risks) and in case if Health and P&S coverages apply to the same affected property, then there are 5% deaths and 25% injuries requiring hospital treatment
Manmade CAT - Motor Liability	Consider a major collision between your insured car and a passenger coach permanently disabling 5 passengers on board the coach. Assume coach passengers are European football league players travelling to a football match in Saudi Arabia; the football match gets cancelled as a result
Manmade CAT - Marine	A collision between an oil tanker and a cruise ship causing 50 deaths and 500 seriously injured people; the oil tanker is insured by your insurance company and is held responsible for the collision; all passengers of cruise ship are US citizens, so legal proceedings are held in US courts; the claims are in respect of marine hull and marine liability, including removal of wreckage and pollution
Manmade CAT - Aviation	Assume a collision of two passenger aircraft with full occupancy over Riyadh airport. One aircraft belongs to Saudi Airlines and the other one belongs to Fly Nas. The collision causes 500 deaths (350 Saudia + 150 Fly Nas) and causes closure of Riyadh Airport for a number of days. The pilot of the aircraft insured by your company is held responsible for the accident.
Operational-cum-Cyber risk	Your insurance company's systems get attacked by a ransomware (e.g. WannaCry, Petya) by international hackers from outside the Kingdom, causing all systems to come to a halt and policyholder data to be accessed illegally. This happens during the peak of renewal period (e.g., in December). The systems remain down for two weeks, leading to loss of renewals/new business. Eventually, the systems get restored after payment of ransom.
Global recession	Low economic activity leading to lower oil demand, causing the oil price to drop, many government/private projects to stall, economic activities to slow down causing recession, mas exodus of expatriates from Saudi Arabia, liquidity severely affected, policyholders pursue claims vehemently, fraud activities increase, all affecting the revenue and claims of insurance companies

Appendix 2 - Solvency and Capital Template
(attached)

Persistency Report 2017

No: 201705000117

Date(g): 31/5/2017 | Date(h): 6/9/1438

This circular refers to the Persistency Report as required in the Actuarial Work Regulation.
A copy of this circular should be passed on to the Company’s Board of Directors, Audit Committee, Appointed Actuary, Risk Management officers and Compliance Officer.
Reference is made to Article (32) of the Actuarial Work Regulation.
Persistency Report
If the Insurance Company writes Savings products, then the Appointed Actuary shall submit an annual Persistency Report to the Company’s Management, Board of Directors and SAMA by the end of the fifth month of the financial year. For the year 2017, this deadline has been revised to 31 July 2017.
The report, at the minimum, shall cover the following:
	a.	The report should separately consider all material individual long-term Protection and Savings products written by the Company including, but not limited to, the following product types:
		i.	Term
		ii.	Universal Life
		iii.	Unit-linked
		Group business should be excluded from the persistency study.
	b.	Persistence Rates should be determined on a monthly basis for the first three policy years of the product from inception, and annually for policy year four onwards.
	c.	Persistency Rates should be determined both by annualised premium and by numbers of policies.
	d.	Persistency rates should be determined separately for each distribution channel including, but not limited to, the following:
		i.	Bancassurance
		ii.	Agency
		iii.	Broker
		iv.	Direct
		v.	Online
	e.	Persistency Rates should be determined separately by the frequency of premium payment.
		i.	Monthly
		ii.	Quarterly
		iii.	Semi-annual
		iv.	Annual
		v.	Single premium (only by number of policies)
	f.	Persistency Rates should be determined separately by region.
	g.	The Period of Investigation must be stated explicitly.
		i.	All data up to December 31, 2016, should be included in the persistency report.
		ii.	It is important that lapse rates are derived separately for policies issued in each calendar year.
		iii.	The Period of Investigation shall be a minimum of 5 years or since the time the Company started selling the Savings portfolio if less.
	h.	A precise statement of how the Exposure has been determined should be stated. It is expected that exposures will be determined using the precise number of days to which all policies are in-force and paying premiums.
		i.	Show all policy status to be included in the exposure calculation Refer to Appendix 1.
		ii.	Exclude policies cancelled during the ‘Free Look’ period from the persistency analysis.
	i.	A precise definition of the lapse event considered should be stated.
		i.	Show all policy status included in the lapse event.
		ii.	Lapses should include all policyholder selected options that lead to all premium payments under the contract ceasing permanently.
		iii.	Each type of lapse should be identified separately. Refer to Appendix 1.
		iv.	Exclude policies cancelled during the 'Free Look' period from the persistency analysis.
		v.	Explain treatment of Waiver of Premium (WOP) claims.
	j.	The number of policies and total annualized premiums that are cancelled within the "Free Look” period permitted by Article (26) of the Insurance Market Code of Conduct Regulation should be stated.
	k.	The report should also consider all other events that represent a reduction in the policyholders' commitment to paying regular premiums at the initial contracted level. This would include partial surrenders, policy loans, policies being made paid up either through the choice of the policyholder or due to premiums ceasing, and premium decrements to a lower level than the initial level of the annualised premium.
	l.	The Company’s process for lapsing policies should be set out in detail. In particular, the process when a premium is not received should be stated. Full details should be provided of all policies with outstanding premiums on the final day of the Period of Investigation. Late premiums should be subdivided by the number of weeks those are over-due by.
	m.	The Appointed Actuary should investigate the Company’s history of collecting premiums from policies where premiums are over-due.
	n.	In addition to the calculation of the lapse rates, the Appointed Actuary should also show the in-force rates, that is, the proportion of policies, by number and annualised premiums, where full premiums have been received by the Company.
	o.	The Appointed Actuary should compare the persistency rates determined with the in-force rates. Differences may arise from pipeline delays in processing lapse events after premium due dates. Where there are material differences in the in- force rates and the persistency rates, the Appointed Actuary should investigate further to analyse the proportion of policies which resume paying premiums when payments are overdue.
	p.	If the Company has more than one distinct portfolio of Protection & Savings business, then the Appointed Actuary should produce separate persistency reports for each portfolio.
	q.	The Appointed Actuary is not required to sub-divide his analysis beyond the level of materiality. However, any simplifications in the analysis must be justified in numerical terms.
	r.	The Appointed Actuary should consider whether there is sufficient data to be able to assess useful confidence intervals around the lapse rates determined. If there is sufficient data, then confidence intervals should be shown as appropriate.
	s.	Use of an automated IT system to perform the persistency analysis is highly encouraged to enable the Company to generate persistency reports periodically.
	t.	Refer to Appendix 1 for a table of contract statuses showing exposures and lapse types that should be considered.
Furthermore, some considerations to be addressed are discussed below:
Reports
The Appointed Actuary must ensure that the actuarial report is clear and comprehensive so that another experienced Actuary can follow the report and come to a similar conclusion as recommended by the Appointed Actuary. The report must contain, as a minimum, the following:
	a.	A clear statement that he or she is acting in a formal capacity as the Appointed Actuary.
	b.	A description of the actuarial guidance that is being followed.
	c.	Dates of all prior reports on persistency prepared by the Appointed Actuary in relation to the Company.
	d.	Comments on all related reports from other actuaries that were produced for the client Company.
	e.	If the prior actuarial reports were not reviewed or considered, full justification should be provided for the lack of such review.
	f.	Material changes to the methodology and assumptions from prior reports should be summarised and highlighted, and the reasons for such changes should be explained.
	g.	Explanation of the selection of all material assumptions and the reason for their choice provided. Any reliance on an external source should be documented.
	h.	An explanation of the methodology adopted by the Appointed Actuary should be included. The formulae used should be clearly documented.
	i.	Other actuaries who worked on the report should be identified.
	j.	Any financial, organizational or other dependency concerning any matter related to the subject of the report, and any relevant information that is not apparent should be disclosed
	k.	A glossary of terms used.
	l.	The Appointed Actuary may show smoothed results for persistency, provided he also shows results using raw data.
	m.	A statement that the lapse rates determined are consistent with other financial modelling carried out.
	n.	A comparison between the new set of results and the previous set from the last persistency analysis.
	o.	For internal reporting, a persistency study should be performed at least twice a year or more frequently at the discretion of the Company and the Appointed Actuary.
	p.	Commentary on the persistency results and recommendations for management to be included in order to provide a better understanding of the results.
Data
The Appointed Actuary must take all reasonable steps to ensure the consistency, accuracy and completeness of the data used in the analysis. All formal reports should contain, as a minimum, the following:
	a.	Confirmation that the available data allows the desired analysis to be completed in the Appointed Actuary’s professional judgment.
	b.	Disclosure of known material data limitations and their implications.
	c.	A full description of the data that was used.
	d.	A full description of all data validations carried out.
	e.	The precise Period of Investigation that the data is derived from must be stated.
	f.	Reasonableness checks against data in the most recent prior reports should be described.
	g.	Any adjustments or filtering of the raw data should be explained, and an attempt made to measure the impact.
	h.	if the Appointed Actuary decides that performing a data review is not possible, the report should indicate that such a review has not be carried out (and the reason behind that) and should disclose any resulting limitation on the use of the actuarial work produced.
	i.	It is not acceptable for an Appointed Actuary’s report to include caveats that seek to place full reliance on others for data quality issues. The Appointed Actuary is expected to carry out sufficient checks to satisfy himself or herself in the results of the report presented.

Appendix 1: Contract Status

Below is the table of contract statuses showing exposures and lapse types that should be considered:

Contract Status	Exposure	Lapse	Identify Rates Separately
Cancelled During ‘Free Look' period	Exclude	Exclude

In-Force	Include full period	Exclude

Death or other risk claim leading to policy termination	Include to event	Exclude
Expired	Include to event	Exclude
Maturity	Include to event	Exclude

Lapse without value	Include to event	Include	Yes
Surrendered with a payment made	Include to event	Include	Yes
Paid Up - Policyholder request	Include to event	Include	Yes
Paid Up - Lost contact with Policyholder	Include to event	Include	Yes
Conversion of product to type requiring no future premium payments	Include to event	Include	Yes

Premium Holiday	Include full period	Exclude	Yes
Policy Loan (if permitted)	Include full period	Exclude	Yes
Premium Decrement	Include full period	Exclude	Yes
Partial Surrender	Include full period	Exclude	Yes
Conversion of product to type requiring lower future premium payments	Include full period	Exclude	Yes
Waiver of Premium on Disability	Include to event	Exclude

Persistency Report

This circular refers to the Persistency Report as required in the Actuarial Work Regulation.
A copy of this circular should be passed on to the Company’s Board of Directors, Audit Committee, Appointed Actuary, Risk Management officers and Compliance Officer.
Reference is made to Article (32) of the Actuarial Work Regulation.
Persistency Report
If the Insurance Company writes Savings products, then the Appointed Actuary shall submit an annual Persistency Report to the Company’s Management, Board of Directors and SAMA by the end of the fifth month of the financial year.
The report, at the minimum, shall cover the following:
	a.	The report should separately consider all material individual long-term Protection and Savings products written by the Company including, but not limited to, the following product types:
		i.	Term
		ii.	Universal Life
		iii.	Unit-linked
		Group business should be excluded from the persistency study.
	b.	Persistence Rates should be determined on a monthly basis for the first three policy years of the product from inception, and annually for policy year four onwards.
	c.	Persistency Rates should be determined both by annualised premium and by numbers of policies.
	d.	Persistency rates should be determined separately for each distribution channel including, but not limited to, the following:
		i.	Bancassurance
		ii.	Agency
		iii.	Broker
		iv.	Direct
		v.	Online
	e.	Persistency Rates should be determined separately by the frequency of premium payment.
		i.	Monthly
		ii.	Quarterly
		iii.	Semi-annual
		iv.	Annual
		v.	Single premium (only by number of policies)
	f.	Persistency Rates should be determined separately by region.
	g.	The Period of Investigation must be stated explicitly.
		i.	All data up to December 31 of the preceding year should be included in the persistency report.
		ii.	It is important that lapse rates are derived separately for policies issued in each calendar year.
		iii.	The Period of Investigation shall be a minimum of 5 years or since the time the Company started selling the Savings portfolio if less.
	h.	A precise statement of how the Exposure has been determined should be stated. It is expected that exposures will be determined using the precise number of days to which all policies are in-force and paying premiums.
		i.	Show all policy status to be included in the exposure calculation. Refer to Appendix 1.
		ii.	Exclude policies cancelled during the ‘Free Look’ period from the persistency analysis.
	i.	A precise definition of the lapse event considered should be stated.
		i.	Show all policy status included in the lapse event.
		ii.	Lapses should include all policyholder selected options that lead to all premium payments under the contract ceasing permanently.
		iii.	Each type of lapse should be identified separately. Refer to Appendix 1.
		iv.	Exclude policies cancelled during the ’Free Look’ period from the persistency analysis.
		v.	Explain treatment of Waiver of Premium (WOP) claims.
	j.	The number of policies and total annualized premiums that are cancelled within the “Free Look” period permitted by Article (26) of the Insurance Market Code of Conduct Regulation should be stated.
	k.	The report should also consider ail other events that represent a reduction in the policyholders’ commitment to paying regular premiums at the initial contracted level. This would include partial surrenders, policy loans, policies being made paid up either through the choice of the policyholder or due to premiums ceasing, and premium decrements to a lower level than the initial level of the annualised premium.
	l.	The Company’s process for lapsing policies should be set out in detail. In particular, the process when a premium is not received should be stated. Full details should be provided of all policies with outstanding premiums on the final day of the Period of Investigation. Late premiums should be subdivided by the number of weeks those are over-due by.
	m.	The Appointed Actuary should investigate the Company's history of collecting premiums from policies where premiums are over-due.
	n.	In addition to the calculation of the lapse rates, the Appointed Actuary should also show the in-force rates, that is, the proportion of policies, by number and annualised premiums, where full premiums have been received by the Company.
	o.	The Appointed Actuary should compare the persistency rates determined with the in-force rates. Differences may arise from pipeline delays in processing lapse events after premium due dates. Where there are material differences in the in-force rates and the persistency rates, the Appointed Actuary should investigate further to analyse the proportion of policies which resume paying premiums when payments are overdue.
	p.	If the Company has more than one distinct portfolio of Protection & Savings business, then the Appointed Actuary should produce separate persistency reports for each portfolio.
	q.	The Appointed Actuary is not required to sub-divide his analysis beyond the level of materiality. However, any simplifications in the analysis must be justified in numerical terms.
	r.	The Appointed Actuary should consider whether there is sufficient data to be able to assess useful confidence intervals around the lapse rates determined. If there is sufficient data, then confidence intervals should be shown as appropriate.
	s.	Use of an automated IT system to perform the persistency analysis is highly encouraged to enable the Company to generate persistency reports periodically.
	t.	Refer to Appendix 1 for a table of contract statuses showing exposures and lapse types that should be considered.
Furthermore, some considerations to be addressed are discussed below:
Reports
The Appointed Actuary must ensure that the actuarial report is clear and comprehensive so that another experienced Actuary can follow the report and come to a similar conclusion as recommended by the Appointed Actuary. The report must contain, as a minimum, the following:
	a.	A clear statement that he or she is acting in a formal capacity as the Appointed Actuary.
	b.	A description of the actuarial guidance that is being followed.
	c.	Dates of all prior reports on persistency prepared by the Appointed Actuary in relation to the Company.
	d.	Comments on all related reports from other actuaries that were produced for the client Company.
	e.	If the prior actuarial reports were not reviewed or considered, full justification should be provided for the lack of such review.
	f.	Material changes to the methodology and assumptions from prior reports should be summarised and highlighted, and the reasons for such changes should be explained.
	g.	Explanation of the selection of all material assumptions and the reason for their choice provided. Any reliance on an external source should be documented.
	h.	An explanation of the methodology adopted by the Appointed Actuary should be included. The formulae used should be clearly documented.
	i.	Other actuaries who worked on the report should be identified.
	j.	Any financial, organizational or other dependency concerning any matter related to the subject of the report, and any relevant information that is not apparent should be disclosed.
	k.	A glossary of terms used.
	l.	The Appointed Actuary may show smoothed results for persistency, provided he also shows results using raw data.
	m.	A statement that the lapse rates determined are consistent with other financial modelling carried out.
	n.	A comparison between the new set of results and the previous set from the last persistency analysis.
	o.	For internal reporting, a persistency study should be performed at least twice a year or more frequently at the discretion of the Company and the Appointed Actuary.
	p.	Commentary on the persistency results and recommendations for management to be included in order to provide a better understanding of the results.
Data
The Appointed Actuary must take all reasonable steps to ensure the consistency, accuracy and completeness of the data used in the analysis. All formal reports should contain, as a minimum, the following:
	a.	Confirmation that the available data allows the desired analysis to be completed in the Appointed Actuary’s professional judgment.
	b.	Disclosure of known material data limitations and their implications.
	c.	A full description of the data that was used.
	d.	A full description of all data validations carried out.
	e.	The precise Period of Investigation that the data is derived from must be stated.
	f.	Reasonableness checks against data in the most recent prior reports should be described.
	g.	Any adjustments or filtering of the raw data should be explained, and an attempt made to measure the impact.
	h.	If the Appointed Actuary decides that performing a data review is not possible, the report should indicate that such a review has not be carried out (and the reason behind that) and should disclose any resulting limitation on the use of the actuarial work produced.
	i.	It is not acceptable for an Appointed Actuary’s report to include caveats that seek to place full reliance on others for data quality issues. The Appointed Actuary is expected to carry out sufficient checks to satisfy himself or herself in the results of the report presented.

Appendix 1: Contract Status

Below is the table of contract statuses showing exposures and lapse types that should be considered:

Contract Status	Exposure	Lapse	Identify Rates Separately
Cancelled During ‘Free Look’ period	Exclude	Exclude

In-Force	Include full period	Exclude

Death or other risk claim leading to policy termination	Include to event	Exclude
Expired	Include to event	Exclude
Maturity	Include to event	Exclude

Lapse without value	Include to event	Include	Yes
Surrendered with a payment made	Include to event	Include	Yes
Paid Up - Policyholder request	Include to event	Include	Yes
Paid Up - Lost contact with Policyholder	Include to event	Include	Yes
Conversion of product to type requiring no future premium payments	Include to event	Include	Yes

Premium Holiday	Include full period	Exclude	Yes
Policy Loan (if permitted)	Include full period	Exclude	Yes
Premium Decrement	Include full period	Exclude	Yes
Partial Surrender	Include full period	Exclude	Yes
Conversion of product to type requiring lower future premium payments	Include full period	Exclude	Yes
Waiver of Premium on Disability	Include to event	Exclude

Financial Condition Report “FCR” Submission for 2018

This circular refers to the Insurance and/or Reinsurance Company’s ‘‘Company” annual Financial Condition Report “FCR” submission for 2018. Reference is made to Cooperative Insurance Companies Control Law’s Implementing Regulation Article (20) part “Second” and “Third”, Article (69) Part (1), and Article (28) of the Actuarial Work Regulation.

Submission Deadlines

The Company must submit the FCR to SAMA by 28 February 2019 along with the FCR Reporting Template. However, the following documents shall be submitted as per the below timelines:
	a.	31 January 2019 - Reserving section of FCR Reporting Template duly filled in, based on the results of the reserving exercise as at 31 December 2018 - Appendix 1
	b.	7 February 2019 - Actuarial Reserve Report as at 31 December 2018 (this will be a subset of the FCR)

FCR Contents

1.	Data:
	a)	A description of the data used in the analysis should be included in the report.
	b)	Adjustments to the raw data by the Company or the Appointed Actuary should be explained.
	c)	Any issues regarding consistency, completeness, or accuracy of data should be documented. Data validation checks carried out should be described. The report should clearly identify the data issues resolved and those still outstanding when the report was produced.
	d)	Reconciliations should be carried out, at a minimum, for Gross Written Premium, Net Written Premium, Gross Earned Premium, Net Earned Premium, Gross Claims Paid, Gross Claims Outstanding, Net Claims Paid and Nel Claims Outstanding, Salvage and Subrogation. Reconciliations should be against financial data, the previous years' FCR, and pricing report data where applicable.
	e)	It is not sufficient to rely on Reconciliations in validating the data. Other data checks to be carried out are left to the professional judgement of the Appointed Actuary. In particular, the Appointed Actuary should comment on
		a.	the accuracy of data relating to Outstanding Salvage & Subrogation recoveries, and all validation performed should be documented.
		b.	the claims backlog and its comparison with historical trend
	f)	A statement on the overall quality of data, encompassing its accuracy, appropriateness and completeness should be included.

2.	Data Deficiency Reserve
		a)	All companies are required to provide the required data to their Appointed Actuary in a format that allows sufficiently detailed analysis to be carried out.
		b)	Medical Expense Insurance claim data must be provided to the Appointed Actuary in a format that allows monthly paid and incurred claims delay tables to be constructed. The Appointed Actuary should use professional judgement to decide on the appropriate granularity of data to use.
		c)	If the Company is unable to provide medical claims data in a format that allows monthly paid and incurred claims delay tables to be constructed, then it must establish a Data Deficiency Reserve of 5% of Medical Expenses Insurance Net Written Premium.
		d)	For all other products, except for long term Protection and Savings business, data must be provided to the Appointed Actuary in a format that allows quarterly paid and incurred claims delay tables to be constructed. The Appointed Actuary should use professional judgement to decide on the appropriate granularity of data to use.
		e)	If the Company is unable to provide data for any other products or lines of business, except for long term Protection and Savings business, in a format that allows quarterly paid and incurred claims delay tables to be constructed for that product or line of business, then it must establish a Data Deficiency Reserve of 5% of the relevant Net Written Premium.

3.	Unearned Premium Reserve (UPR)
	a)	For all one-year policies, except for Marine Cargo Open Cover policies, the UPR must be determined on a 1/365th basis, based on the assumption that the risk is uniform over the policy year.
	b)	For Marine Cargo Open Cover policies, where dates of voyages are usually not available, UPR shall be estimated using the last three months’ premium for the relevant period as per Article 69(2) of Implementing Regulation.
	c)	For shorter-than-one-year Marine Cargo policies, UPR shall be determined:
		i.	Using straight-line method over the policy term as in (a) above; or
		ii.	In the absence of data required for (i) above, using the last three months’ premium for the relevant period as per Article 69 (2) of Implementing Regulation.
	d)	For Engineering Construction projects with policy terms in excess of one year, the Appointed Actuary shall assume that the risk will increase linearly over the policy term in determining the UPR. Companies shall continue to adopt the spreadsheet provided by SAMA with the 2013 FCR to support the calculations, unless the Appointed Actuary has sufficient claims data to carry out full analysis of the incidence of risk. In such cases, the premium earnings pattern may be derived based on this analysis, subject to full documentation of the analysis performed.
	e)	The Company should note that for policies covering Engineering Construction projects with policy terms in excess of one year, premiums should be assumed due on the dates agreed with the Policyholder for the purpose of establishing Doubtful Debt Reserves according to Article 69(2)(d) of the Implementing Regulation.
	f)	For Extended Warranty policies with terms in excess of one year, the Appointed Actuary shall assume that the risk will increase linearly over the policy term in determining the UPR. The spreadsheet, referred to under Item (d) above, should be used for this purpose, unless the Appointed Actuary has sufficient claims data to carry out full analysis of the incidence of risk. In such cases, the premium earnings pattern may be derived based on this analysis, subject to full documentation of the analysis performed.
	g)	For Visitor-visa Medical Expense insurance policies with policy term in excess of one year, the Appointed Actuary shall assume that the risk is uniform over the policy term.
	h)	For the purpose of reporting in the FCR Reporting Template, the UPR in items (d) and (f) must be split into two components as below:
		i.	UPR determined based on the assumption that the risk is uniform over the policy term.
		ii.	Additional UPR determined reflecting the difference between the UPR determined assuming a linearly increasing risk (as per items (d) and (f) above) and sub-para (i) above.

4.	Premium Deficiency Reserve (PDR)
	a)	If the Company has insufficient unearned premium reserve against the corresponding projected claims and expenses under a line of business, then it must hold a Premium Deficiency Reserve for that line of business.
	b)	For the purpose of PDR calculation, allocation of expenses to individual lines of business must be supported by a comprehensive expense analysis. This expense analysis must form a part of the Actuarial Reserve Report as an appendix. For the purpose of this expense analysis, where the Appointed Actuary relies on the outputs produced by other functions (e.g., Finance) of the Company, the Appointed Actuary must satisfy himself/herself with the completeness, accuracy and appropriateness of that analysis, including the input data used for that analysis.
	c)	Where certain expenses are treated as ‘non-recurring’, it must be documented in the Actuarial Reserve Report along with the justification for this treatment.

5.	Claim Reserves - all lines (excluding long-term Protection & Savings)
	a)	Full claims triangles used to determine the claims reserves must be shown in the Appointed Actuary's report.
	b)	'Actual v Expected’ analysis showing the deviation of the projected claims development based on data as at 31 December 2017 from the actual claims developments during the year 2018 for each prior accident period. The report should clearly state the treatment of the above deviations for the purpose of determining the claims reserves as at 31 December 2018. This analysis is required for all lines of business, unless the Appointed Actuary considers a line of business to be immaterial.
	c)	The report should clearly identify all material assumptions used and judgments made, along with their justification, so that another actuary with appropriate skills can reproduce the results independently.
	d)	Claims reserves analysis must consider more than one reserving methodology. For Motor and Medical Expenses lines of business written on a direct basis, both ‘paid claims-based’ and ‘incurred claims-based’ methods must be used. For other lines of business, it is preferred that the Appointed Actuary considers both ‘paid claims-based’ and ‘incurred claims-based’ methods. The Appointed Actuary should use his professional judgment when selecting results based on a particular methodology or a combination of methodologies. The justification for this selection must be documented.
	e)	All reserve projections must be carried out on a Gross-of-recoverables basis, and where possible, all recoverables (i.e., reinsurance, salvage, and subrogation) must be projected separately. The method of estimating the reserves for recoverables must be fully described.
	f)	Claims reserves must not be discounted, unless required by the nature of those claims, e.g., annuity payments under a liability claim. Where discounted, the discount rate assumed must be clearly stated in the report.
	g)	Methodology for estimating the ‘Unallocated’ Loss Adjustment Expense reserves must be fully described. Where incurred-but-not- reported claims reserves are inclusive of the ‘Allocated’ Loss Adjustment Expenses, it must be documented accordingly.

6.	Claim Reserves - Additional Requirements for Motor
		a)	In the past, SAMA had expressed concerns over the reliability of outstanding Salvage & Subrogation claims data. Where the Appointed Actuary intends to use the outstanding Salvage & Subrogation claims data for projecting future recoveries, this must be supported by a detailed analysis of historical recoveries.
		b)	Generally, SAMA expects that, at a minimum, the reserving analysis for motor class will be split by claim-type (i.e., own damage, third party property damage, and bodily injury/death) and by policyholder-type (i.e., corporate and retail), unless the Appointed Actuary can demonstrate that a higher level of data aggregation does not distort the reserve estimates.

7.	Claim Reserves Uncertainty
		a)	The Appointed Actuary must estimate the uncertainty around his/her estimate of the claim reserves. The analysis of reserve uncertainty should be carried out separately for each line of business, and, preferably, also at the portfolio level.
		b)	The Appointed Actuary should use standard actuarial methodologies to estimate the above uncertainty. This may include Bootstrapping techniques, Mack Method, or simply a range of results under various reserving methodologies.

8.	Protection & Savings (P&S) Insurance
	Detailed instructions for Protection & Savings Insurance are shown below.
	a)	Method of calculation of the Mathematical Reserves of P&S business
		i.	The determination of the amount of Mathematical Reserves in respect of the liabilities in the P&S Class, (other than liabilities which have fallen due for payment before the valuation date) shall be made on actuarial principles which have due regard to the reasonable expectations of Policyholders and shall make proper provision for all liabilities on a best estimate basis .
		ii.	The determination shall take account of all prospective liabilities as determined by the policy conditions for each existing contract, taking credit for premiums payable after the valuation date.
		iii.	Allowance should be made for future bonuses, guaranteed benefits including guaranteed surrender values and options, if any.
		iv.	The method of calculation of the amount of the Mathematical Reserves and the assumptions used shall be such as to recognise the distribution of profits in an appropriate way over the duration of each policy.
		v.	The method of calculation of the amount of the Mathematical Reserves and the assumptions used shall not be subject to discontinuities from year to year, unless it can be fully justified. Where any changes are made to the method of calculation or the assumptions used, the impact of each change must be estimated individually in comparison with the method and assumptions used for the previous valuation.
		vi.	All assumptions must be appropriately justified and documented in the Actuarial Reserve Report.
	b)	Acquisition expenses
		i.	In order to reduce the reserve strain during the first policy year, the Company may use Zillmer Reserve Method.
		ii.	The increase permitted by subparagraph (a) above shall be subject to the limitation that the amount of the future premium valued shall not in any event be greater than the amount of the premium actually payable by the policyholder.
	c)	Unit-linked contracts
		i.	Where the benefits payable under a contract are wholly or in part unit- linked benefits, the amount of the Mathematical Reserves determined in respect of those linked benefits shall not be less than the value of the underlying assets.
		ii.	The Appointed Actuary should consider whether any reserves additional to the unit liability should be held for unit-linked policies. In particular, possible future shortfalls in expense margins should be considered by projecting future cash-flows on each unit-linked policy, using appropriate assumptions.
	d)	Mathematical Reserves on Group Life business
		It should be noted:
		i.	The Mathematical Reserve for Employer Sponsored Group Life contracts written on a unit-rated basis where the premium for each individual is not known should be valued by calculating an Unearned Premium Reserve (UPR) for the proportion of the Gross total premium under the contract relating to the remaining period from the valuation date until the expiry of the current period of insurance.
		ii.	The Appointed Actuary should consider carefully whether the premiums for the class of group protection business taken as a whole (with due account being taken of reinsurance arrangements) is adequate, in light of actual experience to date and expected future experience, and if necessary determine an Unexpired Risk Reserve in addition to the UPR. It is acceptable for an Unexpired Risk Reserve to be held at the Company-level so that the Company’s overall experience is taken into account.
		iii.	Deferred acquisition costs arising from group business may not be used as an asset to offset the Mathematical Reserve.
	e)	Mathematical Reserves on Group Credit Life business
		i.	The Mathematical Reserve for Group Credit Life contracts covering customers of banks and finance companies, and written on a unit-rated basis should be set separately for each policy based on its own historical and projected future experience.
		ii.	The Company must provide the Appointed Actuary with all quotation data received in respect of any Credit Life scheme that has been in-force with the Company for less than three full policy years.
		iii.	Loss rates per mille of Sum Insured should be considered for at least the past three years.
		iv.	If there has been a material increase in in-force business over the year, then in the absence of individual age data, the Appointed Actuary should make appropriate assumption on the average age of new joiners.
		v.	Where disability cover is provided with a deferred period then it should be assumed that the insurance company will not be advised of any claim until the end of the deferred period.
	f)	Outstanding claims (including IBNR)
		i.	The Appointed Actuary should identify the reserves that are held in respect of outstanding claims and confirm that the accounts accurately reflect them.
		ii.	Outstanding Claims (including IBNR) may assume claims reporting delay patterns are homogenous for all Protection & Savings business except Group Credit Life.
		iii.	Outstanding claims (including IBNR) for Group Credit Life should be determined on a scheme-by-scheme basis taking into account the slower claims reporting characteristic of this product, and the historic experience available.
	g)	Contents of the Report to SAMA, certificates and signatures
		The Appointed Actuary’s report must include, at a minimum:
		i.	A brief description of each of the main types of contract, sufficient so that the methods and assumptions used in the valuation can be understood. Particular reference should be made to any options and guarantees under the contracts. For unit-linked contracts, full details of the charges made to Policyholders should be set out. Full details of each Group Credit Life scheme insured by the Company should be included within the report.
		ii.	A statement describing the valuation method for contracts that are not unit-linked contracts.
		iii.	Where a retrospective valuation method has been used, a statement giving details of the tests carried out to ensure that the resulting amount of the Mathematical Reserves are no lower than that required if a prospective calculation is used.
		iv.	A statement of all the rates of interest assumed in the valuation, and the types of contracts that each rate applied to.
		v.	A statement of all the rates of mortality and disability assumed in the valuation, the types of contract that each rate applied to and full details of the investigations undertaken to validate the assumptions made. Where standard tables are used, reference must be made to those standard tables.
		vi.	A detailed description of the investigations undertaken to analyse the expenses of the Company between acquisition expenses and renewal expenses, and between different categories of product, together with all the relevant information used in the analysis.
		vii.	A description of how the valuation allows for voluntary discontinuation, together with a justification for the assumptions used.
		viii.	A detailed description of how the valuation allows for the Company’s expected future expenses, showing how the expense allowances in the valuation relate to the actual renewal expenses incurred as determined in sub-paragraph (f) above.
		ix.	A description of the way in which the valuation makes proper provision, either explicitly or implicitly, for future bonuses for participating contracts in a manner consistent with the other assumptions on future experience and with the current method of distribution of bonuses.
		x.	A description of the way in which the valuation makes provision for options and guarantees.
		xi.	A description of all changes in the method of calculation of the Mathematical Reserves or in the assumptions used, together with the full justification and the impact of each change individually.
		xii.	Where additional amounts have been set aside on an aggregated basis for general risks that are not individually assessed, a statement giving details of the additional amounts, the justification and methodology for calculation.

9.	Reinsurance Accruals
	a)	Where any reinsurance treaty includes Swing Rates, or any adjustment reinsurance premium or commissions based on the claims experience under the treaty or a loss participation clause, then the Appointed Actuary is required to determine an explicit Reinsurance Accrual Reserve. The results of the calculation must be provided to the Finance function in order to book those amounts under appropriate categories within the Company’s Financial Statement (e.g. amount payable to or receivable from reinsurers, etc.).
	b)	For any treaty where the reinsurance premium or reinsurance commissions are adjusted based on claims experience, the Reinsurance Accrual Reserve should be based on the projected ultimate loss ratio.

10.	Reinsurance Adequacy Analysis
	a)	The Appointed Actuary must review all effective reinsurance treaties. The Appointed Actuary must comment on the value for money provided by each treaty and its appropriateness given the risks underwritten by the Company. In addition, the Appointed Actuary is required to comment on the amount of risk transfer under the treaty, and as to why it should not be considered as Finite Reinsurance.

11.	Other Contents of FCR
	a)	The Appointed Actuary must ensure that, in addition to the above, the FCR produced covers all other requirements as per the regulations and meets the applicable professional standards of the relevant actuarial organisation.

Board and Management Responsibilities

	a)	The Company’s Board of Directors and management are ultimately responsible for ensuring that the reserves booked in the financial statements are adequate. SAMA expects that the Company will book reserves equal to or higher than those recommended by the Appointed Actuary.
	b)	In those rare circumstances, where the Company intends to book reserves lower than those recommended by the Appointed Actuary, it has to be approved by the Board of Directors, and the CEO of the Company must inform SAMA immediately, along with an appropriate justification, including the external auditor’s views on the proposed reserves. In such cases, it is likely that SAMA will require additional evidence that may include an independent reserving exercise as at 31 December 2018 carried out at the Company’s expense. Until the Company has obtained clearance from SAMA, the Company must not publish its financial statements.
	c)	The Appointed Actuary must, in addition, prepare a short summary document highlighting the key findings in the FCR. This should be no more than five pages in length, and should be submitted to the Board of Directors of the Company as a Board paper, with the Appointed Actuary’s full report being an appendix to the Board paper.
	d)	SAMA requires that the Appointed Actuary present his findings and recommendation at a Board Meeting, to be held before 30April 2019.

Compliance

	a)	A copy of this Circular should be shared with the Company’s Board of Directors, Audit Committee, Chief Financial Officer, Appointed Actuary, External and Internal Auditors,. Risk Management officers and Compliance Officer.
	b)	If, in SAMA’s view, the Actuarial Reserve Report does not meet generally accepted professional standards, then SAMA may require that an independent reserving exercise as at 31 December 2018 be carried out at the Company’s expense for submission to SAMA at a date decided by SAMA.

Appendix 1
FCR Reporting Template (attached)

All data and reports, including the above template, must be submitted via RMS.

Renewal of Permit Issued by SAMA for Liberal Professions Pertaining to Insurance and / or Reinsurance Activities
This section is currently available only in Arabic, please click here to read the Arabic version.

Dedicated Account for Doubtful Debts

In reference to paragraph (d) of Article Sixty-Nine of the Implementing Regulations of the Cooperative Insurance Companies Control Law, which stipulates that " doubtful debts reserves shall be calculated, at a minimum, as follows:

1-	Ten percent (10%) of the total amounts due from reinsurers exceeding 180 days.
2-	Fifteen percent (15%) of the total amounts due from the insured exceeding 90 days.
3-	Twenty-five percent (25%) of the total amounts due from the insured exceeding 180 days.
4-	Seventy-five percent (75%) of the total amounts of uncollected receivables exceeding 360 days.
5-	One hundred percent (100%) of any disputed and uncollected receivables. "

I inform you that the insurance premiums amounts for policies issued to the insured are fully due as of the date of commencement of insurance coverage for policies, (The Inception Date), and the provision for doubtful debts must be calculated on this basis and according to the percentages mentioned in the text of the aforementioned article. We hope to correct the provision for doubtful debts to the company if it is not in accordance with the text of the article, and to fully comply with the above as of 1/1/2011.

Submitting Financial Results, External Auditors' Reports, and Advertisement Forms
This section is currently available only in Arabic, please click here to read the Arabic version.

Benefiting From the "Maher" Program Graduates 12/12
I would like to inform that the Human Resources Development Fund "Hadaf" launched the "Maher 12/12" program to train and qualify human cadres in programs approved by training bodies in many professions required for the labor market. The program aims to train (12,000) job seekers in several professions by 2012.
Since a number of trainees graduated from the insurance program to work in insurance-related jobs such as underwriting, claims settlement, marketing, sales, risk management, health insurance and customer service, and in order to provide them with job opportunities in insurance companies in addition to providing job resources for insurance companies, I hope to communicate with the Human Resources Development Fund and benefit from the graduates of the program. You can contact the General Administration of the King Fahd National Employment Center.

Financial Condition Report (FCR) for 2017

This circular refers to the company’s Financial Condition Report (FCR) for 2017. Reference is made to part “Second” of Article (20), part “Third” of Article (20), Part (1) of Article (69) of the Implementing Regulations, and Article (28) of the Actuarial Work Regulations.

Submission Deadlines

The Company must submit the required documents to SAMA according to the following schedule:
	•	1 February 2018 - Reserving section of FCR Reporting Template duly filled in based on the results of the reserving exercise as at 31 December 2017 — Appendix 1
	•	11 February 2018 — Actuarial Reserve Report as at 31 December 2017 (this will be a subset of the Financial Condition Report)
	•	31 March 2018 - Financial Condition Report as at 31 December 2017, along with the FCR Reporting Template

Financial Condition Report Contents

1.	Data
	a)	A description of the data used in the analysis should be included in the report.
	b)	Adjustments to the raw data by the Company or the Appointed Actuary should be explained.
	c)	Any issues regarding consistency, completeness, or accuracy of data should be documented. Data validation checks carried out should be described. The report should clearly identify the data issues resolved and those still outstanding when the report was produced.
	d)	Reconciliations should be carried out, at a minimum, for Gross Written Premium, Net Written Premium, Gross Earned Premium, Net Earned Premium, Gross Claims Paid, Gross Claims Outstanding, Net Claims Paid and Net Claims Outstanding, Salvage and Subrogation. Reconciliations should be against financial data, the previous years’ FCR, and pricing report data where applicable.
	e)	It is not sufficient to rely on Reconciliations in validating the data. The other data checks to be carried out are left to the professional judgement of the Appointed Actuary.
	f)	Data checks carried out for 31 December 2017 should build on those carried out as at 30 September 2017 (see below).
2.	Data Deficiency Reserve
	a)	All companies are required to provide the required data to their Appointed Actuary in a format that allows sufficiently detailed analysis to be carried out.
	b)	Medical Expense Insurance claim data must be provided to the Appointed Actuary in a format that allows monthly paid and incurred claims delay tables to be constructed. The Appointed Actuary is not necessarily required to use monthly data, but he/she should use professional judgement to decide on the appropriate granularity of data to use.
	c)	If the company is unable to provide medical claims data in a format that allows monthly paid and incurred claims delay tables to be constructed, then it must establish a Data Deficiency Reserve of 5% of Medical Expenses Insurance Net Written Premium.
	d)	For all other products, except for long term Protection and Savings business, data must be provided to the Appointed Actuary in a format that allows quarterly paid and incurred claims delay tables to be constructed. The Appointed Actuary is not necessarily required to use quarterly data, but he/she should use professional judgement to decide on the appropriate granularity of data to use.
	e)	If the company is unable to provide data for any other products or lines of business, except for long term Protection and Savings business, in a format that allows quarterly paid and incurred claims delay tables to be constructed for that product or line of business, then it must establish a Data Deficiency Reserve of 5% of the relevant Net Written Premium.
3.	Unearned Premium Reserve (UPR)
	a)	For all one-year policies, except for Marine Cargo Open Cover policies, the UPR must be determined on a 1/365th basis, assuming the risk is uniform over the policy year.
	b)	For Marine Cargo Open Cover policies, where dates of voyages are usually not available, UPR should be estimated using the last three months' premium for the relevant period as per Article 69(2) of Implementing Regulations.
	c)	For shorter-than-one-year Marine Cargo policies, UPR should be determined:
		i.	Using straight-line method over the policy term as in (a) above; or
		ii.	In the absence of data required for (i) above, using the last three months’ premium for the relevant period as per Article 69 (2) of Implementing Regulations
4.	Unexpired Risk Reserve (URR)
	a)	It should be noted that any Premium Deficiency Reserve is part of the Unexpired Risk Reserve. These should be shown as additional Premium Reserves in the Financial Statements and should not be included within Earned Premium or the UPR. The gross URR must be shown in Column E of Form 62, the reinsurance share in Column P of Form 62, and the net URR in Column AA of Form 62 of the Reporting Forms.
	b)	For Engineering Construction projects with policy terms in excess of one year, the Appointed Actuary shall assume that the risk will increase linearly over the policy term in determining the URR. SAMA had previously provided a spreadsheet to all companies and actuaries to support the calculations for the 2013 FCR. which should continue to be adopted, unless the Appointed Actuary has sufficient claims data to carry out full analysis of the incidence of risk. In such cases, the premium earnings pattern may be derived based on this analysis, subject to full documentation of the analysis performed.
	c)	The Company should note that for policies covering Engineering Construction projects with policy terms in excess of one year, premiums should be assumed due on the dates agreed with the Policyholder for the purpose of establishing Doubtful Debt Reserves according to Article 69(d) of the Implementing Regulations. This is subject to premiums being due on a uniform basis and the annual premium being constant over the period of the contract.
	d)	For Extended Warranty policies with terms in excess of one year, the Appointed Actuary must assume that the risk will increase linearly over the policy term in determining the URR. The spreadsheet, referred to under item (b) above, should be used for this purpose, unless the Appointed Actuary has sufficient claims data to carry out full analysis of the incidence of risk. In such cases, the premium earnings pattern may be derived based on this analysis, subject to full documentation of the analysis performed.
5.	Premium Deficiency Reserve (PDR)
	a)	If the Company has insufficient unearned premium reserve against the corresponding projected claims and expenses under a line of business, then it must hold a Premium Deficiency Reserve for that line of business.
	b)	All expenses must be assigned to individual lines of business, supported by a comprehensive expenses analysis. This must be explicit for commissions, both direct and reinsurance, and claims management expenses. Other Expenses must be allocated appropriately, e.g., in proportion to GWP or GEP, and must be treated consistently year on year.
	c)	Other Expenses must include all expense items allocated to both Policyholders and Shareholders, including Zakat and Income Tax. The only expenses that may be excluded are the investment expenses for both Policyholders and Shareholders.
	d)	All expenses referred to under items (b) & (c) above should be sourced from audited statements of the Company, using the calculation method shown in Appendix 2. Where the calculation of PDR precedes the audit of the above expenses, any material changes in those expenses as a result of the audit exercise should lead to a change in the PDR.
	e)	Any expenses that may be subject to unusual fluctuations may be smoothed. In particular, the change in Doubtful Debt Reserve must be considered as part of the Company’s expenses, but consideration should be given to smoothing this item.
6.	Claim Reserves - all lines of business (excluding life insurance)
	a)	Full claims triangles used to determine the claims reserves must be shown in the Appointed Actuary’s report.
	b)	‘Actual v Expected' analysis showing the deviation of the projected claims development based on data as at 31 December 2016 from the actual claims developments during the year 2017 for each prior accident period. The report should clearly state the treatment of the above deviations for the purpose of determining the claims reserves as at 31 December 2017. This analysis is required for all lines of business, unless the Appointed Actuary considers a line of business to be immaterial.
	c)	The report should clearly identify all material assumptions used and judgments made, along with their justification, so that another actuary with appropriate skills can reproduce the results independently.
	d)	Claims reserves analysis must consider more than one reserving methodology.. For Motor and Medical Expenses lines of business written on a direct basis, both ‘paid claims-based’ and ‘incurred claims- based’ methods must be used. For other lines of business, it is preferred that the Appointed Actuary considers both ‘paid claims-based’ and ‘incurred claims-based’ methods. The Appointed Actuary should use his professional judgment when selecting results based on a particular methodology or a combination of methodologies. This selection should be justified.
	e)	It is expected that all reserve projections will be carried out on a gross- of-recoverables basis, and all recoverables (i.e., reinsurance, salvage, and subrogation) will be projected separately. The method of estimating the reserves for recoverables must be fully described.
	f)	Claims reserves should not be discounted, unless required by the nature of those claims, e.g., annuity payments under a liability claim. Where discounted, the discount rate assumed should be clearly stated in the report.
	g)	Methodology for estimating the Claims Expense (i.e., ALAE and ULAE) reserves should be fully described.
7.	Claim Reserves - Motor-specific Requirements
	a)	In the past, SAMA had expressed concerns over the reliability of outstanding Salvage & Subrogation claims data. Where the Appointed Actuary intends to use the outstanding Salvage & Subrogation claims data for projecting future recoveries, this must be supported by a detailed analysis of historical recoveries.
	b)	In general, the Appointed Actuary should pay extra attention when selecting results based on the incurred claims data, and make adjustments as appropriate.
	c)	The Company should hold a provision of 100% for all outstanding amounts of Salvage/Subrogation recoveries where the date of reporting of an accident was more than one year ago.
8.	Claim Reserves Uncertainty
	a)	The Appointed Actuary must estimate the uncertainty around his/her estimate of the claim reserves. The analysis of reserve uncertainty should be carried out separately for each line of business, and, preferably, also at the portfolio level.
	b)	SAMA expects that the Appointed Actuary will use standard actuarial methodologies to estimate the above uncertainty. This may include Bootstrapping techniques, Mack Method, or simply a range of results under various reserve methodologies.
9.	Reinsurance Accruals
	a)	Where any reinsurance treaty includes Swing Rates, or any adjustment reinsurance premium or commissions based on the claims experience under the treaty or a loss participation clause, then the Appointed Actuary is required to determine an explicit Reinsurance Accrual Reserve. The results of the calculation should be provided to the Finance function in order to book those amounts under appropriate categories within the Company’s Financial Statement (e.g. amount payable to or receivable from reinsurers, etc.).
	b)	For any treaty where the reinsurance premium or reinsurance commissions are adjusted based on claims experience, the Reinsurance Accrual Reserve should be based on the projected ultimate loss ratio.
	c)	In addition, for any open treaties that include Swing Rates, or any adjustment reinsurance premium or commissions based on the claims experience under the treaty or a loss participation clause, then the Appointed Actuary should adjust the Net Unexpired Risk Reserve, as appropriate.
10.	Protection & Savings Insurance
	a)	Detailed instructions for Protection & Savings Insurance are shown in Appendix 3 to this Circular.
	b)	It should be noted that all Group Life and Group Credit Life must be shown as Protection & Savings business within the Reporting Forms and in the Financial Statements.
	c)	In addition, all insurance companies writing either of these products must complete Form 33 showing the Solvency Margin in respect of Protection & Savings business.
	d)	Particular attention should be paid to the Group Credit Life section of the above Appendix.
11.	Other Contents of FCR
	a)	The Appointed Actuary should review any treaty put in place to protect Medical Expense Insurance business or Motor Insurance business. The Appointed Actuary should comment on the value for money provided by the treaty. In addition, the Appointed Actuary is required to comment on the amount of risk transfer under the treaty, and as to why it should not be considered as Finite Reinsurance. The Appointed Actuary may refer to the “Guidance Paper on Risk Transfer, Disclosure and Analysis of Finite Reinsurance” published by the International Association of Insurance Supervisors (IAIS)¹, first published in year 2006, and most recently updated in year 2014.
	b)	The Appointed Actuary must ensure that, in addition to the above, the FCR produced covers all other requirements as per the regulations.

¹ https://www.iaisweb.org/page/supervisory-material/archive-supervisorarchive-supervisory-material-superseded-by-icps-standards-guidance-adopted-in-2011/guidance-papers/file/34128/11-guidance-paper-on-risk-transfer-disclosure-and-analysis-of-finite-reinsurance

Board Reporting

	a)	The Appointed Actuary must, in addition, prepare a short summary document highlighting the key findings in the FCR. This should be no more than five pages in length, and should be submitted to the Board of Directors of the Company as a Board paper, with the Appointed Actuary’s full report being an appendix to the Board paper.
	b)	SAMA requires that the Appointed Actuary present his findings and recommendation at a Board Meeting, to be held before 30 April 2018.

Compliance

	a)	A copy of this Circular should be shared with the Company’s Board of Directors, Audit Committee, Chief Financial Officer, Appointed Actuary, External and Internal Auditors, Risk Management officers and Compliance Officer.
	b)	The Company’s CEO should provide confirmation within seven days of the date of this Circular confirm that that copies have been passed to all those mentioned above.
	c)	If, in SAMA’s view, the Actuarial Reserve Report does not meet generally accepted professional standards, then SAMA may require that an independent reserving exercise as at 31 December 2017 be carried out at the Company’s expense for submission to SAMA at a date decided by SAMA.
	d)	The Company management is ultimately responsible for ensuring that the reserves booked in the financial statements are adequate. SAMA expects that the Company will book reserves equal to or higher than those recommended by the Appointed Actuary. Where the Company booked reserves higher than those recommended by the Appointed Actuary, it must inform SAMA immediately about the additional reserves booked.
	e)	In those rare circumstances, where the Company management intends to book reserves lower than those recommended by the Appointed Actuary, the CEO of the Company must inform SAMA immediately, along with an appropriate justification, including the external auditor’s views on the proposed reserves. In such cases, it is likely that SAMA will require additional evidence, including possibly an independent reserving exercise as at 31 December 2017 carried out at the Company’s expense. Until the Company has obtained clearance from SAMA, the Company shall not be able to publish its financial statements.

Appendix 1
FCR Reporting Template (attached)

Starting from year-end 2018 FCR, SAMA will require all data, including the above template, to be submitted via RMS.

Appendix 2 - Expense Ratio Definition

For the Expense Ratio, the Numerator is:
Commission Incurred () (Form 21, Line 38, Column E) Minus* Reinsurance Commissions Earned (Form 21, Line 18, Column E) Minus Other Underwriting Income (Form 21, Line 19, Column E) Plus Policy Acquisition Costs (Form 21, Line 39, Column E) Plus Other direct underwriting Expenses (Form 21, Line 40, Column E) Plus Doubtful Debt Expense (Form 21, Line 41, Column E) Plus Operational and Technical Expenses (Form 21, Line 51, Column E) Plus Shareholders Expenses (Form 22, Line 39, Column A) Plus Zakat (Form 22, Line 51, Column A) Plus Taxes (Form 22, Line 52, Column A)
* The item “commission incurred (Form 21, Line 38, Column E)” should be replaced with the ‘expected’ commission at the portfolio level for the business to be underwritten.
The Denominator is the Net Earned Premium plus any ‘Other Income’ other than that arising from investments and underwriting activities:
Net Earned Premium (Form 21, Line 17, Column E) + Other Income (Form 21, Line 71, Column E) + Other Income - Shareholders (Form 22, Line 19, Column A)
If a Company has incorrectly treated movements in Premium Deficiency Reserves as part of its earned premium for accounting purposes, then it should reverse these movements out for the purposes of calculating the Denominator above.

Appendix 3 - Protection and Savings (P&S)

1.	This Appendix is included in the FCR letter for actuaries preparing technical provisions for Protection and Savings business for the year-end Financial Statements of companies in Saudi Arabia.
2.	The technical provisions shown in this Appendix should always be prepared in Saudi Riyals.
Method of calculation of the Mathematical Reserves of P&S business
3.	(a)	The determination of the amount of Mathematical Reserves in respect of the liabilities in the P&S Class, (other than liabilities which have fallen due for payment before the valuation date) shall be made on actuarial principles which have due regard to the reasonable expectations of Policyholders and shall make proper provision for all liabilities on prudent assumptions that shall include appropriate margins for adverse deviation of the relevant factors.
	(b)	The determination shall take account of all prospective liabilities as determined by the policy conditions for each existing contract, taking credit for premiums payable after the valuation date.
	(c)	Without prejudice to the generality of subparagraph (a) above, the amount of the Mathematical Reserves shall be determined in compliance with each of paragraphs 4 to 19 below and shall take into account, among other things, the following factors:
		i)	all guaranteed benefits, including guaranteed surrender values;
		ii)	vested, declared or allotted bonuses to which Policyholders are already either collectively or individually contractually entitled;
		iii)	all options available to the Policyholder under the terms of the contract;
		iv)	expenses, including commissions;
		v)	all discretionary charges and deductions;
		vi)	any rights under contracts of reinsurance in respect of business in the P&S Class.
4.	(a)	Subject to subparagraphs (b), (c) and (d) below, the amount of the Mathematical Reserves shall be determined separately for each contract by a prospective calculation.
	(b)	A retrospective calculation may be applied to determine the Mathematical Reserves where a prospective method cannot be applied to a particular type of contract or benefit, or where it can be demonstrated that the resulting amount of the Mathematical Reserves would be no lower than would be required by a prudent prospective calculation.
	(c)	Appropriate approximations or generalisations may be made where they are likely to provide the same, or a higher, result than individual calculations of the same amount of the Mathematical Reserves in respect of each contract.
	(d)	Where necessary, additional amounts shall be set aside on an aggregated basis for general risks that are not individualised.
	(e)	The method of calculation of the amount of the Mathematical Reserves and the assumptions used shall not be subject to discontinuities from year to year arising from arbitrary changes and shall be such as to recognise the distribution of profits in an appropriate way over the duration of each policy.
	(f)	The Mathematical Reserves for contracts under which the Policyholder is eligible to participate in any established surplus shall have regard to the level of the premiums under the contracts, to the assets held in respect of those liabilities, and to the custom and practice of the insurance company in the manner and timing of the distribution of profits or the granting of discretionary additions, as the case may be.
5.	The amount of the Mathematical Reserve determined in respect of a group of contracts shall not be less than such amount as, if the assumptions adopted for the valuation were to remain unaltered and were fulfilled in practice, would enable Mathematical Reserves similarly determined at all times in the future to be covered from resources arising solely from the contracts and the assets covering the amount of the Mathematical Reserve determined at the current valuation.
Net premium reserves
6.	(a)	Where further specified premiums are payable by the Policyholder under a contract (not being a unit linked contract) under which benefits (other than benefits arising from a distribution of profits) are determined from the outset in relation to the total premiums payable there-under, then, subject to subparagraph (c) and paragraph 7 below,
		(i)	where the premiums under the contract are at a uniform rate throughout the period for which they are payable, the premiums to be valued shall be not greater than such level premiums as, if payable for the same period as the actual premiums under the contract and calculated according to the rates of interest and rates of mortality or disability which are to be employed in calculating the Mathematical Reserve under the contract, would have been sufficient at the outset to provide for the benefits under the contract according to the contingencies upon which they are payable, exclusive of any additions for profits, expenses or other charges;
		(ii)	where the premiums under the contract are not at a uniform rate throughout the period for which they are payable, the premiums to be valued shall be not greater than such premiums as would be determined on the principles set out in sub-paragraph 6(a)(i) above modified as appropriate to take account of the variations in the premiums payable by the Policyholder in each year;
		provided that a premium to be valued shall in no year be greater than the amount of the premium payable by the Policyholder.
	(b)	Where the initial terms of the contract have changed since the contract was first made, then for the purposes of the subparagraph (a) above, it shall be assumed that those changes, from the lime they occurred, were provided for in the contract at the time it was made. For the purposes of this paragraph, the terms of the contract are taken to change if the change is indicated in an endorsement on the policy but not if a new policy is issued.
	(c)	An alternative valuation method to that described in subparagraphs (a) to (b) above may be used where it can be demonstrated that the alternative method results in reserves no less, in aggregate, than would result from the use of the method described in those subparagraphs.
Acquisition expenses
7.	(a)	In order to reduce the reserve strain during the first policy year, the Company may use Zillmer Reserve Method
	(b)	The increase permitted by subparagraph (a) above shall be subject to the limitation that the amount of the future premium valued shall not in any event be greater than the amount of the premium actually payable by the policyholder.
Rates of interest
8.	(a)	The rates of interest to be used in calculating the present value of future payments by or to an insurance company shall be no greater than the rates of interest determined from a prudent assessment of the yields on existing assets attributed to the P&S Class business and. to the extent appropriate, the yields which it is expected will be obtained on sums to be invested in the future.
	(b)	For the purposes of subparagraph (a) above, the assumed yield on an asset attributed to the P&S Class business, before any adjustment to take account of the effect of taxation and Zakat, shall not exceed the yield on that asset calculated in accordance with subparagraphs (c) to (e) below, reduced by 5 per cent of that yield.
		For the purpose of calculating the yield on an asset, the asset shall be valued in accordance with Article 65 of the Implementing Regulations, subject to the additional rules in this Appendix.
	(c)	For fixed interest investments the yield on an asset, subject to subparagraph (e) below, shall be that annual rate of interest which, if used to calculate the present value of future payments of interest before the deduction of tax and Zakat and the present value of repayments of capital, would result in the sum of those amounts being equal to the value of the asset.
	(d)	For equity shares or immovable property, the yield on an asset, subject to subparagraph (e) below, shall be the ratio to the value of the asset of the income before deduction of tax and Zakat which would be received in the period of twelve months following the valuation date on the assumption that the asset will be held throughout that period and that the factors which affect income will remain unchanged, taking into account any changes in those factors known to have occurred by the valuation date.
	(e)	In calculating the yield on an asset under this paragraph -
		i)	if the asset does not consist of equity shares or immovable property -
			•	a prudent adjustment shall be made to exclude that part of the yield estimated to represent compensation for the risk that the income from the asset might not be maintained or that capital repayments might not be received as they fall due, and
			•	in making that adjustment, regard shall be had wherever possible to the yields on risk-free investments of a similar term in the same currency:
		ii)	for assets which are equity shares or immovable property, adjustments to yields shall be made as appropriate to exclude that part, if any, of the yield from each category of asset that is needed to compensate for the risk that the aggregate income from that category of asset, taking one year with another, might not be maintained. For the purposes of this subparagraph, a "category of asset" comprises assets of a similar nature, type and degree of risk.
	(f)	In no case shall a rate of interest determined for the purposes of subparagraph (a) above exceed the adjusted overall yield on assets calculated as the weighted average of the reduced yields on the individual assets arrived at according to the provisions of subparagraph (b) above; and when that weighted average is calculated -
		i)	the weight given to each investment shall be its value as an asset determined in accordance with Article 65 of the Implementing Regulations, subject to the additional rules in this Appendix, and
		ii)	except in relation to the rate of interest used in valuing payments of unit linked benefits, both the yield and the value of any linked assets shall be omitted from the calculation.
	(g)	The maximum rate of interest to be applied before any adjustment which takes into account the effect of taxation and Zakat shall be the lesser of:
		i)	the yield as calculated in subparagraph (b) above, and
		ii)	the yield available on long term Saudi Government sukuks or bonds, where “long term” is specified as the maximum duration of the available Saudi Government sukuks or bonds in issue, but not exceeding 15 years, with a maximum rate of six per cent (6.0%) per annum.
	(h)	For the purpose of determining the rates of interest to be used in valuing a particular category of contracts the assets may, where appropriate, be notionally apportioned between different categories of contracts.
	(i)	Where the Mathematical Reserves are denominated in currencies other than Saudi Riyals, the yield shall be determined on assumptions that are as prudent as those made under subparagraphs (c) to (h) above, interpreted in the context of the jurisdiction relevant to that currency.
Rates of mortality and disability
9.	The amount of the Mathematical Reserves in respect of any category of contract shall, where relevant, be determined on the basis of prudent rates of mortality and disability. The rates used shall be based on relevant tables of mortality and disability published internationally, adjusted, where appropriate, to represent the experience of the company and the market in which the contract is written.
Provision for expenses
10.	(a)	Provision for expenses, whether implicit or explicit, shall be not less than the amount required, on prudent assumptions, to meet the total net cost, after taking account of the effect of taxation and Zakat, that would be likely to be incurred in fulfilling all contracts then in force if the company were to cease to transact new business twelve months after the valuation date.
	(b)	The provision mentioned in subparagraph (a) above shall have regard to, among other things, the company's actual expenses in the last twelve months before the valuation date and to the effects of inflation on future expenses on prudent assumptions as to the future rates of increase in prices and earnings.
	(c)	Where the company writes short term Protection & Savings, General and/or Health insurance, the expense provision should allow for all projected expenses over the run-off period for all in-force contracts, not just those for Protection & Savings contracts.
Future bonuses
11.	Account shall be taken either explicitly or implicitly of future bonuses for participating contracts in a manner consistent with the other assumptions on future experience and with the current method of distribution of bonuses.
Options
12.	(a)	Provision shall be made on prudent assumptions to cover any increase in liabilities caused by Policyholders exercising options under their contracts.
	(b)	Where a contract includes an option whereby the Policyholder could secure a guaranteed cash payment within twelve months following the valuation date, the provision for that option shall be such as to ensure that the value placed on the contract is not less than the amount required to provide for the payments that would have to be made if the option were exercised.
	(c)	Where the surrender value of a contract is guaranteed, the provision for the contract at any time shall be at least as great as the value guaranteed at that time.
Contracts not to be treated as an asset
13.	No contract shall be treated as an asset.
Unit-linked contracts
14.	Where the benefits payable under a contract are wholly or in part unit-linked benefits, the amount of the Mathematical Reserves determined in respect of those linked benefits shall not be less than the value of the underlying assets.
15.	The Appointed Actuary should ensure that the number of units allocated to policies is correct and that the calculation of the unit prices is correct. Unit prices should be calculated using asset values consistent with the way that assets are valued in the balance sheet.
16.	The Appointed Actuary should consider whether any reserves additional to the unit liability should be held for unit-linked policies. In particular, possible future shortfalls in expense margins should be considered by projecting future cashflows on each unit-linked policy, using the following guideline assumptions:
	a)	The assessment of appropriate assumptions for future experience should have regard to past, current and expected future experience and to any other relevant data.
	b)	Economic assumptions regarding future investment yields on various classes of investment and inflation must be internally consistent and should be consistent with observable, reliable market data.
	c)	The mortality rates and other claim incidence rates (such as Permanent Total Disability, Accidental Death Benefit etc.) should be based on the company’s recent experience, over at least the last three years, if sufficient data are available for statistically credible rates, otherwise standard published tables (adjusted if appropriate) should be used. The Appointed Actuary should ensure that any investigation of these rates is carried out rigorously. The Appointed Actuary should report to SAMA full details of the investigations carried out into these rates.
	d)	Subject to paragraph 17 below, discontinuance rates should be based on the company’s recent experience. The Appointed Actuary should check that any investigation of discontinuance rates has been carried out rigorously and that, in particular, delays in identification of lapses are not undermining the statistics. Discontinuance rates normally vary by type of policy and the duration that the policy has been in force, and the investigation should take this into account. The Appointed Actuary should provide full details to SAMA of the investigations carried out into discontinuance rates.
	e)	Per policy expense assumptions should be based on an analysis of the company’s actual expenses. It is essential that all expenses of the company are included in the expense analysis and that the analysis of the expenses into the different categories of acquisition and renewal expenses is rigorous and appropriate. The Appointed Actuary should report to SAMA the full details of the expense analysis carried out.
	f)	If the calculation produces a negative result for any contract, it should be set to zero.
Allowance for voluntary discontinuance
17.	Allowance shall not be made in the valuation for the voluntary discontinuance of any contract if the amount of the Mathematical Reserves so determined would thereby be reduced. Where allowance for voluntary discontinuance increases the reserve required, prudent rates of discontinuance should be allowed for, based on the company's recent experience.
Mathematical Reserves on Group Life business
18.	It should be noted:
	a)	The Mathematical Reserve for Employer Sponsored Group Life contracts written on a unit-rated basis where the premium for each individual is not known should be valued by calculating an Unearned Premium Reserve (UPR) for the proportion of the gross total premium under the contract relating to the remaining period from the valuation date until the expiry of the current period of insurance.
	b)	The Appointed Actuary should consider carefully whether the premiums for the class of group protection business taken as a whole (with due account being taken of reinsurance arrangements) is adequate, in light of actual experience to date and expected future experience, and if necessary determine an Unexpired Risk Reserve in addition to the UPR. It is acceptable for an Unexpired Risk Reserve to be held at the company level so that the company’s overall experience is taken into account.
	c)	Deferred acquisition costs arising from group business may not be used as an asset to offset the Mathematical Reserve.
Mathematical Reserves on Group Credit Life business
19.	(a)	The Mathematical Reserve for Group Credit Life contracts covering customers of banks and finance companies, and written on a unit-rated basis should be set separately for each policy based on its own historical and projected future experience.
	(b)	The company must provide the Appointed Actuary with all quotation data received in respect of any Credit Life scheme that has been in-force with the company for less than three full policy years.
	(c)	Loss rates per mille of Sum Insured should be considered for at least the past three years. Where there is any indication of deteriorating experience the Appointed Actuary should make a prudent allowance for ongoing deterioration in experience.
	(d)	If there has been a material increase in in-force business over the year, then in the absence of individual age data, the Appointed Actuary should make a prudent assumption on the average age of new joiners.
	(e)	Where disability cover is provided with a deferred period then it should be assumed that the insurance company will not be advised of any claim until the end of the deferred period.
Outstanding claims (including IBNR)
20.	(a)	The Appointed Actuary should identify the reserves that are held in respect of outstanding claims and confirm that the accounts accurately reflect them. Both Gross claims and reinsurance recoveries should be checked, paying particular attention to any single value in excess of SR100k.
	(b)	Outstanding Claims (including IBNR) may assume claims reporting delay patterns are homogenous for all Protection & Savings business except Group Credit Life.
	(c)	Outstanding claims (including IBNR) for Group Credit Life should be determined on a scheme-by-scheme basis taking into account the slower claims reporting characteristic of this product, and the historic experience available.
Contents of the Report to SAMA, certificates and signatures
21.	SAMA will largely leave the Appointed Actuary to write his own report on the methods, assumptions and calculations of the technical provisions, but SAMA will specify some matters that must be included, namely the data, methods, assumptions and calculations used in calculating the Mathematical Reserves at the end of each year.
22.	The Appointed Actuary’s report should include:
	a)	A certificate signed by the Appointed Actuary certifying, if such is the case, that the Mathematical Reserves have been determined in accordance with Appendix 3 of SAMA’s FCR letter for 2017, and stating the total amount of the Mathematical Reserves at 31 December 2017.
	b)	A brief description of each of the main types of contract, sufficient so that the methods and assumptions used in the valuation can be understood. Particular reference should be made to any options and guarantees under the contracts. For unit-linked contracts, full details of the charges made to Policyholders should be set out. Full details of each Group Credit Life scheme insured by the company should be included within the report.
	c)	Where a retrospective method has been used in accordance with paragraph 4(b) of this document, a statement giving details of the tests carried out to ensure that the resulting amount of the Mathematical Reserves would be no lower than would be required by a prudent prospective calculation.
	d)	Where additional amounts have been set aside on an aggregated basis for general risks that are not individualised in accordance with paragraph 4(d) of this document, a statement giving details of the additional amounts, the reasons for them and how they were calculated.
	e)	A statement, if such is the case, that the method of calculation of the amount of the Mathematical Reserves and the assumptions used were not subject to discontinuities from year to year arising from arbitrary changes and were such as to recognise the distribution of profits in an appropriate way over the duration of each policy.
	f)	A statement describing the valuation method for contracts that are not unit- linked contracts, if this was not the net premium method implied by paragraph 6 of this document.
	g)	A statement describing the allowance for acquisition expenses, if any, made in accordance with paragraph 7 of this document.
	h)	A statement of all the rates of interest assumed in the valuation in accordance with paragraph 8 of this document, and the types of contracts that each rate applied to.
	i)	A statement of all the rates of mortality and disability assumed in the valuation in accordance with paragraph 9 of this document, the types of contract that each rate applied to and full details of the investigations undertaken to validate the assumptions made. Where standard tables are used reference may be made to the standard tables.
	j)	A detailed description of the investigations undertaken to analyse the expenses of the company between acquisition expenses and renewal expenses, and between different categories of product, together with all the relevant information used in the analysis.
	k)	A detailed description of how the valuation allows for the company’s expected future expenses, in accordance with paragraph 10 of this appendix, showing how the expense allowances in the valuation relate to the actual renewal expenses incurred as determined in sub-paragraph (j) above.
	l)	A description of the way in which the valuation makes proper provision, either explicitly or implicitly, for future bonuses for participating contracts in a manner consistent with the other assumptions on future experience and with the current method of distribution of bonuses in accordance with paragraph 11 of this document.
	m)	A description of the way in which the valuation makes prudent provision for options and guarantees in accordance with paragraph 12 of this document.
23.	The admissible value of the assets for regulatory purposes is restricted by Article 65 of the Implementing Regulations and Table (2) of those regulations sets maximum admissibility percentages for each type of asset.
24.	The amount of the regulatory capital will be equal to the Solvency Margin for Protection and Saving Insurance business calculated in accordance with Article 67 in the Implementing Regulations, plus the amount of solvency capital for General and Health Insurance business calculated in accordance with Article 66 in the Implementing Regulations.

Underwriting Practices

SAMA has noticed alarming market practices in underwriting, especially for medical expenses and motor insurance, which are not in line with international practice, and are damaging the functioning of the market; these practices are:
	•	Insurance companies are prepared to quote for schemes without enough claims experience being provided.
	•	Premium rates being guaranteed for periods in excess of one year for medical expenses and motor insurance.
	•	Insurance companies are managing insurance claims (e.g. medical expenses) without taking on the risk. Under this type of arrangement, the risk is not covered/shouldered by the insurance company, but the company administers the insurance claims of the client, and is acting purely as a TPA.
SAMA introduced requirements for insurance companies to obtain and submit actuarial pricing reports for medical expenses and motor businesses late in 2012 and to be implemented starting from 1 January 2013 for medical expenses insurance business and from 1 April 2013 for motor insurance business. The submitted actuarial medical and motor pricing reports should be updated to fully take into account the recent claims experience of insurance companies.
This letter (Circular) details SAMA’s instructions with respect to the above mentioned issues.

1. Claims Experience Requirements

1.1 Underwriting

No insurance company should ever provide a quotation without having adequate underwriting information on which to scientifically determine the premium rates appropriate for policy terms & conditions offered.
The following requirements must be adhered to in all circumstances:
	•	During 2014, quotations may only be provided if at least one or more years’ claims experience is provided.
	•	During 2015, quotations may only be provided if at least two or more years’ claims experience is provided.
	•	From 2016 onwards, quotations may only be provided if at least 3 or more years’ claims experience is provided.
	•	If a risk is entirely new, the insurance company may only quote the book rates, which have been submitted to SAMA. The insurance company is not allowed to apply any discounts to these rates.
	•	If the risk has been in existence for less than 3 years from 2016, or 2 years from 2015, then the insurance company may quote provided they receive full claims experience for the time the risk has been in existence.
	•	No insurance company is allowed to provide any quotation for medical expenses or motor business unless it has received claims experience as above.
	•	An insurance company can provide a quotation as illustration only based on the information provided to it. However, the insurance company must amend the quotation based on full underwriting data. It may not issue a policy on quoted rates until it has full data to provide an accurate quotation. Under no circumstances may an insurance company provide actual rates, unless it has sufficient data subdivided according to the rating factors it will adopt in its underwriting manual.
	•	For medical expenses insurance full demographic data must be provided before any quotation may be provided.

1.2 Nature of the Claims Experience to be Required

Insurance companies must require that the claims experience consists, at a minimum, of the following:
	•	Number of claims paid by policy year
	•	Amount of claims paid by policy year
	•	Numbers of claims reported but not yet settled by policy year
	•	Claim amount of claims reported but not yet settled by policy year
	•	Deductible or excess applied for each policy year.
	•	The date the claims data was provided and the precise period of the claims experience.
	•	The provided data for the in-force policy year should represent enough claims experience for the policy within six months before the renewal date (i.e. at least 6 months claims paid).
For motor insurance:
	•	Information should be provided as to how depreciation provision is applied when settling a claim for comprehensive coverage.
	•	The amounts should be net of any allowance for salvage and/or subrogation for motor claims.
	•	The number of vehicles covered at each renewal date and at the date of the claims data should be provided for fleet or leasing schemes.
For medical expenses insurance:
	•	The number of lives covered at each renewal date, and at the date the claims data should be provided and separated by age, gender and employee or dependent status.
	•	The amounts should be the actual ones payable to the medical service providers at the time of the claim, and therefore gross of any bulk discount applied in arrears for medical expenses claims.
It should be noted that all claims dates referred to in this Circular are accident or treatment dates. For the definitions of the terminology mentioned in this Circular with respect to the claims experience, please refer to the Financial Reporting Forms - Guidelines published by SAMA.
The insurance industry has proposed that it should develop a standardised form to ensure that the claims experience data provided is consistent across all insurers. SAMA has no objection to any standard form being developed, but the above information must be used to provide from the effective date of this Circular, whether or not a standard form has been agreed by then.

1.3 Responsibility for Providing Claims Experience

The key relationship is between the policyholder and the insurance company. SAMA requires that the insurance company provides the policyholder, upon his written request or his representative’s written request (i.e. broker), within 15 working days of making the request with sufficient and accurate information of his claims experience. It is the responsibility of the policyholder to provide the insurance company with sufficient and accurate information for it to price and underwrite the risk it is taking on.
Where the insurance company outsources its claims administration to a TPA, then the TPA is required to provide the data requested to the insurance company within 10 working days of its request.
The claims experience report issued by either the insurance company or its TPA must be stamped & signed by the authorised person and the report must be printed on the issuer heading letters (insurance company or its TPA).
After receiving the claims experience, the policyholder should review the report and confirm in writing that he reviewed it and that all information included within the report is accurate to the best of his knowledge.
With respect to the personal lines of the business, the insurance company is not required to obtain the policyholder’s claims experience in a report format from policyholder or the existing insurance company; instead the insurance company should ensure that its proposal form asks about all material facts including the policyholder’s claims experience.
If it is found that inaccurate claims experience was provided then the insurance company should have the right to review the premium rate charged, and take appropriate actions. These could include adjusting the premium, or requiring that any commission paid to the broker be refunded if due to broker misrepresentation or non-disclosure.
In extreme circumstances where evidence has been obtained that claims data provided to the insurance company in order to quote was misstated with fraudulent intent, then the insurance company may cancel the policy and take the proper actions against the parties who are responsible for that.

1.4 Role of Brokers

A broker may collect the claims experience and provide it to the insurance company. It should be noted that brokers must act on behalf of the policyholder and conduct their business according to professional and ethical standards and as per the applicable laws and regulation, including the provisions of the Implementing Regulations of the Law on Supervision of Co-operative Insurance Companies, Insurance Intermediaries Regulation, Market Code of Conduct Regulation and Regulation of Reinsurance Activities Regulation.
Using a broker to collect this data does not in any way reduce the responsibility of the policyholder to ensure that accurate information is provided to the insurance company.

1.5 Pricing of Group Medical or Motor Fleet/Leasing Risks

Insurance companies should comply with the following instructions when applying the claims experience:
1.	Apply an experience rating approach for group or fleet/leasing risks, and must supply a fully justified credibility formula set out and signed off by the company’s Appointed Actuary.
2.	A form or Excel spreadsheet should be produced which ensures that the pricing mechanism adopted complies with the credibility formula that is signed off by the company’s Appointed Actuary. A copy of the form or Excel spreadsheet should be provided to SAMA.
3.	The Appointed Actuary should determine the annual increase in the burning costs allowing for claims trends, inflation to be built in the credibility formula calculation mechanism.
4.	The Appointed Actuary’s pricing report should specify the size of schemes for which this blended pricing approach must be adopted. It must define the size of smaller schemes where book rates should be used.
5.	The insurance company may request that its Appointed Actuary assist with individual quotations for a particular scheme if it considers that there are reasons why the scheme falls outside the standard pricing process. All such individual quotations must be fully documented, auditable, and made available to SAMA on request. The Appointed Actuary should ensure that these individual quotations fall outside the standard pricing process before providing his/her recommendation, and he/she may be held liable if he/she quotes rates for individual schemes which are later shown to be too low resulting in losses to the company.

2. Premium Rate Guarantees

It is not permitted for any insurance company to enter into any arrangement with any insured for a period in excess of one year for medical expenses insurance or for motor insurance with rates guaranteed for more than one year. Policyholders can choose to renew their annual policy with the same insurance company, but this must be on terms negotiated and agreed at renewal.

3. Insurance Companies Acting as Third Party Administrator (TPA’S)

SAMA noticed that there are some insurance companies manage insurance expenses claims (e.g. medical costs) without taking on the risk. Under this type of arrangement, the risk is not covered/shouldered by the insurance company, but the company administers the insurance claims of the client. This service represents claims administration services, or acting as a TPA, without bearing the insurance risk, which insurance companies are not licensed to do.
Article 3-2 of the Law On Supervision of Cooperative Insurance Companies does not permit insurance companies to carry out any activities other than insurance. Insurance companies are not allowed to provide claims administration services without bearing insurance risk, and insurance companies should comply with this instruction by 1 July 2014 if they do have any agreement in place.

4. Medical & Motor Pricing Report

SAMA is requiring all insurance companies to provide a full actuarial pricing update for medical and motor products on at least an annual basis, and will consider requiring more frequent updates if necessary.
SAMA requires all companies approved to sell medical or motor products to provide full updated reports as follows:
	1)	Medical, by 1 June 2014
	2)	Motor, by 1 July 2014
For any medical/motor pricing reports, the Appointed Actuary must use up to date complete data to determine the premium rates. The data used in the report must be up to date when the report is submitted to SAMA. Specifically if a report is submitted between:
	1)	1 March to 31 May: it must use complete data up to at least 31 December of the previous year.
	2)	1 June to 31 August: it must use complete data up to at least 31 March of the same year
	3)	1 September to 30 November: it must use complete data up to at least 30 June of the same year.
	4)	1 December to 31 December: it must use complete data up to at least 30 September of the same year.
	5)	1 January to 28 February: it must use complete data up to at least 30 September of the previous year.
Medical/Motor products approval may be withdrawn if the updated actuarial pricing reports are not submitted or are not compliant with SAMA’s instructions.
The insurance company’s Appointed Actuary should prepare the medical and motor pricing reports that are to be submitted to SAMA unless the insurance company has obtained SAMA’s no objection to ask another actuary to prepare the pricing reports at least three months before the date of the actuarial report submission. It should be noted that SAMA will only allow another actuary to be used only if it is justified, and SAMA will require a report to be submitted from the Appointed Actuary in addition to those prepared by the other actuary. It should be noted that there are no restrictions on the preparation of technical or actuarial reports that are not submitted to SAMA.
The insurance company should note that it is acceptable to provide partial submissions to SAMA from the Appointed Actuary in respect of
		a.	Revisions to credibility formula
		b.	Changes to recommended loadings
		c.	Pricing of a single product within the medical or motor class
The insurance company may seek SAMA’s approval to submit partial pricing submissions from the Appointed Actuary in other circumstances.
SAMA’s written no objection is needed before any actuarial pricing report or partial submission is implemented. It is, however, always acceptable to charge higher premium rates than those determined by the Appointed Actuary, subject to such rates being fully documented and justified and in line with Article (46) of Implementing Regulations.
It should be noted that there is no requirement for the company to submit any actuarial pricing report to SAMA unless required by this Circular, or the company wishes to amend its rating structure.
If the company makes any material alteration in its reinsurance arrangements for medical or motor insurance, then it must consult with its Appointed Actuary to determine whether the recommended loadings in the premium rates remain adequate, and must amend its rates as appropriate.
Minimal Requirements And Considerations For The Medical And Motor Pricing Reports must be followed in all subsequent reports. These are set out in an Appendix to this Circular.
It should be noted that the Appointed Actuary must recommend premium rates with no cross subsidies between the rating factors, in line with Article 46 of the Implementing Regulations. However if, for competitive purposes, the company wishes to charge rates which have some element of cross-subsidisation, then it may ask the Appointed Actuary to prepare an additional report setting out the risks of applying the cross-subsidies, based on expected portfolios of business written which may not be too dissimilar to the in-force portfolio. SAMA will review the cross-subsidy report separately.
The company should submit a corresponding underwriting manual, rating structure and premium rates that meet the Minimal Requirements And Considerations For The Medical And Motor Pricing Reports. The rating structure and premium rates should be in Excel spreadsheet format.
The Appointed Actuary is responsible to ensure a comprehensive and concise report is provided to SAMA as to minimize the extent of required follow-up queries from SAMA.
In addition, the Appointed Actuary must prepare a short summary document highlighting his key findings for each actuarial pricing report. This should be no more than 5 pages in length, and should be submitted to the Board of Directors of the company as a Board paper within five working days of the Appointed Actuary’s submission, with the Appointed Actuary’s full report being an appendix to the Board paper.
The actuarial pricing reports submitted to SAMA cannot be preliminary or initial and are required to be the final reports. The reports should clearly summarize and compare the Company’s current premium rates (loads and discounts) and the new premium rates (loads and discounts) calculated by the Appointed Actuary.

5. Compliance

A copy of this Circular should be passed to the Company’s Board of Directors, Audit Committee, Internal Auditors, Risk Management officers, Compliance Officer, Appointed Actuary and External Auditors.
The Appointed Actuary must prepare a short summary document highlighting the key recommendations of the pricing report. This should be submitted to the internal control functions (internal audit, risk management, and compliance functions) with the pricing report submission. The purpose of this document is to ensure that:
•	The internal control functions understand the Appointed Actuary’s recommendations.
•	There are internal controls in place to ensure the company is following the Appointed Actuary’s recommendations.
•	The internal control functions, set up a meeting with the Appointed Actuary to understand his/her recommendations and how to ensure that the company is following his/her recommendations.
The compliance function should report to SAMA any material lack of compliance with SAMA’s instructions. This should be based on the reports of the Internal Audit function and the Risk Management function, and should include an action plan for addressing the key issues identified.
The Internal Audit function should carry out a continuous audit, at least on quarterly basis, of the underwriting function to assess compliance with company’s internal procedure and guidelines as defined in the underwriting manual submitted to SAMA.
The Risk Management function should carry out quarterly assessment of the underwriting risks, and recommend improvements to processes, and address any other weaknesses which should be improved such as any need for additional training of underwriting staff.
The internal control functions (internal audit, risk management, and compliance functions) should provide the Audit Committee on a quarterly basis with a report on their findings and suggested corrective actions. Moreover, on quarterly basis the compliance function should provide SAMA with a copy of the minutes of the Audit Committee meeting in which the report was discussed. The minutes should summarize the findings and any corrective action that should be taken by the company.

6. Implementation of New Rates

Any proposed premium rate increases may be introduced on a File & Use basis, which means the insurance company files the new actuarial report with SAMA and implements the new proposed premium rate, subject to such rates being in line with Article (46) of the Implementing Regulations. However, all premium rate reductions may only be implemented subject to receiving a no objection letter from SAMA.
Any other changes in the premium rating basis that do not clearly represent an increase in the rates to be charged may also only be implemented once SAMA has issued a no objection letter to the company.
Insurance companies should not expect to be able to implement any proposed rate reductions until at least 3 months after they have submitted the report to SAMA, and should not expect any response from SAMA within 2 months.
Where the Appointed Actuary, who has prepared the pricing report is different from the Actuary who prepared the previous pricing report which was accepted by SAMA, then the company should not expect to be able to implement any proposed rate reductions for at least 4 months, after they have submitted the report to SAMA, and should not expect any response from SAMA within 3 months.

7. Regulatory Action for Non Compliance

It should be noted that if an insurance company, broker, insurance agent or insurance claims settlement specialist (third party administrator) is not in compliance with this Circular, SAMA will take the regulatory/legal actions as stipulated in the Law on Supervision of Co-operative Insurance Companies and its Implementing Regulations.
Thus, SAMA instructs the insurance company to do the following:
	1.	Provide SAMA with the updated underwriting manuals, which reflects the instructions stated in Sections 1, 2, 3 and 4 of this Circular, for medical expenses and motor insurance. These should be provided with the actuarial pricing reports.
	2.	Provide SAMA with an unprotected soft copy of the Excel spreadsheets that set out the blended credibility approach that the insurance company is going to adopt to price group medical expenses and fleet/leasing motor risks which are in compliance with instructions stated in this Circular. These should be provided with the actuarial pricing reports.
	3.	Immediately provide insurance company’s employees who are in charge of underwriting with a copy of this Circular.
	4.	The requirements set out in Section 1 of this Circular will be effective from 1 April 2014.
	5.	The requirements set out in Section 2 of this Circular will be effective immediately.
	6.	The requirements set out in Sections 3 of this Circular will be effective from 1 July 2014.
	7.	The requirements set out in Section 4 of this Circular will be effective as detailed in Section 4.
	8.	Provide confirmation from the insurance company’s CEO/GM within seven days of the date of this Circular of adherence to the instructions stated in this Circular.
	9.	Copies of this Circular should be provided to the full Board of Directors of the company. Minutes of the Board meeting on the adherence to the requirements set out in this Circular should be provided to SAMA within 90 days of the date of this Circular.
	10.	SAMA requires that the Appointed Actuary attends Board Meetings to present his Board Pricing papers, and take questions on his full pricing reports. The company should provide minutes of the relevant Board meetings to SAMA, and copies of the Appointed Actuary’s Board papers within 10 business days of the meeting.

Appendix - Minimal Requirements and Considerations for the Medical and Motor Pricing Reports

Insurance Supervision Department
No: ______________________________	Date: _______________________
Attachments: _________________	Date (G): ___________________
Summary
It should be noted that whilst these instructions have largely been issued in previous SAMA letters, there are some minor updates, and the Appointed Actuary should comply with the instructions below.

Professional Guidance
The report shall comply with relevant guidance and standards issued by actuarial societies such as the Institute and Faculty of Actuaries in the UK, the American Academy of Actuaries in the US, the Canadian Institute of Actuaries or the Australian Institute of Actuaries. Reports must state which Guidance they are complying with.
SAMA requires that the following professional standards be followed:
	1)	Knowledge and Experience - An actuary shall perform professional services only if the actuary is competent and appropriately experienced to do so.
	2)	Values and Behaviour - An actuary shall act honestly, with integrity and competence, and in a manner that fulfills the professions responsibility to the public and upholds the reputation of the actuarial profession.
	3)	Professional Accountability - An actuary shall be accountable to a professional actuarial association, or similar professional oversight organization.
The actuarial pricing reports should contain dates of all prior reports produced by the Appointed Actuary in relation to the specific company. The Appointed Actuary should also comment on all related reports from other actuaries that were produced for the specific Company. If the prior actuarial reports were not reviewed or considered, reasons should be provided for the lack of such review. Material changes to the methodology and assumptions should be summarized and highlighted, and the reasons for such changes should be explained.

Data
The Appointed Actuary should use available data that in the Appointed Actuary’s professional judgment allow the desired analysis to be performed. Known material data limitations should be disclosed and their implications discussed.
A full description of the data used in the pricing analysis should be included in the report, noting any deficiencies, and fully describing all data validations carried out.
Data quality issues generally fall into three categories:
	•	Consistency - i.e. whether data is consistent and collected in a standard format;
	•	Complseteness - i.e. an assessment of data thoroughness, taking into consideration the importance of missing data (e.g. is data missing for large limit/high hazard locations); and
	•	Accuracy - i.e. an assessment of data correctness.
Details of validation checks should be provided.
The precise period of investigation that the data is derived from must be stated. Data used should be as up to date as possible. A reasonable check should be carried out against the data used in the most recent prior report. Any adjustments or filtering of the raw data should be explained. An attempt should be made to measure the impact of such adjustment. If the Appointed Actuary decides that to perform a data review is not appropriate, the report should indicate that such a review has not be carried out (and why) and should disclose any resulting limitation on the use of the actuarial work product.
It should be noted that it is not acceptable to exclude any schemes with poor claims histories from the analysis without SAMA’s explicit permission, which will only be granted only if it is justified.

Consistency with Reserving
All analysis shall make an appropriate and fully justified allowance for IBNR and IBNER. The IBNR & IBNER’s used in pricing shall be determined in a consistent manner with the actuarial estimate of the Company reserves, unless any differences in approach are fully explained and justified. However, detailed reserving calculations will not normally be required.

Risk Rates Analysis
The Company’s experience shall be analysed at the level of the rating factors adopted by the Company in pricing its risks. If the Appointed Actuary’s review of the data and experience indicates that other rating factors should be considered and reviewed for the Company’s underwriting and pricing, the report should contain the relevant analysis and comments.
The treatment of any cells which have insufficient data to be fully credible should be described.
All premium rates used by the company within its pricing must be considered by Appointed Actuary. The Appointed Actuary should comment on proposed deviations from filed rates, and also on all credits/discounts and loads in the rating programme.

Changes in product terms, distribution methods, commission terms
Full allowance should be made for any changes in areas such as:
	•	Policy terms and Conditions
	•	Distribution Methods such as changes in the proportion of business written through different channels
	•	Commission rates payable

Blending Book Rates with Experience for Larger Schemes
The Appointed Actuary should define the minimum size of a scheme where book rates shall be blended with the claims experience of the scheme itself (the Burning Cost).
The Company must apply an experience rating approach for group medical and fleet/leasing motor risks over the size defined by the Appointed Actuary, and a fully justified credibility formula should be set out and signed off by the Appointed Actuary.
This approach should take into account burning costs over a three year period, where available, and the Appointed Actuary should specify in detail how burning costs are to be calculated.
An Excel spreadsheet should be produced which ensures that the pricing mechanism adopted complies with the formula.
The Appointed Actuary should note that SAMA imposes no restrictions on his/her choice of rating factors. It is permissible to use the size of scheme as a rating factor if there is adequate data to support it.
However, it is not permissible to use arbitrary discounts for large schemes without analysis of the experience.
The report should include a list and comments on:
	•	The 10 largest policies (by premium volume) for the most recent completed 3 policy periods and their premium and losses (paid and incurred).
	•	The 5 worst performing policies (by loss ratio) for the most recent completed 3 policy periods and their premium and losses (paid and incurred).
	•	The 5 best performing policies (by loss ratio) for the most recent completed 3 policy periods and their premium and losses (paid and incurred).

Trends
The Appointed Actuary should consider any trends in underlying experience both in the determination of personal lines rates, and in setting rating mechanism for group medical and fleet/leasing motor risks.
Examples of trends to be considered are:
	•	Claims cost inflation
	•	Changes in claims costs as result of increased awareness of insurance in the population.
	•	Changes in regulations
As well as trends over a period, the Appointed Actuary may need to consider the impact of seasonality on claims experience within each year.

Loadings
An allowance for expenses shall be made at a level which is consistent with the Company’s expenses experienced in the last two years. Significant deviations from actual experience should be fully justified. The exact source of the expense components used in the calculations should be referenced.

Benchmarking
It should be noted that Article 46(3) of the Implementing Regulations states that the prices used by each company should not rely upon other Company’s pricing.
SAMA has accepted the use of Benchmarks in the first pricing round, and will continue to accept their use where the company’s own data is insufficient.
However SAMA’s expectation is that Appointed Actuary’s will seek to comply with this legal requirement as soon as is practical, and it expects that the use of benchmarks will be phased out over time as the company has more of its own data to derive prices.

Use Requirements
The Company must make use of the premium rates determined by the Appointed Actuary.
All premiums charged by the Company must be at least those set out by the Appointed Actuary, unless explicit permission has been obtained from SAMA.
This explicit permission to vary from the Appointed Actuary’s premium rates may follow from SAMA’s approval of the separate cross-subsidisation report prepared by the Appointed Actuary or any partial submissions from the Appointed Actuary in respect of
	a.	Revisions to credibility formula
	b.	Changes to recommended loadings
	c.	Pricing of a single product within the medical or motor class

Compliance with the Prior Actuarial Pricing Reports
The Appointed Actuary should review the company’s records to determine the extent to which the recommended minimum rates were, in fact, implemented, and report on the same in the pricing report, and determine any impact on the company’s performance as a result of this variation.
The Appointed Actuary should comment on the actual experience of the company since the previous report, and if applicable how that experience would have changed if the company had fully implemented the pricing basis recommended by the Appointed Actuary at the last pricing date.
In order to investigate the compliance with the experience rating basis recommended, the Appointed Actuary should take samples of the top five groups/fleets by premium income from the insurance company’s portfolio and derive the experienced-rated premium rate. This can then be compared with the actual rate charged for each of the top five groups.
The Appointed Actuary is required to provide with his pricing report an Excel workbook to validate compliance with previous submitted pricing reports. The Excel workbook provided by SAMA (“ComplianceWithActuarialRates.xlsx”) can be used to validate compliance for medical business, and modified to be applicable for motor business. The insurance company should provide SAMA with copies of Excel workbooks.

Other components of the report
The reports should be a comprehensive analysis of the Company’s most recent experience. The report should be clear and comprehensive so that another experienced Appointed Actuary can follow the report and come to a conclusion. Examples of other components to be analysed and commented on are:
	>	Clear summary of the proposed premium rates, the percentage change from the most recent approved rate for each component and the overall percentage impact of the proposed rates on the total premium for the Company’s motor book of business.
	>	Assumptions should be explained and the reason for their selection provided. If they rely on an external source, that source should be provided.
	>	Other actuaries who worked on the report should be identified. The process of peer review of the report should be explained and the peer reviewer of the report identified.
	>	The specific proposed effective date of the filed rates should be presented.
	>	Material judgmental adjustments or assumptions that the Appointed Actuary applied to the data or are known by the Appointed Actuary to have been applied to the data.
	>	Limitations on the use of the actuarial work product due to uncertainty about the quality of the data.
	>	Any unresolved concerns the Appointed Actuary may have about the data that could have a material effect on the actuarial report.
	>	Considerations of cautions regarding possible uncertainty or risk in results.
	>	Any financially, organizationally, or other dependency concerning any matter related to the subject of the report and any such relevant information that is not apparent should be disclosed.
	>	Identify parties responsible for each material assumption and method that are not the Appointed Actuary’s.
	>	If the report includes materially different results or expresses a different opinion from the most recent former report of the Appointed Actuary, the report should make it clear that the earlier results or opinion are no longer valid and explain why they have changed.

Medical Expenses - Underwriting Practices 2016

SAMA issued the original Underwriting Circular on 25/5/1435.
At the request of the Insurance Executive Committee (IEC) SAMA subsequently issued standard claims experience forms for medical and motor insurance on 1 December 2014 to come into effect on 1 January 2015. These forms included clarifications, corrections and updates to the original Underwriting Circular.
The Underwriting Practices 2015 update was issued on 24/6/2015.
SAMA issued Property Instructions on 20/10/2015.
SAMA has noted that underwriting and other practices in the medical and motor classes are now diverging as the market develops. In future SAMA will issue Circulars and Instructions separately by Class of Insurance as defined in Article 33 of the Implementing Regulations.
This Circular refers to health insurance only.
An updated version of the claims experience forms for medical expenses was issued on 9 June 2016, with an implementation date of 1 September 2016.
SAMA has noted that underwriting practices in the market remain out of line with international practice in some respects that are damaging the functioning of the market. These practices include:
	•	Limited rating factors being used to price individual medical risks, with such risks being treated as commodity products.
SAMA introduced requirements for insurance companies to obtain and submit actuarial pricing reports for medical expenses businesses late in 2012 and to be implemented starting from 1 January 2013 for medical expenses insurance business.
These actuarial pricing reports were required to be updated by June 2014. and then by August 2015.
The submitted actuarial medical pricing reports must be updated to fully take into account the recent claims experience of insurance companies.
The technical instructions for actuarial pricing reports have now been included within SAMA’s Actuarial Work Regulations, and these Regulations should be read in conjunction with this Circular.
This Circular details SAMA's instructions with respect to the above mentioned issues.
No insurance company shall ever provide a quotation without having adequate underwriting information, including claims experience, on which to scientifically determine the premium rates appropriate for the policy terms & conditions offered. It should be noted that this applies to all insurance policies of all classes.

1. Claims Experience Requirements

1.1 Medical Underwriting

SAMA has developed claims experience forms and quotation instructions at the request of the industry.
These have been updated following feedback from the industry, and the 2016 version was issued on 9 June 2016.

1.2 Nature of the Claims Experience to be Required for Medical Insurance

At the request of the industry SAMA developed standard forms to be used by all insurers. These were issued in December 2014. and came into effect from 1 January 2015.
SAMA notes that sometimes the completion of these forms may not be as required, and would clarify that:
	a)	The company providing the claims experience must always provide data that is as up-to-date as possible. The claims experience provided should at a minimum include all claims processed more than 3 months before the claims experience reporting date.
	b)	The monthly data provided for the most recent underwriting year is for claims paid in each month, and claims outstanding at the end of each month. All data must be shown.
	c)	The Policy Year is the year from the last renewal data of the policy. If, for instance, a policy renews on 1 July, then the 2016 Policy Year is the period from 1 July 2016 to 30 June 2017.
	d)	Full benefit information must be provided as staled in the experience form instructions.

1.3 Responsibility for Providing Claims Experience

The key relationship is between the policyholder and the insurance company. SAMA requires that the insurance company provides the policyholder, upon his written request or his representative's written request (i.e. broker), within 15 working days of making the request with sufficient and accurate information of his claims experience, including up-to-date incurred claims. It is the responsibility of the policyholder to provide the insurance company with sufficient and accurate information for it to price and underwrite the risk it is taking on.
Where the insurance company outsources its claims administration to a I PA, then the TPA is required to provide the data requested to the insurance company within 10 working days of its request.
The claims experience report issued by either the insurance company or its TPA must be stamped & signed by the authorised person and the report must be printed on the issuer heading letters (insurance company or its TPA).
After receiving the claims experience, the policyholder should review the report and confirm in writing that he reviewed it and that all information included within the report is accurate to the best of his knowledge.
If the insurance company fails to obtain the policyholder's confirmation that the claims experience is accurate then it should note that it may not be able to take any action if it subsequently discovers it has charged an inadequate premium rate based on the data provided.
With respect to personal lines business, the insurance company is not required to obtain the policyholder’s claims experience in a report format from the policyholder or the existing insurance company; instead the insurance company should ensure that its proposal form asks about all material facts including the policyholder's claims experience.
If it is found that inaccurate claims experience was provided then the insurance company shall have the right to review the premium rate charged, and take appropriate actions. These include adjusting the premium, or requiring that any commission paid to the broker be refunded if due to broker misrepresentation or non-disclosure.
In extreme circumstances where evidence has been obtained that claims data provided to the insurance company in order to quote was misstated with fraudulent intent, then the insurance company may cancel the policy and take the proper actions against the parties who are responsible.

1.4 Role of Brokers

A broker may collect the claims experience and provide it to the insurance company. It should be noted that brokers must act on behalf of the policyholder and conduct their business according to professional and ethical standards and as per the applicable laws and regulations, including the provisions of the Implementing Regulations of the Law on Supervision of Co-operative Insurance Companies, Insurance Intermediaries Regulation, Market Code of Conduct Regulation and Regulation of Reinsurance Activities Regulation.
Using a broker to collect this data docs not in any way reduce the responsibility of the policyholder to ensure that accurate information is provided to the insurance company.

1.5 Pricing of Group Medical Insurance

Insurance companies must comply with the following instructions when applying the claims experience:
1.	Apply an experience rating approach for group risks, and they must also supply a fully justified credibility formula recommended, and signed off, by the Company’s Actuary.
2.	A form or Excel spreadsheet shall be produced which ensures that the pricing mechanism adopted complies with the credibility formula that is recommended by the Company’s Actuary. A copy of the form or Excel spreadsheet must be provided to SAMA.
3.	The Actuary shall determine the annual increase in the burning costs allowing for claims trends, inflation to be built in the credibility formula calculation mechanism.
4.	The Actuary’s Pricing Report shall specify the size of schemes for which this blended pricing approach must be adopted. It must define the size of smaller schemes where book rates shall be used.
5.	The Insurance Company may request that its Actuary assists with individual quotations for a particular scheme if it considers that there are reasons why the scheme falls outside the standard pricing process. All such individual quotations must be fully documented, auditable, and made available to SAMA on request. The Actuary should ensure that these individual quotations fall outside the standard pricing process before providing his/her recommendation.
6.	The Actuary is required to specify in his pricing report the range of discounts that companies can adopt in their pricing based on discounts received on the existing portfolio. Companies should use the discount that they expect to receive from the Medical Service Providers in their quotation. The underwriters justification for the discount used should be fully documented, and provided to SAMA and the internal control functions on request.
It should be noted that SAMA imposes no restrictions on the form of the credibility formula to be adopted by each company, provided that it has been recommended by the Actuary. For instance, the Actuary may choose to vary the credibility formula by class of insurance, own or other insurer’s experience, good or poor experience. SAMA may challenge the credibility formula adopted if it considers that it has not been fully justified technically.

1.6 Pricing of Individual Medical Risks for Employed Expatriates and Dependents

Individual or Retail Medical Policies for employed expatriates and their dependents are being phased out for renewals with effect from 1 July 2016.
The employer will be required to replace them with corporate policies.
It may not he possible for an employer to obtain reliable claims experience if his employees have been covered by individual policies. In such cases insurance companies must price the policy using their corporate book rates.
Any corporate policy written without claims experience should be endorsed to make it clear that not disclosing claims experience may invalidate the contract, and entitle the Insurance company to charge more if it is subsequently finds that claims experience was available from a prior corporate policy.
Before issuing any quotation, the insurance company must verify whether or not the client has been insured under a corporate policy in the past, by utilizing the authorized access to data that will be provided by CCHI.

1.7 Other Individual Policies

Other individual policies are unaffected by the changes to medical expenses products for employed expatriates and their dependents.
It is expected that special consideration will need to be given to products for Saudi Arabian individuals and their families, as this market develops.

2. Premium Rate Guarantees

It is not permitted for any insurance company to enter into any arrangement with any insured for a period in excess of one year for medical expenses insurance with rates guaranteed for more than one year. Policyholders can choose to renew their annual policy with the same insurance company, but this must be on terms negotiated and agreed at renewal.
It should be noted that the use of prescribed formula for renewals, even if it takes into account the loss experience for the first year is not acceptable. Full allowance for current inflation and future trends expectations must be made for all quotations at the time of the renewal.

3. Insurance Companies Other than Leading a Medical Policy

3.1 Acting as Co-Insurer not Leading the Policy

Any insurer participating in a panel of insurers, or following a lead co-insurer must ensure that they obtain full exposure and claims data to underwrite the policy fully. It is not permitted to place full reliance on a lead insurer.

4. Medical Pricing Report

4.1 General Requirements

SAMA is requiring all insurance companies to provide a lull actuarial pricing update for medical products on at least an annual basis, and will consider requiring more frequent updates if necessary.
SAMA requires all companies approved to sell medical products to provide lull updated reports by 30 September 2016.
For any medical pricing reports, the Appointed Actuary must use up to date complete data to determine the premium rates. The data used in the report must be up to date when the report is submitted to SAMA. Specifically, if a report is submitted between:
	1)	1 March to 31 May: it must use complete data up to at least 31 December of the previous year.
	2)	1 June to 31 August: it must use complete data up to at least 31 March of the same year
	3)	1 September to 30 November: it must use complete data up to at least 30 June of the same year.
	4)	I December to 31 December: it must use complete data up to at least 30 September of the same year.
	5)	1 January to 28/29 February: it must use complete data up to at least 30 September of the previous year.
Medical products approval may be withdrawn if the updated Actuarial Pricing Reports arc not submitted or are not compliant with SAMA's instructions.
The Insurance Company's Appointed Actuary shall prepare the medical pricing reports that are to be submitted to SAMA unless the Insurance Company has obtained SAMA's no objection to ask another actuary to prepare the pricing reports at least three months before the date of the actuarial report submission. It should be noted that SAMA will only allow another actuary to be used only if it is justified, and SAMA will require a report to be submitted from the Appointed Actuary in addition to those prepared by the other actuary. It should be noted that there are no restrictions on the preparation of technical or actuarial reports that are not submitted to SAMA.
If a company submits two actuarial reports to SAMA then it must implement the one prepared by its Appointed Actuary. It may only implement the premium rates in the other actuary's report if and when it receives SAMA's noobjection.
The Insurance Company should note that it is acceptable to provide partial submissions to SAMA from the Actuary in respect of
		a.	Revisions to credibility formula
		b.	Changes to recommended loadings
		c.	Pricing of a single product within the medical class
		d.	Introduction of a new rating factor
		e.	A new network option
		f.	Other amendments to the pricing basis that the actuary recommends, subject to these not leading to a reduction in premium rates for retail/individual medical
The Insurance Company may seek SAMA's approval to provide partial pricing submissions from the Actuary in other circumstances.
It is always acceptable to charge higher premium rates than those determined by the Actuary, subject to such rates being fully documented, justified, and in line with Article (46) of Implementing Regulations.
It should be noted that there is no requirement for the Company to submit any actuarial pricing report to SAMA unless required by this Circular, or the Company wishes to amend its premium rates or rating structure. The Company must never charge rates lower than those that have been submitted to SAMA. It is always permitted to charge higher rates than those in the Actuary's report, provided the rates charged are fair, reasonable and technically justified.
If the Company makes any material alteration in its reinsurance arrangements for medical insurance, then it must consult with its Actuary to determine whether the recommended loadings in the premium rates remain adequate, and must amend its rates as appropriate.
It should be noted that the Actuary must recommend premium rates with no cross subsidies between the rating factors, in line with Article 46 of the Implementing Regulations. However if, for competitive purposes, the Company wishes to charge rates which have some element of crosssubsidisation, then it may ask the Actuary to prepare an additional report setting out the risks of applying the cross-subsidies, based on the expected portfolios of business written, which may not be too dissimilar to the in-force portfolio. SAMA will review the cross-subsidy report separately.
It should be noted that cross-subsidies are only permitted within the same class of insurance. In addition, no cross-subsidies are permitted between retail and corporate business.
The Actuary is responsible to ensure that a comprehensive and concise report is provided to SAMA, so as to minimize the extent of required follow-up queries from SAMA.
In addition, the Actuary must prepare a short summary document highlighting his key findings for each Actuarial Pricing Report. This shall be no more than five (5) pages in length, and must be submitted to the Board of Directors of the Company as a Board paper within five working days of the Actuary's submission, with the Actuary’s full report being an appendix to the Board paper.
The Actuarial Pricing Reports submitted to SAMA cannot be preliminary or initial and are required to be the final reports. The reports shall clearly summarize and compare the Company's current premium rates (loads and discounts) and the new premium rates (loads and discounts) calculated by the Actuary.

4.2 Mandatory Loading Requirements

The Actuary is required to include the following loadings within the gross premium rates:
	1)	An Expense Loading covering all of the Company’s expenses, both tor policyholders and shareholders, allocated appropriately to each class of insurance. A Company may use projected expenses if it meets the criteria set out in Section 4.3
	2)	A Commission Loading covering any direct payments made in respect of the acquisition of a policy, whether to intermediaries or to internal staff.
	3)	A Profit Loading that must be explicitly approved by the Board of Directors of the Company.
	4)	A Contingency Loading set at 2.5% of premium for medical expenses.
	5)	A Financial Condition Loading to allow for the lower risk capacity of any insurance company that is not able to cover its solvency margin fully. This is defined fully in Appendix Three.
Detailed requirements for the calculation of these loadings are shown in Appendix Two.
SAMA has noted that there is some confusion in the industry about the correct definitions of Loss Ratio. Expense Ratio and Combined Ratios, so these are set out in Appendix Four.
a. Use of Projected Expense Loadings
If a Company has cover for its statutory solvency margin in excess of 125% as at 31 December 2015. and it docs not have product approval for any Savings products, then it may adopt projected expense loadings for medical insurance.
The pricing report should provide justification lor the proposed expense loadings by including a prudent business projection showing the legal solvency margin of the Company as at the end of 2016, 2017 and 2018.
In addition, in order to use projected expense loadings a Company must demonstrate that it has been achieving economies of scale over 2014 and 2015. In particular:
	1)	The Company must have had more than 100% growth in Medical Insurance Gross Written Premium from 2014 to 2015.
	2)	The Company must have had no increase in loss ratio in 2015 from that experienced in 2014.
	3)	The Loss Ratio in 2014 must be no higher than 80%.
If this business projection does not sufficiently demonstrate that the Company will have 110% cover for its statutory solvency margin as at the end of 2016. 2017 and 2018, then SAMA will require the Company to increase its expense loadings.
By 2018 the projection must show that the Company is fully covering all of its allocated expenses to the medical class by its premium loadings from medical business written.
In addition:
	•	Medical premium income and expenses must be projected based on stated and justified assumptions.
	•	The allocation of expenses to the medical line of business must be based on slated and justified assumptions.
If al any quarter end, the cover for the legal solvency margin is below 110% then the Company must immediately increase its expense loadings lor medical expenses business to those determined according to the mandatory loadings section, with all expenses being covered by premiums written.

5. The Underwriting Manual

5.1 Submission to SAMA
The Company must submit a corresponding Underwriting Manual, rating structure and premium rates.

The rating structure and premium rates must be in Excel spreadsheet format.

5.2 Contents of the Underwriting Manual

Underwriting Manuals must contain sufficient information so that an external party can follow any quotation produced by an Insurance Company tor a risk in that Class of Insurance.
Underwriting Manuals must:
	•	be consistent with the pricing reports
	•	be comprehensive and cover all risks
	•	be clear and user-friendly
	•	fully describe the quotation process
	•	include the Underwriting Authority Statement, fully described
	•	be consistent with reinsurance arrangements
	•	where appropriate, they must be consistent with TPA agreements
	•	where appropriate, they must be consistent with CCHI requirements
All premium rates to be charged must be approved by the Actuary. Any adjustments to be made to the base rates determined by the Actuary must be documented in the Underwriting Manual.
The Underwriting Manual shall be signed off by the Chief Underwriter or Chief Technical Officer for the class of insurance, as designated by the Company.
The Actuary should review the Underwriting Manual (excluding the Underwriting Authority Statement) for technical accuracy and consistency with the pricing report, and highlight any inaccuracies.
The Risk Manager shall also sign off the Underwriting Manual (including the Underwriting Authority Statement) from the process perspective.
Il should be noted that the Company is fully responsible for the accuracy, clarity and comprehensiveness of the Underwriting Manual.
SAMA requires that companies commit to translating their Underwriting Manual and Underwriting Authority Statement into Arabic by 31 December 2016.

5.3 The Underwriting Authority Statement

The Underwriting Authority Statement must set out fully the levels to which each Underwriter may quote.
This could be measured by Gross Written Premium. Sum Insured, or Number of Lives for Medical, or a combination of these.

5.4 Discretionary Reductions in Loadings for Individual Quotations

This section sets out the requirements to fully document in the Underwriting Authority Statement any discretion to reduce loadings for individual quotations. This is distinct from section 4.4 which sets out when and how the Insurance Company can apply to SAMA to be allowed to reduce loadings for all quotations.
Any discretion to reduce Loadings for a particular quote would normally only lie with the Chief Underwriter or Chief Technical Officer. The scope to which this discretion extends must be fully documented.
Any additional discretion to reduce Loadings, for individual quotations, that lies with the Chief Executive Officer must be fully documented.
The Minimum Loadings that must be applied for all quotations must be clearly stated, The Minimum Loadings, net of commission, must be no less than 75% of the total loadings, net of commission, recommended by the Actuary.
No discretion to reduce loadings to a particular quotation may be applied until the Underwriting Authority Statement has been approved by the Board of Directors, and it has been submitted to SAMA.

5.5 Training on the Updated Underwriting Manual and Underwriting Tools

Everyone who has any level of authority to underwrite must be trained in the use of the Underwriting Manual and the Underwriting Tools.
Records must be maintained of formal training undergone.
The Company must provide a quarterly update to SAMA of the underwriting training undertaken.
SAMA considers that well trained and competent underwriters are essential to any insurance company writing medical expenses insurance.
If an Insurance Company has been authorised to write medical expenses insurance for more than three years, but does not have suitably skilled underwriters in place then SAMA will consider taking action, including the suspension of product approvals, until the situation is resolved.

6. Compliance and Record Keeping

A copy of this Circular must be passed to the Company’s Board of Directors, Audit Committee. Internal Auditors, Risk Management officers. Compliance Officer. Responsible Actuary and External Auditors.
The Actuary must prepare a short summary document highlighting the key recommendations of the pricing report. This shall be submitted to the Board of Directors and the internal control functions (internal audit, risk management, and compliance functions) with the pricing report submission.
The purpose of this document is to ensure that:
•	The internal control functions understand the Actuary's recommendations.
•	There arc internal controls in place to ensure the Company is following the Actuary's recommendations.
•	The internal control functions set up a meeting with the Actuary to understand his/her recommendations and how to ensure that the Company is following his/her recommendations.
The Compliance function must report to SAMA any material lack of compliance with SAMA's instructions. This shall be based on the reports of the Internal Audit function and the Risk Management function, and shall include an action plan for addressing the key issues identified.
The Internal Audit function must carry out a continuous audit, at least on a quarterly basis, of the underwriting function to assess compliance with the Company’s internal procedures and guidelines as defined in the Underwriting Manual submitted to SAMA.
The Risk Management function must cany out a quarterly assessment of the underwriting risks, and recommend improvements to processes, and address any other weaknesses that should be improved such as any need for additional training of underwriting staff.
The internal control functions (internal audit, risk management, and compliance functions) must provide the Audit Committee on a quarterly basis with a report on their findings and suggested corrective actions. Moreover, on a quarterly basis the Compliance function must provide SAMA with a copy of the minutes of the Audit Committee meeting in which the report was discussed. The minutes must summarize the findings and any corrective action that should be taken by the Company.
The Underwriting Authority Statements for Medical products must be formally approved by the Board of Directors within 60 days of the required submission dates of the Actuarial Pricing Reports to SAMA.
The Compliance Officer must ensure that all those mentioned in the first paragraph of this section receive copies of the Actuary’s Pricing Reports, the Board Summary documents and the Underwriting Manuals.
In addition, all members of staff who have a designated underwriting authority level must be passed copies of the Underwriting Manual by the Compliance Officer.
The Company must ensure that it has in place a central database accessible by Senior Management and all Internal Control functions containing lull records of all quotations issued by the Company, and all backing data.
Companies are required to have a centralised quotations database in place by 1 July 2016.

7. Implementation of New Rates

7.1 File and Use

Any proposed revisions to premium rates, rating structure and credibility formula may be introduced on a File & Use basis, which means the insurance Company files the new actuarial report with SAMA and implements the new proposed premium rate, subject to such rates being in line with Article (46) of the Implementing Regulations.
The proposed revisions must be implemented within one month of the date the report is submitted to SAMA.
One specific exception is that, for Individual/Rctail Medical, premium rates may not be introduced on a File & Use basis, if the premium rates for more than 50% of the business that the Company expects to write are to be reduced. Any proposed reductions in retail premium rates may only be introduced if SAMA provides its no-objection. However, if SAMA has not provided a response to the Company within three months of its submission of reduced rates, then it may assume that SAMA has no objection to its introduction of the rates.

7.2 SAMA’s Review Process

SAMA’s review of the Actuarial Pricing Reports will be split into two parts:
	a)	A review of the loadings for expenses, contingency, profit and any financial condition loading to be applied to ensure that these are compliant with requirements.
	b)	A technical review of the methodology adopted.
If non-compliant loadings arc being applied the Company will be required to correct these within five working days of SAMA's letter to the Company.
SAMA will also review
	c)	The Underwriting Manual to check that it is complete and consistent with the Actuarial Pricing Report.
	d)	The Excel pricing tool provided to check that it is compliant with the Actuarial Pricing Report, and that it is documented in the Underwriting Manual.
SAMA's reviews must not be regarded as reducing in any way the responsibility of the Company and the Actuary to comply with regulatory requirements.
If SAMA discovers that any company or actuary has abused the File and Use process, then appropriate regulatory actions will be taken.

7.3 Regular Rate Increases

All companies are required to increase their medical rates on a quarterly basis to allow for inflation and anticipated future trends in experience, as recommended in the Actuary’s report.
Any Company that is required to apply a Financial Condition Loading must update that loading quarterly based on the Quarterly Reporting Forms. It must submit a brief note to SAMA setting out and justifying the revised Financial Condition Loading.
The exception to this is that the Financial Condition Loading must not be reduced at any quarter unless the Company has used reserves that have been determined by its Appointed Actuary.

7.4 Regulatory Action for Non Compliance

It should be noted that if an insurance company, broker, insurance agent or insurance claims settlement specialist (third party administrator) is not in compliance with this Circular. SAMA will take the regulatory/legal actions as stipulated in the Law on Supervision of Co-operative Insurance Companies and its Implementing Regulations.
Thus. SAMA instructs the Insurance Company to do the following:
	1.	Submit the 2016 pricing report by 30 September 2016.
	2.	Implement the new premium rating basis by 31 October 2016, provided it fits the File & Use requirements.
	3.	Provide SAMA with a copy of the five-page Board summary report by 30 September 2016.
	4.	Provide SAMA with the updated Underwriting Manuals, including the Underwriting Authority Statement, which reflects the instructions stated in Sections 1, 2, 3, 4 and 5 of this Circular, for medical expenses insurance. These must be provided within 60 days alter the deadline for the submission of the Actuarial Pricing Reports.
	5.	Provide SAMA with an unprotected soft copy of the Excel spreadsheets that set out the blended credibility approach that the Insurance Company is going to adopt to price group medical expenses which are in compliance with instructions stated in this Circular. These must be provided with the Actuarial Pricing Reports.
	6.	Provide SAMA with copies of the minutes of the Audit Committee meetings in which quarterly internal auditor reports are discussed.
	7.	Provide SAMA with a quarterly summary of training undergone by Underwriting staff.
	8.	Immediately provide the Insurance Company’s employees who are in charge of underwriting with a copy of this Circular.
	9.	The requirements set out in this Circular will be effective immediately.
	10.	Provide confirmation from the Insurance Company’s CEO/GM within seven days of the date of this Circular of adherence to the instructions stated in this Circular.
	11.	Copies of this Circular must be provided to the full Board of Directors of the Company. Minutes of the Board meeting on the adherence to the requirements set out in this Circular must be provided to SAMA within 90 days of the date of this Circular.
	12.	SAMA requires that the Actuary attend Board Meetings to present his Board Pricing papers, and take questions on his full pricing report. The Company must provide minutes of the relevant Board meetings to SAMA, and copies of the Actuary’s Board papers within ten business days of the meeting.

Appendix One - Additional Requirements

Blending Book Rates with Experience for Larger Schemes
An Excel spreadsheet must be produced which ensures that the pricing mechanism adopted complies with the credibility formula recommended by the Actuary.

Compliance with the Prior Actuarial Pricing Reports

In order to investigate the compliance with the experience rating basis recommended, the Actuary shall take samples of the top five groups by premium income from the Insurance Company’s portfolio and derive the experienced-rated premium rate. This can then be compared with the actual rate charged for each of the top live groups.

The Actuary is required to provide with his pricing report an Excel workbook to validate compliance with previous submitted pricing reports. The Excel workbook provided by SAMA (“ComplianceWithActuarialRates.xlsx”) can be used to validate compliance for medical business. The Insurance Company must provide SAMA with copies of the Excel workbooks.

Appendix Two - Mandatory Loading Requirements - Details

The Actuary is required to include at least the following loadings within the Office Premium rates:
1)	An expense loading (e)
2)	A commission loading (c)
3)	A profit loading (p)
4)	A contingency loading (co)
5)	A financial condition loading (f).
That is
Office Premium >= Risk Premium / (1 - e - c - p - co - f)

1. Expense Loading

The expense loading must cover all of the Company’s expenses, both for policyholders and shareholders. The Actuary should develop an appropriate allocation of expenses for the medical line of business.
For any Company that was licensed by SAMA to write any class of insurance business as at 1 January 2013. the expense loading is subject to a minimum of the expense ratio of the Company for 2015. For the purposes of this sub- paragraph, expense ratio must be calculated using the formula set out in Appendix Four modified as follows:
	•	The item “commission incurred (Form 21, Line 38, Column E) should be omitted, as commission is covered by the separate commission loading.
	•	Some companies may have incorrectly reported I PA tees in Forms 81 and 82 on the grounds that they are loss adjustment expenses, as opposed to in line 40 of form 21. Where companies have taken this approach the formula in Appendix Four will need to be adjusted so that 1 PA tees are included in the expense ratio.
For the avoidance of doubt, the Actuary is expected to perform two calculations:
•	An expense loading for the medical expenses line of business using an allocation of expenses to that line of business determined by the Actuary,
•	The expense ratio of the Company using the formula set out in Appendix Four, adjusted as above.
The expense loading is then whichever of these calculations leads to the higher result.
Any Company that was not licensed to write any class of insurance as at 1 January 2013 may calculate the expense loading using a prudent projection of its expenses and premium income for the third calendar year following the date at which it was first licensed to write any class of business.
Any Composite Insurance Company, defined as any company writing general/health insurance and a material amount of long-term Protection & Savings business, must not use the expense ratio for the Company as a whole. Instead, an expense report shall determine a suitable split of expenses between Protection & Savings and General/Health. and the Expense Ratio determined for General/Health only.
Any expenses that may be subject to unusual fluctuations may be smoothed. In particular, the change in Doubtful Debt Reserve must be considered part of the Company's expenses, but consideration should be given to smoothing this item.

2. Commission Loading
The commission loading will normally reflect the actual commission to be paid on a case by case basis.

3. Profit Loading
The profit loading must be at least 2% of gross premium. It must be explicitly- approved by the Board of Directors of the Company.

4. Contingency Loading
The contingency loading must be set at 2.5% of gross premium.

5. Financial Condition Loading

A Financial Condition Loading is required to allow for the lower risk capacity of any insurance company that does not have sufficient Admissible Assets to meet the Required Margin before application of the Minimum Capital Requirement (Reporting Form 31, Line 43, Column A).
The required calculation to be adopted for this loading is set out in Appendix Three.
If a Company is in the process of increasing its capital, then the Actuary must provide two sets of premium rates for the Company to use, one prior to the capital raising exercise, and the other based on the expected solvency position once the additional capital has been raised, allowing for the different Financial Condition Loadings before and after the capital increase.
The rates based on the post capital raising financial condition may only be used once the Company has received the proceeds of the capital raising exercise.

Appendix Three - Financial Condition Loading

All companies that do not hold sufficient Admissible Assets to cover their Total Required Margin before application of the Minimum Capital Requirement must include an additional loading in the medical premium rates that they charge.
This is based on the data presented in Form 31 in the most recent Quarterly or Annual Returns, subject to any amendments required by SAMA.
The Financial Condition Ratio is defined as the Net Admissible Assets / Total Required Margin.
Financial Condition Ratio = (Form 31, Line 39, Column A) / (Form 31, Line 43, Column A)
If the Financial Condition Ratio is greater than or equal to 1 then no loading shall be applied to the premium rates.
If the Financial Condition Ratio is less than 1 then a Financial Condition Loading must be applied
The Financial Condition Loading for Medical Expenses is determined as:
16% x (1- Financial Condition Ratio)
The Financial Condition Loading shall be rounded to the nearest whole percentage point.
Note "Column A" refers to the Form Label, not the Excel Column.

Appendix Four - Standard Income Statement Ratio Definitions

This section sets out the standard definitions of the Loss Ratio. Expense Ratio and Combined Ratio equivalent to those used internationally.
Key points to note are that
	1)	Combined Ratio = Loss Ratio + Expense Ratio
	2)	A Combined Ratio in excess of 100% means a Gencral/Health Insurance Company is making Underwriting Losses. These may be mitigated by investment returns.
	3)	These ratios must not be used for any Company writing material amounts of long term Protection & Savings business.
For all three ratios the Denominator is the Net Earned Premium plus any other income other than that arising from investments:
Net Earned Premium (Form 21, Line 17, Column E) +
Other Underwriting Income (Form 21. Line 19, Column E) +
Other Income (Form 21, Line 71. Column E) +
Other Income - Shareholders (Form 22. Line 19, Column A)
If a Company has incorrectly treated movements in Premium Deficiency Reserves as part of its earned premium for accounting purposes, then it should reverse these movements out for the purposes of calculating its Standard Income Statements Ratios.
For Loss Ratio, the Numerator is the Claims Incurred (in Form 21, Line 37, Column E), adjusted to exclude any changes in Premium Reserves, such as Premium Deficiency Reserves or Catastrophe Reserves.
The adjusted Claims Incurred are then divided by the Denominator to determine the Loss Ratio.
For the Expense Ratio, the Numerator is:
Commission Incurred (Form 21. Line 38, Column E)
Minus Reinsurance Commissions Earned (Form 21, Line 18, Column E) +
Policy Acquisition Costs (Form 21, Line 39, Column E) +
Other direct underwriting Expenses (Form 21, Line 40, Column E) +
Doubtful Debt Expense (Form 21. Line 41, Column E) +
Operational and Technical Expenses (Form 21, Line 51, Column E) +
Shareholders Expenses (Form 22, Line 39, Column A) +
Zakat (Form 22. Line 51, Column A)
Taxes (Form 22, Line 52, Column A)
The Combined Ratio is defined as the Loss Ratio + Expense Ratio

Underwriting Practices 2015

SAMA issued the original Underwriting Circular on 25/5/1435.
At the request of the Insurance Executive Committee (IEC) SAMA subsequently issued standard claims experience forms for medical and motor insurance on 1 December 2014 to come into effect on 1 January 2015. These forms included clarifications, corrections and updates to the original Underwriting Circular.
With the issue of this Circular, the Claims Experience Forms remain in force. There are some clarifications to the instructions for quotations which are shown in Appendices Four and Five to this Circular.
SAMA has noted that underwriting practices in the market remain out of line with international practice in several respects that are damaging the functioning of the market. These practices include:
	•	Inadequate loadings being applied to risk premium rates to allow for all expenses, contingencies, profit and the financial condition of the company.
	•	Limited rating factors being used to price individual motor and medical risks, with such risks being treated as commodity products
	•	For property and engineering insurance, and other largely reinsured risks, insurers acting as intermediaries focusing on volume rather than as risk takers.
SAMA introduced requirements for insurance companies to obtain and submit actuarial pricing reports for medical expenses and motor businesses late in 2012 and to be implemented starting from 1 January 2013 for medical expenses insurance business and from 1 April 2013 for motor insurance business. These actuarial pricing reports were required to be updated by June 2014 for medical and August 2014 for motor.
The submitted actuarial medical and motor pricing reports must be updated to fully take into account the recent claims experience of insurance companies.
The technical instructions for the actuarial pricing reports have now been included within SAMA’s Actuarial Work Regulations, and these Regulations should be read in conjunction with this Circular.
This Circular details SAMA’s instructions with respect to the above mentioned issues.
No insurance company shall ever provide a quotation without having adequate underwriting information, including claims experience, on which to scientifically determine the premium rales appropriate for the policy terms & conditions offered. It should be noted that this applies to all insurance policies of all classes.

1. Claims Experience Requirements

1.1 Medical and Motor Underwriting

SAMA has included updated quotation instructions within the claims experience developed at the request of the industry.
These have been further clarified following feedback from the industry, and the current versions are shown in Appendix Four and Appendix Five of this Circular.

1.2 Nature of the Claims Experience to be Required for Medical and Motor

At the request of the industry SAMA developed standard forms to be used by all insurers. These were issued in December 2014, and came into effect from 1 January 2015.
SAMA notes that sometimes the completion of these forms may not be as required, and would clarify that:
	a)	The company providing the claims experience must always provide data that is as up-to-date as possible.
	b)	The monthly data provided for the most recent underwriting year is for claims paid in each month, and claims outstanding at the end of each month. All data must be shown.
	c)	The Policy Year is the year from the last renewal data of the policy. If, for instance, a policy renews on 1 July, then the 2015 Policy Year is the period from 1 July 201 5 to 30 June 2016.
	d)	Full benefit information must be provided as stated in the experience form instructions.

1.3 Responsibility for Providing Claims Experience

The key relationship is between the policyholder and the insurance company. SAMA requires that the insurance company provides the policyholder, upon his written request or his representative’s written request (i.e. broker), within 15 working days of making the request with sufficient and accurate information of his claims experience, including up-to-date incurred claims. It is the responsibility of the policyholder to provide the insurance company with sufficient and accurate information for it to price and underwrite the risk it is taking on.
Where the insurance company outsources its claims administration to a TPA, then the TPA is required to provide the data requested to the insurance company within 10 working days of its request.
The claims experience report issued by either the insurance company or its TPA must be stamped & signed by the authorised person and the report must be printed on the issuer heading letters (insurance company or its TPA).
After receiving the claims experience, the policyholder should review the report and confirm in writing that he reviewed it and that all information included within the report is accurate to the best of his knowledge.
If the insurance company fails to obtain the policyholder’s confirmation that the claims experience is accurate then it should note that if may not be able to lake any action if it subsequently discovers it has charged an inadequate premium rate based on the data provided.
With respect to the personal lines of the business, the insurance company is not required to obtain the policyholder’s claims experience in a report format from the policyholder or the existing insurance company; instead the insurance company should ensure that its proposal form asks about all material facts including the policyholder’s claims experience.
If it is found that inaccurate claims experience was provided then the insurance company shall have the right to review the premium rate charged, and take appropriate actions. These include adjusting the premium, or requiring that any commission paid to the broker be refunded if due to broker misrepresentation or non-disclosure.
In extreme circumstances where evidence has been obtained that claims data provided to the insurance company in order to quote was misstated with fraudulent intent, then the insurance company may cancel the policy and take the proper actions against the parties who are responsible.

1.4 Role of Brokers

A broker may collect the claims experience and provide it to the insurance company. It should be noted that brokers must act on behalf of the policyholder and conduct their business according to professional and ethical standards and as per the applicable laws and regulation, including the provisions of the Implementing Regulations of the Law on Supervision of Co-operative Insurance Companies, Insurance Intermediaries Regulation, Market Code of Conduct Regulation and Regulation of Reinsurance Activities Regulation.
Using a broker to collect this data does not in any way reduce the responsibility of the policyholder to ensure that accurate information is provided to the insurance company.

1.5 Pricing of Group Medical or Motor Fleet/Leasing Risks

Insurance companies must comply with the following instructions when applying the claims experience:
1.	Apply an experience rating approach for group or fleet/leasing risks, and must supply a fully justified credibility formula recommended, and signed off, by the company’s Actuary.
2.	A form or Excel spreadsheet shall be produced which ensures that the pricing mechanism adopted complies with the credibility formula that is recommended by the company’s Actuary. A copy of the form or Excel spreadsheet must be provided to SAMA.
3.	The Actuary shall determine the annual increase in the burning costs allowing for claims trends, inflation to be built in the credibility formula calculation mechanism.
4.	The Actuary’s pricing report shall specify the size of schemes for which this blended pricing approach must be adopted. It must define the size of smaller schemes where book rates shall be used.
5.	The insurance company may request that its Actuary assists with individual quotations for a particular scheme if it considers that there are reasons why the scheme falls outside the standard pricing process. All such individual quotations must be fully documented, auditable, and made available to SAMA on request. The Actuary should ensure that these individual quotations fall outside the standard pricing process before providing his/her recommendation.
It should be noted that SAMA imposes no restrictions on the form of the credibility formula to be adopted by each company, provided that it has been recommended by the Actuary. For instance, the Actuary may choose to vary the credibility formula by class of insurance, own or other insurer’s experience, good or poor experience. SAMA may challenge the credibility formula adopted if it considers that it has not been fully justified technically.

1.6 Pricing of Individual Medical Risks

SAMA notes that many of these products are issued solely in order for expatriates to obtain, or renew, their residence permit (Iqama) to live in Saudi Arabia.
This situation is not sustainable indefinitely, with claims rates at their currently low levels.
SAMA will seek to work with the Insurance Industry, and other Government agencies, to ensure that all insurance products sold provide genuine benefits to the consumer, and are not just put in place to comply with other regulatory requirements.

1.7 Pricing of Individual Motor Risks

This class of business has been unprofitable for many in the market, partially due to limited data collection and the use of insufficient rating factors.
SAMA will seek to work with the Industry to agree minimum data collection and rating factors to be used, by each individual company.
It should be noted that an industry database would primarily be used for fraud detection, and not for setting prices.
It may be possible to use some rating factors from industry data, but these would need to be used within the pricing framework set out in the actuary’s pricing report.
Under no circumstances may companies use premium rates derived entirely from industry data.

1.8 Underwriting of Property Insurance

SAMA intends to issue quotation instructions for Property Insurance in 2015.
These should be considered to be part of this Circular, and in particular Section 6 on Compliance fully applies to these Instructions.

1.9 Underwriting of Engineering Insurance

SAMA intends to issue quotation instructions for Engineering Insurance in 2015.
These should be considered to be part of this Circular, and in particular Section 6 on Compliance fully applies to these Instructions.

1.10 Underwriting of Other Insurance Risks

SAMA will continue to review the state of the market for all insurance classes, together with the effectiveness of the measures undertaken for Medical, Motor. Property and Engineering risks.
Measures on other classes may be taken following detailed consultation with the industry.

2. Premium Rate Guarantees

It is not permitted for any insurance company to enter into any arrangement with any insured for a period in excess of one year tor medical expenses insurance or for motor insurance with rates guaranteed for more than one year. Policyholders can choose to renew their annual policy with the same insurance company, but this must be on terms negotiated and agreed at renewal.
It should be noted that the use of prescribed formula for renewals, even if it takes into account the loss experience for the first year is not acceptable. Full allowance for current inflation and future trends expectations must be made for all quotations at the time of the renewal.

3. Insurance Companies Other than Leading a Medical or Motor Policy

3.1 Acting as Third Party Administrator (TPA’S)

SAMA noticed that there are some insurance companies that manage insurance expenses claims (e.g. medical costs) without taking on the risk. Under this type of arrangement, the risk is not covered/shouldered by the insurance company, but the company administers the insurance claims of the client. This service represents claims administration services, or acting as a TPA, without bearing the insurance risk, which insurance companies are not licensed to do.
Article 3-2 of the Law On Supervision of Cooperative Insurance Companies does not permit insurance companies to carry out any activities other than insurance. Insurance companies are not allowed to provide claims administration services without bearing insurance risk.

3.2 Acting as Co-Insurer Not Leading the Policy

4 Medical & Motor Pricing Report

4.1 General Requirements

SAMA is requiring all insurance companies to provide a full actuarial pricing update for medical and motor products on at least an annual basis, and will consider requiring more frequent updates if necessary.
SAMA, requires all companies approved to sell medical or motor products to provide full updated reports as follows:
	1)	Medical, by 31 August 2015
	2)	Motor, by 30 September 2015
For any medical/motor pricing reports, the Responsible Actuary must use up to date complete data to determine the premium rates. The data used in the report must be up to date when the report is submitted to SAMA. Specifically if a report is submitted between:
	1)	1 March to 31 May: it must use complete data up to at least 31 December of the previous year.
	2)	1 June to 31 August: it must use complete data up to at least 31 March of the same year
	3)	1 September to 30 November: it must use complete data up to at least. 30 June of the same year.
	4)	1 December to 31 December: it must use complete data up to at least 30 September of the same year.
	5)	1 January to 28 February: it must use complete data up to at least 30 September of the previous year.
Medical/Motor products approval may be withdrawn if the updated actuarial pricing reports are not submitted or are not compliant with SAMA’s instructions.
The insurance company’s Responsible Actuary shall prepare the medical and motor pricing reports that are to be submitted to SAMA unless the insurance company has obtained SAMA’s no objection to ask another actuary to prepare the pricing reports at least three months before the date of the actuarial report submission. It should be noted that SAMA will only allow another actuary to be used only if it is justified, and SAMA will require a report to be submitted from the Responsible Actuary in addition to those prepared by the other actuary. It should be noted that there are no restrictions on the preparation of technical or actuarial reports that are not submitted to SAMA.
If a company submits two actuarial reports to SAMA then it must implement the one prepared by its Responsible Actuary. It may only implement the premium rates in the other actuary’s report if and when it receives SAMA's no- objection.
The insurance company should note that it is acceptable to provide partial submissions to SAMA from the Actuary in respect of
		a.	Revisions to credibility formula
		b.	Changes to recommended loadings
		c.	Pricing of a single product within the medical or motor class
		d.	Introduction of a new rating factor
		e.	A new network option for medical expenses
		f.	Other amendments to the pricing basis that the actuary recommends, subject to these not leading to a reduction in premium rates for retail/individual medical or retail/individual motor business
The insurance company may seek SAMA’s approval to provide partial pricing submissions from the Actuary in other circumstances.
It is always acceptable to charge higher premium rates than those determined by the Actuary, subject to such rates being fully documented, justified, and in line with Article (46) of Implementing Regulations.
It should be noted that there is no requirement for the company to submit any actuarial pricing report to SAMA unless required by this Circular, or the company wishes to amend its premium rates or rating structure. The company must never charge rates lower than those that have been submitted to SAMA. It is always permitted to charge higher rates than those in the actuary's report, provided the rates charged arc fair, reasonable and technically justified.
If the company makes any material alteration in its reinsurance arrangements for medical or motor insurance, then it must consult with its Actuary to determine whether the recommended loadings in the premium rates remain adequate, and must amend its rates as appropriate.
It should be noted that the Actuary must recommend premium rates with no cross subsidies between the rating factors, in line with Article 46 of the Implementing Regulations. However if, for competitive purposes, the company wishes to charge rates which have some element of cross-subsidisation, then it may ask the Actuary to prepare an additional report setting out the risks of applying the cross-subsidies, based on expected portfolios of business written which may not be too dissimilar to the in-force portfolio. SAMA will review the cross-subsidy report separately.
It should be noted that cross-subsidies are only permitted within the same class of insurance. In addition no cross-subsidies are permitted between retail and corporate business for either medical or motor.
The Actuary is responsible to ensure a comprehensive and concise report is provided to SAMA as to minimize the extent of required follow-up queries from SAMA.
In addition, the Actuary must prepare a short summary document highlighting his key findings for each actuarial pricing report. This shall be no more than five (5) pages in length, and must be submitted to the Board of Directors of the company as a Board paper within five working days of the Actuary’s submission, with the Actuary’s full report being an appendix to the Board paper.
The actuarial pricing reports submitted to SAMA cannot be preliminary or initial and are required to be the final reports. The reports shall clearly summarize and compare the Company’s current premium rates (loads and discounts) and the new premium rates (loads and discounts) calculated by the Actuary.

4.2 Mandatory Loading Requirements

The actuary is required to include the following loadings within the gross premium rates:
	1)	An Expense Loading covering all of the company’s expenses, both policyholders and shareholders, allocated appropriately to each class of insurance. As medical and motor insurance are resource intensive products, the loading for expenses (including commissions) must be set at a minimum of the expense ratio for 2014 provided the company has been writing business for three full years. If a company was licensed by SAMA to write any class of insurance business as at 1 January 2012, it must cover all of its 2014 expenses in the Expense Loading. Only insurance companies that were not licensed to write any class of insurance as at 1 January 2012 may adopt prudent project projections in order to set their expense loadings.
	2)	A Profit Loading that must be explicitly approved by the Board of Directors of the company. This must be at least 2% of premium.
	3)	A Contingency Loading set at 2.5% of premium for medical expenses and 5% of premium for motor business.
	4)	A Financial Condition Loading to allow for the lower risk capacity of any insurance company that does not have sufficient Admissible Assets to meet the Required Margin before application of the Minimum Capital Requirement (Reporting Form 31, Line 43. Column A), The required calculation to be adopted for this loading is set out in Appendix Two.
SAMA has noted that there is some confusion in the industry about the correct definitions of Loss Ratio, Expense Ratio and Combined Ratios, so these are set out in Appendix Three.
Any Composite Insurance Company, defined as any company writing general/health insurance and a material amount of long-term Protection & Savings business, must not use the expense ratio for the company as a whole. Instead, an expense report shall determine a suitable split of expenses between Protection & Savings and General/Health, and the Expense Ratio determined for General/Health only.
If a company has not been writing any business for three full years then the actuary may estimate the expense ratio for its third year of writing business based on prudent assumptions.
If a company is in the process of increasing its capital then the actuary must provide two sets of premium rates for the company to use, one prior to the capital raising exercise, and the other based on the expected solvency position once the additional capital has been raised. The rates based on the post capital raising financial condition may only be used once the company has received the proceeds of the capital raising exercise.
Any expenses that may be subject to unusual fluctuations may be smoothed. In particular the change in Doubtful Debt Reserve must be considered part of the company’s expenses, but consideration should be given to smoothing this item.

5. The Underwriting Manual

5.1 Submission to SAMA
The company must submit a corresponding underwriting manual, rating structure and premium rates.

The rating structure and premium rates must be in Excel spreadsheet format.

5.2 Contents of the Underwriting Manual

Underwriting Manuals must contain sufficient information so that an external party can follow any quotation produced by an Insurance Company for a risk in that Class of Insurance.
Underwriting Manuals must:
	•	be consistent with the pricing reports
	•	be comprehensive and cover all risks
	•	be clear and user-friendly
	•	fully describe the quotation process
	•	include the Underwriting Authority Statement, fully described
	•	be consistent with reinsurance arrangements
	•	for medical, where appropriate, they must be consistent with TPA agreements
	•	for medical, where appropriate, they must be consistent with CCHI requirements
	•	for motor, where appropriate, they must be consistent with Najm procedures
All premium rates to be charged must be approved by the actuary. Any adjustments to be made to the base rates determined by the actuary must be documented in the Underwriting Manual.
The Underwriting Manual shall be signed off by the Chief Underwriter or Chief Technical Officer for the class of insurance, as designated by the company.
The Actuary should review the Underwriting Manual (excluding the Underwriting Authority Statement) for technical accuracy and consistency with the pricing report, and highlight any inaccuracies.
The Risk Manager shall also sign off the Underwriting Manual (including the Underwriting Authority Statement) from the process perspective.
It should be noted that the Company is fully responsible for the accuracy, clarity and comprehensiveness of the Underwriting Manual.
SAMA requires that companies commit to translating their Underwriting Manual and Underwriting Authority Statement into Arabic by 31 December 2016. The extended timetable granted for this is in order to ensure that the English documents are of a high standard before they are translated.

5.3 The Underwriting Authority Statement

The Underwriting Authority Statement must set out fully the levels to which each Underwriter may quote.
This could be measured by Gross Written Premium, Sum Insured, Number of Lives for Medical or Number of Vehicles for Motor for standard risks, or a combination of these.
Any discretion to reduce Loadings for a particular quote would normally only lie with the Chief Underwriter or Chief Technical Officer. The scope to which this discretion extends must be fully documented.
Any additional discretion to reduce Loadings that lies with the Chief Executive Officer must be fully documented.
The Minimum Loading that must be applied for all quotations must be clearly stated. The Minimum Loading, net of commission, must be no less than 75% of the total loading, net of commission, recommended by the Actuary.
No discretion to reduce loadings to a particular quotation may be applied until the Underwriting Authority Statement has been approved by the Board of Directors, and it has been submitted to SAMA.

5.4 Training on the Updated Underwriting Manual
Everyone who has any level of authority to underwrite must be trained in the use of the Underwriting Manual and the Underwriting Tools.

Records must be maintained of formal training undergone.

6. Compliance and Record Keeping

A copy of this Circular must be passed to the Company’s Board of Directors, Audit Committee, Internal Auditors, Risk Management officers, Compliance Officer, Responsible Actuary and External Auditors.
The Actuary must prepare a short summary document highlighting the key recommendations of the pricing report. This shall be submitted to the Board of Directors and the internal control functions (internal audit, risk management, and compliance functions) with the pricing report submission.
The purpose of this document is to ensure that:
•	The internal control functions understand the Actuary’s recommendations.
•	There are internal controls in place to ensure the company is following the Actuary’s recommendations.
•	The internal control functions set up a meeting with the .Actuary to understand his/her recommendations and how to ensure that the company is following his/her recommendations.
The compliance function must report to SAMA any material lack of compliance with SAMA’s instructions. This shall be based on the reports of the Internal Audit function and the Risk Management function, and shall include an action plan for addressing the key issues identified.
The Internal Audit function must carry out a continuous audit, at least on a quarterly basis, of the underwriting function to assess compliance with the company’s internal procedures and guidelines as defined in the underwriting manual submitted to SAMA.
The Risk Management function must carry out a quarterly assessment of the underwriting risks, and recommend improvements to processes, and address any other weaknesses that should be improved such as any need for additional training of underwriting staff.
The internal control functions (internal audit, risk management, and compliance functions) must provide the Audit Committee on a quarterly basis with a report on their findings and suggested corrective actions. Moreover, on a quarterly basis the compliance function must provide SAMA with a copy of the minutes of the Audit Committee meeting in which the report was discussed. The minutes must summarize the findings and any corrective action that should be taken by the company.
The Underwriting Authority Statements for Medical and Motor products must be formally approved by the Board of Directors within 60 days of the required submission dates of the actuarial pricing reports to SAMA.
The Compliance Officer must ensure that all those mentioned in the first paragraph of this section receive copies of the Actuary’s Pricing Reports, the Board Summary documents and the Underwriting Manuals.
In addition all members of staff who have a designated underwriting authority level must be passed copies of the Underwriting Manual by the Compliance Officer.
The company must ensure that it has in place a central database accessible by Senior Management and all Internal Control functions containing full records of all quotations issued by the company, and all backing data.
Companies are required to have a centralised quotations database in place by 1 July 2016.

7. Implementation of New Rates

7.1 File and Use

Any proposed revisions to premium rates, rating structure and credibility formula may be introduced on a File & Use basis, which means the insurance company files the new actuarial report with SAMA and implements the new proposed premium rate, subject to such rates being in line with Article (46) of the Implementing Regulations.
The proposed revisions must be implemented within one month of the date the report is submitted to SAMA.
One specific exception is that, for both Individual/Retail Motor and Individual/Retail Medical, premium rates may not be introduced on a File & Use basis, if the premium rates for more than 50% of the business that the company expects to write are to be reduced. Any proposed reductions in retail premium rates may only be introduced if SAMA provides its no-objection However if SAMA has not provided a response to the company within 3 months of its submission of reduced rates, then it may assume that SAMA has no objection to its introduction of the rates.

7.2 SAMA’s Review Process

SAMA’s review of the actuarial pricing reports will be split into two parts:
	a)	A review of the loadings for expenses, contingency, profit and any financial condition loading to be applied to ensure that these are compliant with requirements.
	b)	A technical review of the methodology adopted.
If non-compliant loadings are being applied the company will be required to correct these within 5 working days of SAMA’s letter to the company.
SAMA will also review
	c)	The Underwriting Manual to check that it is complete and consistent with the actuarial pricing report.
	d)	The Excel pricing tool provided to check that it is compliant with the actuarial pricing report, and that it is documented in the underwriting manual.
SAMA’s reviews must not be regarded as reducing in any way the responsibility of the company and the actuary to comply with regulatory requirements.
If SAMA discovers that any company or actuary has abused the File and Use process then appropriate regulatory actions will be taken.

7.3 Regular Rate Increases

All companies are required to increase their medical and motor I PL rates on a quarterly basis to allow for inflation and anticipated future trends in experience, as recommended in the actuary’s report.
Where comprehensive motor premiums are expressed as a percentage of the sum insured, quarterly rate increases are not required unless the actuary has recommended increases be applied.
Any company that is required to apply a Financial Condition Loading must update that loading annually based on the Year End position, unless there has been a material change in the cover for its solvency. It must submit a brief note to SAMA setting out and justifying the revised Financial Condition Loading.

8. Regulatory Action for Non Compliance

It should be noted that if an insurance company, broker, insurance agent or insurance claims settlement specialist (third party administrator) is not in compliance with this Circular, SAMA will take the regulatory/lcgal actions as stipulated in the Law on Supervision of Co-operative Insurance Companies and its Implementing Regulations.
Thus, SAMA instructs the insurance company to do the following:
	1.	Provide SAMA with the updated Underwriting Manuals, including the Underwriting Authority Statement, which reflects the instructions stated in Sections 1, 2, 3, 4 and 5 of this Circular, for medical expenses and motor insurance. These must be provided within 60 days after the deadline for the submission of the actuarial pricing reports.
	2.	Provide SAMA with an unprotected soft copy of the Excel spreadsheets that set out the blended credibility approach that the insurance company is going to adopt to price group medical expenses and fleet/leasing motor risks which are in compliance with instructions stated in this Circular. These must be provided with the actuarial pricing reports.
	3.	Immediately provide insurance company’s employees who are in charge of underwriting with a copy of this Circular.
	4.	The requirements set out in this Circular will be effective immediately.
	5.	Provide confirmation from the insurance company’s CEO/GM within seven days of the date of this Circular of adherence to the instructions stated in this Circular.
	6.	Copies of this Circular must be provided to the full Board of Directors of the company. Minutes of the Board meeting on the adherence to the requirements set out in this Circular must be provided to SAMA within 90 days of the date of this Circular.
	7.	SAMA requires that the Actuary attend Board Meetings to present his Board Pricing papers, and take questions on his full pricing reports. The company must provide minutes of the relevant Board meetings to SAMA, and copies of the Actuary’s Board papers within 10 business days of the meeting.

Appendix One - Additional Requirements

Blending Book Rates with Experience for Larger Schemes
An Excel spreadsheet must be produced which ensures that the pricing mechanism adopted complies with the credibility formula recommended by the Actuary.

Compliance with the Prior Actuarial Pricing Reports

In order to investigate the compliance with the experience rating basis recommended, the Actuary shall take samples of the top five groups/fleets by premium income from the insurance company's portfolio and derive the experienced-rated premium rate. This can then be compared with the actual rate charged for each of the top five groups.
The Actuary is required to provide with his pricing report an Excel workbook to validate compliance with previous submitted pricing reports. The Excel workbook provided by SAMA (“ComplianceWithActuarialRates.xlsx”) can be used to validate compliance for medical business, and modified to be applicable for motor business. The insurance company must provide SAMA with copies of the Excel workbooks.

Appendix Two - Financial Condition Loading

All companies that do not hold sufficient Admissible Assets to cover their Total Required Margin before application of the Minimum Capital Requirement must include an additional loading in the medical and motor premium rates that they charge.
This is based on the data presented in Form 31 in the most recent Quarterly or Annual Returns, subject to any amendments required by SAMA.
The Financial Condition Ratio is defined as the Net Admissible Assets / Total Required Margin.
Financial Condition Ratio = (Form 31, Line 39, Column A) / (Form 31, Line 43, Column A)
If the Financial Condition Ratio is greater than or equal to 1 then no loading shall be applied to the premium rates.
If the Financial Condition Ratio is less than 1 then a Financial Condition Loading must be applied
The Financial Condition Loading for Medical Expenses is determined as:
16% x (1- Financial Condition Ratio)
The Financial Condition Loading for Motor is determined as:
20% x (1- Financial Condition Ratio)
Both Loadings shall be rounded to the nearest whole percentage point.
Note “Column A" refers to the Form Label, not the Excel Column.

Appendix Three - Standard Income Statement Ratio Definitions

This section sets out the standard definitions of the Loss Ratio. Expense Ratio and Combined Ratio equivalent to those used internationally.
Key points to note are that
	1)	Combined Ratio = Loss Ratio + Expense Ratio
	2)	A Combined Ratio in excess of 100% means a General/Health Insurance company is making Underwriting Losses. These may be mitigated by investment returns.
	3)	These ratios must not be used for any company writing material amounts of long term Protection & Savings business.
For all three ratios the Denominator is the Net Earned Premium plus any other income other than that arising from investments:
Net Earned Premium (Form 21, Line 17, Column E) +
Other Underwriting Income (Form 21, Line 19, Column E) +
Other Income (Form 21, Line 71, Column E) +
Other Income - Shareholders (Form 22, Line 19, Column A)
If a company has incorrectly treated movements in Premium Deficiency Reserves as part of its earned premium for accounting purposes, then it should reverse these movements out for the purposes of calculating its Standard Income Statements Ratios.
For Loss Ratio, the Numerator is the Claims Incurred (in Form 21, Line 37, Column E), adjusted to exclude any changes in Premium Reserves, such as Premium Deficiency Reserves or Catastrophe Reserves
The adjusted Claims Incurred are then divided by the Denominator to determine the Loss Ratio.
For the Expense Ratio, the Numerator is:
Commission Incurred (Form 21, Line 38, Column E)
Minus Reinsurance Commissions Earned (Form 21, Line 18, Column E) +
Policy Acquisition Costs (Form 21, Line 39, Column E) +
Other direct underwriting Expenses (Form 21, Line 40, Column E) +
Doubtful Debt Expense (Form 21, Line 41, Column E) +
Operational and Technical Expenses (Form 21, Line 51, Column E) +
Shareholders Expenses (Form 22, Line 39, Column A) +
Zakat (Form 22, Line 51, Column A)
Taxes (Form 22, Line 52, Column A)
The Combined Ratio is defined as the Loss Ratio + Expense Ratio

Appendix Four - Quotation Instructions for Medical Insurance

	INSTRUCTIONS FOR HEALTH QUOTATIONS
1	This sheet contains clarifications on the quotation process required by the Underwriting Circular.
2	All insurance companies must, in addition to this experience form, obtain full exposure data at the inception date of the policy in order to finalise a quotation.
3	The required exposure data must be consistent with the company's underwriting manual.
4	Exposure Data must show all lives to be covered, and should show the rating factors used by the company for every life. Data may be used in quotations aggregated by age bands, provided these age bands are shown.
5	Full demographic data must be provided before any quotation may be provided. Age and sex of lives to be covered may be provided on an individual basis, or may be age banded.
6	Any health insurance quotation must be age, sex, employee/dependent status and benefit level dependent, at a minimum. Benefit levels must take into account provider classes and network options. It is not permitted to quote a flat fixed cost applicable to all lives covered.
7	Companies must quotes premium rates sub-divided by rating factors, and these should be in proportion to the company's book rates. Exceptions to this may only be adopted where the claims experience for the group is highly credible, and the mechanism for setting the rates is defined fully in the company's Underwriting Manual.
8	The Insurance Company must determine Book Rates for all health insurance quotations, unless the amount of claims experience is sufficient to be fully credible. The amount of experience needed for full credibility must be defined by the actuary, and documented in the Underwriting Manual.
9	The Insurance Company must determine Experience or Burning Cost Rates for all health insurance quotations, unless the number of lives is below the threshold set by the actuary The threshold must be documented in the Underwriting Manual.
10	It should be noted that the Insurance Company is required to collect experience data even when the number of lives is below the threshold. The company's underwriters should consider whether claims on small groups are indicative of issues that may merit individual underwriting.
11	Where Book Rates and Experience / Burning Cost Rates have been determined, the company must determine a Blended Rate using the credibility formulae approved by the actuary. The credibility formulae must be fully documented in the Underwriting Manual.
12	This Blended Rate represents the minimum rate that the company may quote. It is fully acceptable to quote higher rates if the Underwriter is not comfortable with the Blended Rate.
13	All loadings for expenses and profit determined by the actuary, and documented in the Underwriting Manual must be included in the Gross Premium Rates. It is only necessary to quote the Gross Premium Rates to the client.
14	Lower quotations may only be prepared to the extent that these are fully defined within the company's Underwriting Authority Statement, which must be included in the Underwriting Manual, approved by SAMA.
15	For Medical Expenses groups, it is not permitted for an Insurance Company to offer profit sharing arrangements.
16
17	During 2015, quotations may only be provided if at least two or more years' claims experience is provided.
18	From 2016 onwards, quotations may only be provided if at least 3 or more years’ claims experience is provided.
19	If a risk is entirely new, the insurance company may only quote the book rates, which have been submitted to SAMA. The insurance company is not allowed to apply any discounts to these rates.
20	If the risk has been in existence for less than 3 years from 2016, or 2 years from 2015, then the insurance company may quote, provided they receive full claims experience for the time the risk has been in existence.
21	No insurance company is allowed to provide any quotation for medical expenses unless it has received claims experience, except if the risk is entirely new
22	Risks may be referred to the company's Responsible Actuary to quote, provided there is some claims experience. Entirely new risks with no claims experience may not be referred to the actuary.
23	An insurance company can provide a quotation as illustration only based on the information provided to it. However, the insurance company must amend the quotation based on full underwriting data. It may not issue a policy on quoted rates until it has full data to provide an accurate quotation. Under no circumstances may an insurance company provide actual rates, unless it has sufficient data, subdivided according to the rating factors it will adopt in its Underwriting Manual

Appendix Five - Quotation Instructions for Motor Insurance

	INSTRUCTIONS FOR MOTOR QUOTATIONS
1	This sheet contains clarifications on the quotation process required by the Underwriting Circular.
2	All insurance companies must, in addition to this experience form, obtain full exposure data at the inception date of the policy in order to finalise a quotation.
3	The required exposure data must be consistent with the company's underwriting manual
4	Exposure Data must show all vehicles to be covered, and should show the rating factors used by the company for every vehicle.
5	It is not the responsibility of any insurance company to provide exposure data to any other party unless this has been explicitly agreed between the Insurance Company and the policyholder.
6	Any motor Third Party Liability (TPL) insurance quotation must be vehicle type dependent, at a minimum. It is not permitted to quote a flat fixed cost applicable to all vehicles covered
7	The Insurance Company must determine Book Rates for all motor insurance quotations, unless the amount of claims experience is sufficient to be fully credible. The amount of experience needed for full credibility must be defined by the actuary and documented in the Underwriting Manual.
8	The Insurance Company must determine Experience or Burning Cost Rates for all motor insurance quotations, unless the number of vehicles is below the threshold set by the actuary. The threshold must be documented in the Underwriting Manual.
9	It should be noted that the Insurance Company is required to collect experience data even when the number of vehicles is below the threshold. The company's underwriters should consider whether claims on small schemes are indicative of fraudulent activity, or of issues that may merit individual underwriting.
10	Where Book Rates and Experience / Burning Cost Rates have been determined, the company must determine a Blended Rate using the credibility formulae approved by the actuary. The credibility formulae must be fully documented in the Underwriting Manual.
11	This Blended Rate represents the minimum rate that the company may quote it is fully acceptable to quote higher rates if the Underwriter is not comfortable with the Blended Rate.
12	All loadings for expenses and profit determined by the actuary, and documented in the Underwriting Manual must be included in the Gross Premium Rates. It is only necessary to quote the Gross Premium Rates to the client.
13	Lower quotations may only be prepared to the extent that these are fully defined within the company's Underwriting Authority Statement, which must be included in the Underwriting Manual, approved by SAMA.
14
15	During 2015, quotations may only be provided if at least two or more years' claims experience is provided.
16	From 2016 onwards, quotations may only be provided if at least 3 or more years’ claims experience is provided
17	If a risk is entirely new, the insurance company may only quote the book rates, that have been submitted to SAMA. The insurance company is not allowed to apply any discounts to these rates.
18	For motor schemes, an insurance company may provide a quotation with a profit sharing element. These may only be quoted if the actuary has defined how profit sharing mechanisms may work in the pricing report, and any profit sharing must follow the format set out by the actuary.
19	If the risk has been in existence for less than 3 years from 2016, or 2 years from 2015, then the insurance company may quote provided they receive full claims experience for the time the risk has been in existence.
20	No insurance company is allowed to provide any quotation for motor business unless it has received claims experience.
21	If a quotation is required for Comprehensive cover where the scheme has only been insured for Third Party cover in the past, then the existing experience should be used to determine the Third Party component of the rates. Book rates must be used to determine the Own Damage part of the premium rates.
22	If a quotation is required for Third Party cover only, where the scheme has only been insured for Comprehensive cover in the past, then experience for Third Party claims only must be obtained, and used to determine the rates.
23	An insurance company can provide a quotation as illustration only based on the information provided to it. However, the insurance company must amend the quotation based on full underwriting data. It may not issue a policy on quoted rates until it has full data to provide an accurate quotation. Under no circumstances may an insurance company provide actual rates, unless it has sufficient data, subdivided according to the rating factors it will adopt in its underwriting manual.

Soft Launch

Insurance Sector

Insurance (Draft)

Laws and Regulations

Implementing Regulations of the Cooperative Insurance Companies Control Law

Definitions

Article One

Objectives of the Law and the Implementing Regulations

Article Two

Classes of Insurance

Article Three

First: General Insurance

Second: Health Insurance

Third: Protection and Savings Insurance

Licensing Requirements

Article Four

First: Insurance and/or Reinsurance Companies:

Second: Insurance and Reinsurance Services Provider:

Third: Individuals Providing Insurance and reinsurance Services:

Article Five

Article Six

Article Seven

Article Eight

Article Nine

Article Ten

Article Eleven

Regulation of Insurance Operations

Article Twelve

Article Thirteen

Article Fourteen

Article Fifteen

Article Sixteen

Article Seventeen

Article Eighteen

Article Nineteen

Article Twenty

Article Twenty-One

Article Twenty-Two

Article Twenty-Three

Article Twenty-Four

Article Twenty-Five

Article Twenty-Six

Corporate Governance

Article Twenty-Seven

Article Twenty-Eight

Article Twenty-Nine

Regulatory And Supervisory Procedures

Article Thirty

Article Thirty-One

Article Thirty-Two

Article Thirty-Three

Article Thirty-Four

Article Thirty-Five

Article Thirty-six

Article Thirty-Seven

Article Thirty-Eight

Article Thirty-Nine

Article Forty

Article Forty-One

Article Forty-Two

Article Forty Three

Article Forty-Four

Article Forty-Five

Article Forty-Six

Article Forty-Seven

Article Forty-Eight

Article Forty-Nine

Article Fifty

Article Fifty-One

Article Fifty-two

Article Fifty-Three

Article Fifty-Four

Article Fifty-Five

Article Fifty-Six

Article Fifty-Seven

Statutory Deposit

Article Fifty-Eight

Investment

Article Fifty-Nine

Article Sixty