17 March 2026
The year 2025 marks the sixth consecutive
cycle of actuarial reports submitted by insurance companies under the Actuarial
Work Rules (AWR) issued in March 2020. The AWR aim to enhance the role and
responsibilities of actuaries in the insurance sector in order to facilitate
informed decision-making by management and to provide greater technical support
to the business as the market sophistication continues to grow in the Kingdom
Under these Rules, the Appointed Actuary is
obligated to perform a number of actuarial analyses, at least, annually, and
convey to the Executive Management, Board of Directors and the Insurance
Authority (IA) the outcome of those analyses in the form of an actuarial
report, prepared separately on each individual topic.
The rules also require the Appointed Actuary
to investigate and advise the Company on its solvency position and identify all
major risks using appropriate actuarial techniques. To support this
requirement, a Stress & Scenario
Test (SST) framework was introduced in 2020. Since then, the framework has
expanded significantly in scope and sophistication each year, with the
objective of facilitating a measured transition towards a Risk-Based Capital
(RBC) regime, which is now due to come into effect from 1 January 2027.
This document
encompasses IA’s observations from its review of the Solvency
& Capital Report 2025, to provide companies with early insight into
the potential impact of moving to the RBC-based solvency framework and
highlights each insurer’s susceptibility to various risks. The document
concludes with a dedicated section outlining the IA’s expectations to the Board
of Directors, Executive Management, the Appointed Actuary, and Head of
Actuarial Function.
It contains the below sections:
1. Current Capital Requirement v Risk-Based
Capital.
2. Composition of Risk-Based Capital.
3. Capital Drivers within Individual Risk
Modules.
4. RBC Breakdown by Risk Exposure Type.
5. Overall RBC Expressed as a Percentage of
Different Exposure Measures.
6. Top Risks for Insurance Companies.
7. Diversification Benefit within Risk Types.
8. Actuarial Function’s Contribution.
9. Insurance Authority Expectations.
On 28 October 2025, the IA announced that the RBC framework will become
the new solvency assessment regime for insurance and reinsurance companies
operating in Saudi Arabia, fully replacing the current solvency regime
effective 1 January 2027.
Through multiple iterations since 2020
(including four dry runs already conducted, fifth dry run coming up soon based
on the results of year 2025, to be followed by quarterly parallel runs during
2026), management of insurance companies have been provided with ample opportunity
to understand the link between business strategy and risk-based capital
requirements, with the expectation that each insurance company will actively
work towards embedding a culture of risk-based decision-making in its
day-to-day operations and in setting its strategic targets.
In this regard, the Authority summarizes a
number of important observations emerged from its review and shares these
observations with the Company’s executive management, along with the
expectations in respect of those observations. The IA anticipates that
management will consider each of those observations and IA expectations
diligently, internal discussions will be held at the Board of Directors’ level
and with all relevant functions, and appropriate actions will be taken by
management.