In the process of modernizing marine insurance in the Kingdom of Saudi Arabia (KSA), the Saudi Arabia Central Bank (SAMA) issued official Marine Insurance Coverage Instructions on October 4, 2023. The issuing of these instructions was a significant step towards establishing a regulatory framework for both mandatory and non-mandatory marine insurance within the KSA, as well as establishing minimum coverage and benefit levels. These instructions focused on adhering to international standards and adapting practices to those of the modern shipping industry. Several key mandates were outlined in the Marine Insurance Coverage Instructions, including directives related to wreck removal protocols, compulsory coverage for the operators and crew members of vessels, and pollution risks arising from oil-based fuels. The KSA is enforcing these requirements to enhance maritime safety standards, mitigate potential liabilities, and foster the development of a more resilient and sustainable shipping industry.
SAMA further established the Independent Authority (IA) on November 23, 2023, through Royal Decree No. 85, marking a shift in the oversight of the insurance sector, which SAMA was previously responsible for regulating and managing. The formation of the IA is an important step towards strengthening the existing system of regulatory supervision. The goal of the IA is twofold: (1) initiate developments that are in line with international standards when it comes to writing insurance policies and (2) enhance market efficiency as per the objectives established by Vision 2030 in KSA.
To address disputes arising from marine insurance policies within the KSA, the Law on Supervision of Cooperative Insurance Companies issued a royal decree (no. M/32) (dated 02/06/1424H), which created the Insurance Disputes Committee (IDC) and appeal committee in 2003. The IDC is governed by KSA law and hears disputes involving insureds, Saudi insurance companies, and third-party administrators. It also operates as a quasi-judicial body under the IA. Committee hearings are held before a panel that is led by a legal advisor and two insurance experts. This panel of competent members of the insurance industry ensures that individuals and companies have a fair and impartial platform for dispute resolution.
Further these developments encourage the enforcement of arbitration clauses in insurance contracts, which is an important factor to consider. While the IDC and KSA generally uphold arbitration clauses in insurance policies, obtaining approval of such clauses from SAMA, and now the IA, often presents a challenge. Accordingly, SAMA recommends including dispute resolution clauses in insurance policies and references the IDC, specifying KSA law as the governing law. Although SAMA allows maritime insurance policies to incorporate arbitration clauses, however, SAMA prefers that policies refer to an alternative dispute resolution mechanism, such as the IDC.
The KSA’s insurance regulations have evolved in line with Vision 2030. With the establishment of effective insurance regulations and dispute resolution techniques, the KSA is heading towards unlocking new opportunities for growth within the insurance industry in KSA.
For any further enquires kindly contact
Dr. Bader AlBusaiyes
Founder and Managing Partner
AlSuwaiket & AlBusaiyes Lawyers and Legal Consultants Co.,
Email: dr.bader@sbsaudilawyers.com
Mob: +966 50 5945306
in collaboration with
Marium Merchant
Junior Associate
Fichte & Co Legal
Dubai, United Arab Emirates
Email: marium.merchant@fichtelegal.com
Mob: +971 50 4500274
