The licensing requirements for the underwriting activity

Definitions

For the purposes of these Requirements, the following words and expressions wherever they appear herein shall have the meanings assigned to them in the Implementing Regulations of the Cooperative Insurance Companies Control Law.
For the application of the provisions of these Requirements, the following terms wherever they appear shall have the meanings set out opposite each of them, unless the context indicates otherwise:

a) IA: The Insurance Authority.
b) Licensing Requirements: The licensing requirements for the underwriting activity.
c) Company: The insurance company engaged in insurance and/or reinsurance activities.
d) Providers of Ancillary Services: Persons licensed to practice any of the freelance professions related to insurance and/or reinsurance activities.
e) Underwriting Activity: The professional process through which  the company assesses the risks presented to it, decides whether to accept or reject them, and determines the coverage terms and the appropriate premium rate.
f) Law: The Cooperative Insurance Companies Control Law.
g) Regulations: The Implementing Regulations of the Cooperative Insurance Companies Control Law.​​​

Purpose and Scope of Application

a) These Requirements aim to establish the provisions and conditions for licensing of the underwriting activity.

b) These Requirements apply to applicants seeking an underwriting license, to those licensed to practice the underwriting activity, and the company contracted with the licensees to carry out the underwriting activity. ​​​

Licensing Provisions​

A) Applications for a license to conduct underwriting activities shall be submitted to the IA. The underwriting activity may not be carried out unless a license is obtained from the IA.

Conditions for Granting the License​

The IA shall assess whether the applicant fully meets the licensing requirements. The license application shall be submitted to the IA and shall include the following: 

1. Completion of the licensing application form

2. Articles of Association.

3. Bylaws

4. Organizational Structure.

5. Feasibility Study.

6. A three-year business plan, which must include at a minimum the following:

a) The lines of insurance in which the providers of ancillary services intend to operate.
b) The expected startup costs and the financial sources required for funding.
c) The projected growth rates of the activity.
d) The expected number of employees and the plan for training and employing Saudi nationals.
e) Annual expenses based on the projected growth rates of the activity.
f) Pro forma financial statements linked to the growth projections.
g) Annual costs based on the expected growth rates.
h) Pro forma financial statements associated with the growth rates.
I) Branch opening plan.

7. Any agreements with other parties

8. An irrevocable bank guarantee in an amount equivalent to the required capital, issued in favor of the IA by a local bank, to be automatically renewed until the full capital is paid​​

​​Licensing Procedures:​

a)The IA shall notify the applicant within thirty working days from the date of submission whether the application is complete or not, and shall inform them of any deficiencies.

b) The applicant must rectify any deficiencies within thirty working days from the date of IA’s notification; otherwise, the application shall be subject to cancellation.

c) The IA shall decide on the application within ninety working days from the date it notifies the applicant that the application is complete.​

Scope of Activities​:​

​Licensed providers of ancillary services practicing the underwriting activity must enter into an agreement with the Company that specifies the contracting mechanism, the limits of the risks permitted to be underwritten, and the terms for accepting risks on behalf of the Company.

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​​Licensed underwriters may engage in ancillary services, provided that they obtain a license from the IA prior to commencing such activities.

​Licensed underwriters must exclusively conduct underwriting on behalf of the contracting Company for each line of insurance.

The Company shall be responsible for monitoring the licensed underwriters’ compliance with the terms and conditions of the agreement.​​

​​Engaging in both insurance underwriting and reinsurance underwriting activities concurrently is not permitted except with the approval of the IA.

​General Provisions

Providers of ancillary services licensed to practice the underwriting activity shall be subject to the statutory provisions governing ancillary service activities as set out in the Law, the Regulations, and any other rules or instructions issued by the IA.

​The IA may impose any additional restrictions or conditions on the practice of the underwriting activity.

​Failure to comply with these Requirements constitutes a violation of the Cooperative Insurance Companies Control Law and its Implementing Regulations, and subjects the violator to the applicable statutory penalties.

​These Requirements have been issued in both Arabic and English. In the event of any discrepancy between the two versions, the Arabic text shall prevail.