Cooperative Insurance Companies Control Law
The Cooperative Insurance Companies Control Law promulgated by Royal Decree No. (M/32) dated 02/06/1424H (corresponding to 31/07/2003) amended by the Royal Decree No. (M30) dated 27/5/1434H (corresponding to 08/04/2013), and amended in accordance to the Royal Decree No. (M/12) dated 23/1/1443H (corresponding to 01/09/2021).
Article 1
Insurance in the Kingdom of Saudi Arabia shall be provided by insurance companies registered in the Kingdom operating in accordance with the practice of cooperative insurance in line with the provisions of the Articles of Incorporation of the National Company for Cooperative Insurance issued by Royal Decree No (M/5) dated 17/4/1405H, and not inconsistent with the provisions of Shari’ah
Article 2
Subject to the provisions of the Law of Cooperative Health Insurance issued by Royal Decree No. (M/10) dated 1/5/1420H, the Saudi Central Bank shall have the power to:
1. Receive and review incorporation requests of cooperative insurance and reinsurance companies and insurance related services providers; to assure fulfilment of requests to the licensing requirements set out by the Saudi Central Bank, and issue the initial approval in order to refer the requests to the competent authority to complete incorporation procedures.
2. Issue licenses, supervise, control, and regulate the activities of insurance and reinsurance companies and insurance-related service providers, and shall exercise its powers as stated under the provisions of this Law and its Implementing Regulation, and notably to:
a. Regulate and approve rules for investment of insurance and reinsurance premiums, and design a formula for distribution of insurance and reinsurance surplus among shareholders and policyholders, provided that separate accounts are kept for shareholders, policyholders and insurance operations.
b. Determine the sums of money required to be deposited in one of the local banks in order to practice each of the different classes of insurance.
c. Approve standard forms of insurance and reinsurance policies, and determine the minimum insurance amount for third party liability coverage, subject to the provisions of laws applicable in this regard.
d. Set rules determining the method of investing the assets of insurance and reinsurance companies.
e. Set general rules determining the assets each company shall allocate inside and outside the Kingdom, the minimum and maximum assets required for each class of insurance and the conditions that shall be observed in each class, and the minimum and maximum underwriting premiums in relation to the capital and reserves of the company.
f. Set rules protecting the rights of beneficiaries, and ensure the ability of the insurance companies to fulfil the claims and obligations.
3. Obtain fees of licenses and provided services, and such fees shall be determined by the Governor.
Article 3
1. No person in the Kingdom shall conduct insurance or reinsurance activities or provide insurance related services without obtaining the license from the Saudi Central Bank.
2. Subject to Paragraph (1) of this Article, the insurance and reinsurance company shall comply with the following:
a. The company shall be a joint-stock company.
b. The principal purpose of the company shall be to conduct insurance or reinsurance activities, and the company shall not undertake other activities unless they are necessary or complementary to its principal purpose.
3. Insurance and reinsurance companies may not submit a request for initial public offering to sell any of its stocks without obtaining the prior approval of the Saudi Central Bank, which shall set the rules for such approval.
4. Insurance companies shall not directly own insurance brokerage companies or establishments, and reinsurance companies shall not own reinsurance brokerage companies or establishments.
5. The capital of the insurance or reinsurance company shall only be amended upon approval of the Saudi Central Bank and pursuant to the provisions of the Companies Law. The Implementing Regulation shall determine the minimum paid-up capital for insurance or reinsurance company, which shall not be less than three hundred million Saudi riyals.
Article 4
The implementing regulation shall specify the insurance operations governed by this Law, and each insurance company shall specify the classes of insurance it shall provide.
Article 5
An insurance or re-insurance company - upon commencing business - may not suspend its insurance activities without the prior approval of the Saudi Central Bank. This is to ensure that insurance companies take all necessary measures to safeguard the rights of the policyholders and the investors.
Article 6
Nomination of members of the board of directors of insurance and reinsurance companies and insurance-related service providers, members of audit committees, committees emerging from the board, managers and senior positions specified by the Saudi Central Bank shall be subject to the approval of the Saudi Central Bank. The Saudi Central Bank shall set the rules of their appointment.
Article 7
The chairman of the board of directors of an insurance or re-insurance company, managing director, a member of the board of directors and general manager shall be liable, each within the limits of his authority, for the company’s violation of any of the provisions of this Law or its implementing regulation.
Article 8
The Saudi Central Bank may inspect the records and accounts of any insurance or re-insurance company through the Saudi Central Bank’s employees or auditors appointed by it, provided that the inspection be carried out at the site of the insurance or re-insurance company. In this case the employees of the company shall submit whatever is in their possession or under their authority or records, data, and documents requested from them, and disclose any information they have, relating to the company, to the employees of the Saudi Central Bank or whoever it may appoint as auditors.
Article 9
An insurance or re-insurance company may not open any branch or office inside or outside the Kingdom, agree to merge with, own any insurance or banking activity, have control thereof, or own shares of another insurance or re-insurance company without the written approval of the Saudi Central Bank.
Article 10
1. The general assembly of the insurance or reinsurance company shall annually appoint two auditing offices from among the certified accountants licensed to practice the profession in the Kingdom and shall determine their fees.
2. The auditors shall include in their annual report presented to the general assembly– in addition to the data provided for in the Companies Law– their opinion as to whether the financial statements of the company correctly reflect its true financial position on the date of the balance sheet and the results of its activities during the fiscal year which expires on that date, and as to whether the preparation, presentation and audit of these statements conform to the generally accepted accounting principles applied in the Kingdom.
3. Financial statements and the auditors’ report shall be published within three months from the date of the end of the company’s fiscal year.
Article 11
The Saudi Central Bank may at any time request any insurance or re-insurance company to submit to it– at the time and in the form it determines– any information it deems necessary to fulfill the purposes of this Law. It shall also send to the Saudi Central Bank at its request the following:
1. A statement of the revenues and expenses for each insurance class.
2. A detailed statement of the insurance activities carried out by the company during the stated period.
3. Statistical statements and general information about the activities of the company.
4. A statement of the investments of the company.
5. Any other information requested by the Saudi Central Bank.
Article 12
It is prohibited for any person who obtains any information, while carrying out any work related to the application of the provisions of this Law, to disclose or benefit from it in any way.
Article 13
All insurance and re-insurance companies shall submit to the Department of Zakat and Income Tax their zakat or tax returns, the audited financial statements and any other information or documents which the Department deems necessary for the purpose of determining the amount subject to zakat or taxation in accordance with the provisions of the Tax Law, the Zakat Collection Law and their implementing regulation and payment of the sums due, within the times specified by the Law.
Article 14
Insurance and re-insurance companies governed by this Law shall deposit in one of the local banks, a statutory deposit to the order of the Saudi Central Bank, and the implementing regulation shall determine the rules relating to this deposit.
Article 15
The insurance and re-insurance companies shall allocate a part of their annual profits, not less than 20%, as a statutory reserve, until the total reserve amounts to 100% of the capital paid.
Article 16
All insurance and re-insurance companies shall set up the required reserves for their insurance classes, and other reserves as provided for in the implementing regulation of this Law.
Article 17
All insurance and re-insurance companies governed by the provisions of this Law shall keep a separate account for each class of insurance as specified in the implementing regulation of this Law. They shall also keep records and books to record insurance policies issued by the company, names and addresses of the holders of such policies and the date of concluding each policy, its effectiveness, prices and conditions provided for in it. Any change or amendment occurring in such policies shall also be recorded in these records and books. The Saudi Central Bank may issue the decisions it deems necessary to compel insurance companies to record in the books and records any data it deems necessary to exercise its authority of control and supervision. The data contained in the records and books mentioned above may be entered in the computer in accordance with the rules and procedures provided for in the implementing regulation of the Law of Commercial Books.
Article 18
Officers of the Saudi Central Bank appointed by a decision of the Saudi Central Bank’s Governor, shall be responsible to carry out activities of inspection, supervision, and restrain of violations of the provisions of this Law or its Implementing Regulation. The responsibilities and framework of those officers shall be determined in the Implementing Regulation. At the discretion of the Governor; supporting tasks of inspection, supervision and restrain may be referred to the private sector.
Article 19
1. If the Saudi Central Bank finds that any insurance or reinsurance company or insurance-related service provider has followed a policy to which it may adversely affect its ability to fulfill its obligations, has violated professional standards, or has violated the provisions of this Law or its Implementing Regulation, the Saudi Central Bank may impose one or both of the two following penalties:
a. Fine stipulated in Article (21) of this Law.
b. Cancellation of the issued license, provided that such cancellation is supported by the committee referred to in Article (20) of this Law.
2. In addition to provisions of Sub-Paragraph (a) of Paragraph (1) of this Article, the Saudi Central Bank may take against the insurance or reinsurance company or insurance-related service provider stated in paragraph (1) of this Article any of the following actions:
a. Issue a warning.
b. Require presenting an appropriate program that explains the corrective measures to be taken.
c. Compel to stop practicing all or some activities.
d. Prevent distribution of profits to meet the solvency margin requirements.
e. Suspend the person responsible for the violation from work and suspend their powers.
f. Suspend any of the persons referred to in Article (6) of this Law from work.
g. Appoint one or more consultants to provide them with consultation regarding the management of its activities at their expense.
h. Any other action specified in the Implementing Regulation.
3. The Saudi Central Bank may, instead of imposing the penalty stipulated in Sub-Paragraph (b) of Paragraph (1) of this Article, take against the entities stated in Paragraph (1) of this Article any of the actions stipulated in Paragraph (2) of this Article.
4. The Saudi Central Bank may announce the penalties it imposes based on Paragraph (1) of this Article when they are final, and may also announce the actions taken based on Paragraph (2) of this Article as it deems necessary to protect the insureds and the stability of the insurance sector, and the Saudi Central Bank shall set the necessary rules for such announcements.
Article 20
One or more preliminary committees shall be formed by resolution of the Council of Ministers. The committee(s) shall be composed of not less than three specialized members, working full-time if possible, and at least one of them must be a regulatory consultant. The Committee members shall maintain a three-year membership subject to renewal. The committee(s) shall be responsible for:
1. Settling all disputes arising from insurance contracts, including disputes arising between insurance companies and their clients and beneficiaries of the insurance coverages, or between insurance companies and third party in case of subrogation, and disputes arising between insurance-related service providers and their clients.
2. Settling all disputes arising among insurance companies, reinsurance companies, and insurance related services providers.
3. Settling grievances filed against the penalties and actions imposed by the Saudi Central Bank in accordance with Article (19) of this Law, provided that the grievance is filed to the committee within (30) days from the date of notification of action. The committee may issue decisions awarding damages, requesting to revert to the original status or issuing any other decisions as appropriate to protect the rights of the aggrieved.
4. Looking into decision of license cancellation issued by the Saudi Central Bank.
Article 21
1. Without prejudice to any harsher punishment provided for in any other law, anyone who conduct insurance activities or insurance related service activities without a license from the Saudi Central Bank shall be punished by a fine of no more than two million Saudi riyals and imprisonment for a period not exceeding four years, or by either.
2. Subject to Paragraph (1) of this Article, anyone who violates any of the provisions of this Law shall be punished by a fine of no more than two million Saudi riyals. In case of continuation of violation, a fine of no more than (10,000) Saudi riyals shall be imposed for each day the violation continues.
3. The decision issued for the penalty to be imposed may include a statement for the publication of the summary of the decision at the expense of the violator in a local newspapers or in any other appropriate channel; depending on the type, gravity and effect of the violation committed. Decisions shall only be published after being final.
Article 22
1. An Appeal Committee shall be formed of not less than three consultants, working full-time if possible, who are specialized and knowledgeable about the jurisprudence of transactions and insurance. The Committee is responsible for looking into grievances raised by concerned parties against the rulings of the Committees set forth in Article (20) of this Law, and its decisions shall be final and not open to appeal.
2. The chairman and members of the Appeal Committee shall be appointed by a royal order. Their membership shall be for a three- year renewable term.
3. Rules and regulation governing the business of the Committees set forth in this Law and governing prosecution before these Committees shall be issued by the Council of Ministers.
4. Remuneration of members of the Committees set forth in this Law shall be determined by the Minister of Finance.
Article 23
The implementing regulation of this Law shall be issued by a decision of the Minister of Finance, shall be published within sixty days from the date of publication of this Law, and shall come into effect on the date of the enforcement of this Law.
Article 24
Subject to what is stated in Article One of this Law whatever is not provided for therein shall be governed by the Companies Law to the extent permitted by the nature of such type of companies.
Article 25
This Law shall be published in the Official Gazette and shall come into effect after ninety days from the date of its publication.