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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.

Soft Launch

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

Article Sixty-One

Article Sixty-Two