Saudi Reinsurance Company (Saudi Re), announced the signing on an exclusive reinsurance contract with Malath Insurance Company, on behalf of the Saudi insurance industry, to provide reinsurance coverage on the Inherent Defects Coinsurance Program. With this arrangement, the sole Saudi reinsurer will act as the exclusive reinsurer for the Saudi Arabian Inherent Defects Coinsurance Program for five years.
Saudi Re will provide reinsurance treaty and facultative protection and expects the contract is to reflect positively on Saudi Re’s sales and financial performance.
The Inherent Defects Insurance (IDI) is a compulsory cover, mandated by the Council of Ministers Resolution No. 509 issued on June 5, 2018 requiring all contractors involved in private sector construction projects to obtain an IDI policy. The implementation of the IDI program will follow a phased approach over a three-year period. The Saudi Arabian Monetary Authority (SAMA) issued last March a standard policy wording for the IDI specifying a duration of 10 years for the cover. More than 100,000 construction permits were issued in 2019 based on the data of the Ministry of Municipal & Rural Affairs (MOMRA). This new line of business is expected to stir growth in the Property and Casualty sector which represents 15 percent of the overall insurance market premium in Saudi Arabian which recorded SR 37.9 billion in 2019.
Saudi Re Managing Director and Chief Executive Officer Fahad Al-Hesni commented, “We are very excited to be given the opportunity to serve as the exclusive reinsurer to the Inherent Defects Coinsurance Program. This falls within Saudi Re objective to support its home market, and we welcome the initiatives led by SAMA to develop the insurance industry and enhance the market practices”.
“The IDI is a 10-year long cover and we have arranged a special retrocession protection as risk management measure to manage this long-tail business,” Al-Hesni stated