Saudi Reinsurance Retention Requirements: 2026 Guide
On this page
- Saudi Arabia Reinsurance Retention Requirements: How Insurers Can Meet Local Retention Targets
- Key Takeaways
- What Are Saudi Arabia's Reinsurance Retention Requirements?
- Who Regulates Reinsurance in Saudi Arabia Now?
- How Does the 30% Local Reinsurance Rule Work?
- Which Reinsurers Can Saudi Insurers Use?
- Worked Example: Testing Two Insurers Against Both 30% Tests
- How Can Insurers Meet Local Retention Targets Without Adding Volatility?
- Which Mistakes Put Saudi Insurers Out of Compliance?
- What Should the Reinsurance Team and Appointed Actuary Prepare?
- How Do the Rules Affect Capital, IFRS 17 and Counterparty Risk?
- What Does the Saudi Reinsurance Market Look Like?
- Checklist for CFOs and Heads of Reinsurance
- Key Terms
- Sources
- Frequently Asked Questions
Saudi Arabia Reinsurance Retention Requirements: How Insurers Can Meet Local Retention Targets
Last reviewed: November 2026
Saudi reinsurance retention requirements combine two tests: a minimum retention of 30% of total premium, and an obligation to offer at least 30% of treaty and facultative reinsurance business to domestic reinsurers. Together they aim to keep more insurance risk and premium inside the Kingdom.
The two tests are often confused, but they measure different things. A company can pass one and fail the other.
This guide is for CEOs, CFOs, CUOs, appointed actuaries and heads of reinsurance at Saudi insurers, and for reinsurers writing Saudi business. It explains both tests, works through a compliance example in SAR, and shows how to meet local retention targets without adding unwanted volatility.
Key Takeaways
- The Insurance Authority (IA) is now the sole regulator of Saudi insurance and reinsurance, having taken over from SAMA.
- The Implementing Regulations require insurers to retain at least 30% of total premium.
- IA instructions from late 2024 require insurers to offer at least 30% of treaty and facultative business to domestic reinsurers.
- Offshore reinsurers face a BBB (S&P) rating floor and mandatory registration on the IA platform.
- The IA's own review found that less than one-fifth of ceded business stayed within the Kingdom.
- Higher retention works best when the larger net account is protected by excess of loss.
What Are Saudi Arabia's Reinsurance Retention Requirements?
Saudi reinsurance retention requirements are a minimum retention test and a local reinsurance test. The table below separates them.
| Test | What It Measures | Threshold | Source |
|---|---|---|---|
| Minimum retention | Premium kept net of all reinsurance, as a share of total premium | At least 30% of total insurance premium | Article 40, Implementing Regulations of the Cooperative Insurance Companies Control Law |
| Local reinsurance offer | Share of reinsurance business offered to domestic reinsurers first | At least 30% of treaty and facultative business | IA instructions issued in Q4 2024 |
| Reinsurer quality (offshore) | Rating of reinsurers outside the Kingdom | S&P BBB or equivalent, unless the IA has no objection | Article 42, Implementing Regulations |
| Reinsurer registration (offshore) | Whether a foreign reinsurer is registered with the IA | Registration required before contracting | IA Circular No. 85 (2025) |
The retention test protects the local balance sheet and the domestic market's share of underwriting profit. The local reinsurance test builds capacity at Saudi reinsurers and keeps more reinsurance premium in the Kingdom.
Both rules sit within a framework under review. The IA has consulted on a new insurance law and released draft implementing regulations, so confirm current text with the IA before relying on any threshold.
Who Regulates Reinsurance in Saudi Arabia Now?
The Insurance Authority is the unified regulator for insurance, reinsurance and takaful in Saudi Arabia. The Saudi Cabinet approved the IA as the unified, independent regulator in August 2023, and it began operating as the sector's sole regulator later that year.
Insurance supervision previously sat with the Saudi Central Bank (SAMA). Health insurance supervision moved from the Council of Health Insurance to the IA in 2024.
Many reinsurance rules still trace back to the SAMA era. The Implementing Regulations, including Articles 40 and 42, were written under SAMA and remain the reference point unless the IA has amended or replaced them.
What Does the IA Expect From the Appointed Actuary?
The Actuarial Work Rules require an annual report from the Appointed Actuary on the appropriateness of reinsurance arrangements and retention levels for each line. The actuary must also recommend an optimal reinsurance arrangement to the board and senior management.
In its review of the 2024 reports, the IA noted that most recommendations across treaty types suggested increasing retention. It expects boards to understand the rationale and actively consider those recommendations.
How Does the 30% Local Reinsurance Rule Work?
The local reinsurance rule requires insurers to offer at least 30% of their reinsurance business to domestic reinsurers before placing it abroad. The IA's own review describes instructions issued in Q4 2024 covering both treaty and facultative business.
Market reports describe a phased path. A 2022 mechanism reportedly started the local share at 20% for 2023 and rose to 30% by 2025, with the late-2024 instructions confirming 30% and extending it to facultative business from 1 January 2025.
Do Local Reinsurers Have Priority?
Local licensed reinsurers have priority to accept or decline the offered share. Saudi Re's disclosures describe placements needing to exhaust local market capacity before going to foreign reinsurers.
That makes evidence essential. Insurers should keep a record of what was offered, to whom, on what terms, and what each local reinsurer accepted or declined.
Offer or Placement?
The IA review describes the obligation as an offer, while some trade reports describe it as a cession. The difference matters when local reinsurers decline part of the share.
Confirm with the IA how declined shares are treated for your company. Until you have that answer, keep the declination evidence for every offer.
Which Reinsurers Can Saudi Insurers Use?
Saudi insurers can use domestic reinsurers and registered foreign reinsurers that meet the rating rules. Three checks apply to offshore capacity.
- Rating floor. Article 42 requires offshore reinsurers rated at least S&P BBB, or an equivalent from a recognised agency. The IA runs a no-objection service for reinsurers rated below the acceptable BBB level.
- Registration. IA Circular No. 85 of August 2025 requires foreign reinsurers on Saudi risks to register on the IA platform, with a reported deadline of 1 March 2026. Insurers and brokers must verify registration before signing.
- Article 42 still applies. Registration does not exempt the insurer from checking Article 42 compliance, including licensing in the home jurisdiction.
These checks apply to every offshore share, including facultative placements and broker-led placements. A useful way to see where your offshore exposure sits is an offshore reinsurance map by country, entity and jurisdiction.
Worked Example: Testing Two Insurers Against Both 30% Tests
This example is illustrative and simplified, and uses SAR millions. It assumes the 30% retention applies to total gross written premium and the 30% local offer applies to total ceded premium.
Insurer A: A Diversified Personal and Commercial Book
| Line | Gross Written Premium | Ceded Share | Ceded Premium | Retained Premium |
|---|---|---|---|---|
| Medical | 900 | 5% | 45 | 855 |
| Motor | 600 | 5% | 30 | 570 |
| Property | 300 | 80% | 240 | 60 |
| Engineering | 120 | 90% | 108 | 12 |
| Marine | 80 | 70% | 56 | 24 |
| Total | 2,000 | 479 | 1,521 |
Retention is 1,521 ÷ 2,000 = 76.05%, comfortably above the 30% floor. The local offer must be at least 30% × 479 = 143.7.
Insurer A passes the retention test easily, because medical and motor dominate. Its compliance work is almost entirely about the local offer.
Insurer B: A Commercial Specialist
| Line | Gross Written Premium | Ceded Share | Ceded Premium | Retained Premium |
|---|---|---|---|---|
| Property | 500 | 85% | 425 | 75 |
| Engineering | 300 | 90% | 270 | 30 |
| Marine | 150 | 75% | 112.5 | 37.5 |
| General accident | 50 | 50% | 25 | 25 |
| Total | 1,000 | 832.5 | 167.5 |
Retention is 167.5 ÷ 1,000 = 16.75%, below the 30% floor. Insurer B must retain at least 300, so it needs another 132.5 of retained premium or a regulatory approval.
Bringing Insurer B Into Compliance
Insurer B raises its retained share on its three heaviest-ceded treaties at renewal.
| Line | Old Ceded Share | New Ceded Share | New Ceded Premium | Reduction in Cessions |
|---|---|---|---|---|
| Property | 85% | 65% | 325 | 100 |
| Engineering | 90% | 80% | 240 | 30 |
| Marine | 75% | 70% | 105 | 7.5 |
| General accident | 50% | 50% | 25 | 0 |
| Total | 695 | 137.5 |
New retention is (1,000 − 695) ÷ 1,000 = 30.5%, which passes. The local offer becomes at least 30% × 695 = 208.5.
Suppose domestic reinsurers accept 150 of the 208.5 offered and decline 58.5. Local reinsurers then hold 150 ÷ 695 = 21.6% of ceded premium, and the declined 58.5 is placed abroad with documented declinations.
The lesson for insurers: the retention test moves risk onto the balance sheet. Insurer B now keeps 35% of each property risk instead of 15%, so it needs per risk and catastrophe excess of loss protecting the larger net account.
The lesson for reinsurers: domestic reinsurers get the first look at a larger share, but on terms set by the cedent's programme. Foreign reinsurers increasingly write the balance, and they need to be registered and rated before they can.
How Can Insurers Meet Local Retention Targets Without Adding Volatility?
Insurers can meet local retention targets by keeping more of the proportional business and buying non-proportional protection on the net. The table below maps common situations to the usual lever.
| Situation | Lever That Usually Fits | Why |
|---|---|---|
| Retention below 30% because of high quota share cessions | Raise the quota share retention, add per risk XoL on the net | Increases retained premium while capping single-risk losses |
| Large surplus treaty on property or engineering | Reduce the number of surplus lines, buy per risk XoL | Retained lines grow, large-loss volatility stays controlled |
| Catastrophe-exposed net account after higher retention | Cat XoL sized to the new net exposure | Protects capital from accumulation in one event |
| Local reinsurers decline part of the offered share | Document declinations, then place abroad with registered reinsurers | Keeps evidence of the local-first process |
| Facultative-heavy energy or large-risk book | Offer facultative shares locally first, then build treaty capacity | The local rule now covers facultative as well as treaty |
| Group or fronting arrangements | Check retention and local offer before signing | Fronting can push retention below the floor |
These are starting points, not rules. Test each change against the Appointed Actuary's reinsurance optimisation analysis and your risk appetite.
Which Mistakes Put Saudi Insurers Out of Compliance?
Six mistakes cause most retention and local cession problems. Most come from data, not from intent.
Confusing the Two 30% Tests
The retention test and the local offer test use different bases. Reporting one figure for both hides failures.
Measuring Retention by Treaty, Not in Total
The retention floor applies to total premium. A team that checks individual treaties can miss a company-level shortfall, or worry needlessly about a single line.
Forgetting Facultative Placements
The late-2024 instructions bring facultative business into the local offer. Facultative placed directly by underwriters often bypasses the reinsurance team's local offer process.
No Record of Local Offers and Declinations
If a local reinsurer declines, the evidence must show when the offer was made and on what terms. A broker's email chain is weak evidence.
Placing With Unregistered Foreign Reinsurers
Since the registration deadline, signing with an unregistered foreign reinsurer creates a regulatory breach. Broker-led placements need the same check as direct ones.
Raising Retention Without Re-Testing Capital
Higher retention increases net exposure, and the risk-based capital requirement changes with it. The solvency effect must be tested before the board approves the programme.
What Should the Reinsurance Team and Appointed Actuary Prepare?
The reinsurance team and Appointed Actuary need one shared dataset for retention, local offers and the annual reinsurance report. The table below lists the core items.
| Data Item | Why It Matters |
|---|---|
| Gross written premium by line and in total | Base for the 30% retention test |
| Ceded premium by treaty and facultative placement | Base for the 30% local offer and the retention calculation |
| Local offer log: date, reinsurer, share, terms, response | Evidence of the local-first process |
| Panel list with domicile, rating and IA registration status | Article 42 and Circular No. 85 checks |
| Large-loss and catastrophe exposure on the net account | Tests whether higher retention needs more XoL |
| Appointed Actuary recommendations and board response | Shows the board considered the optimisation analysis |
| Reinsurance results by line and treaty | Shows whether profit is being ceded unnecessarily |
Which Questions Should Boards Ask at Renewal?
- Does the company pass the 30% retention test in total, and by how much?
- What share of ceded premium was offered locally, and what share was accepted?
- Which foreign reinsurers on the panel are registered, and which are rated close to BBB?
- Which Appointed Actuary recommendations were not adopted, and why?
- How does the proposed programme change the risk-based capital requirement?
Profit leakage is part of this conversation. The IA's review noted that significant profits have been ceded to reinsurers on several lines, which supports a case for higher retention where capital allows.
Our guide to reinsurance buying with a capital objective covers that trade-off.
How Do the Rules Affect Capital, IFRS 17 and Counterparty Risk?
The retention and local cession rules affect capital, accounting and counterparty exposure at the same time. Higher retention raises the risk-based capital charge for insurance risk, while a more concentrated local panel can raise counterparty concentration.
The IA has asked boards to understand how reinsurer credit ratings affect reinsurance contract assets under IFRS 17. Under IFRS 17, the cedent must allow for the risk of reinsurer non-performance when measuring those assets.
The IA also encourages insurers to diversify their reinsurance book to manage accumulation and counterparty default risk. Shifting a larger share to a small number of domestic reinsurers needs the same counterparty analysis as any offshore panel, and shared exposures can be hidden, as our piece on reinsurance counterparty contagion explains.
What Does the Saudi Reinsurance Market Look Like?
The Saudi market has historically relied heavily on international reinsurers. In its review of 2024 actuarial reports, the IA found that less than one-fifth of ceded business stayed within the Kingdom on both ceded premium and ceded reserve bases.
The same review showed quota share treaties dominating purchases, which the IA linked to lower risk tolerance. It expects the domestic share to grow over time following the late-2024 instructions.
Regulation is also moving. The IA has consulted on a new insurance law and draft implementing regulations, which may restate or change the current retention and reinsurer rules.
Checklist for CFOs and Heads of Reinsurance
Use this checklist before binding each renewal and at each quarter end.
- Total retention is at least 30% of total premium, with headroom tested after renewal changes
- At least 30% of treaty and facultative business has been offered to domestic reinsurers first
- Every local offer, acceptance and declination is recorded with dates and terms
- Every foreign reinsurer is registered with the IA and meets the Article 42 rating floor, or has a no-objection
- Higher retentions are protected by per risk and catastrophe excess of loss sized to the new net account
- The Appointed Actuary's recommendations and the board's response are documented
- Capital and IFRS 17 effects of the programme are tested before board approval
- Ceded premium, reinsurer shares and settlements reconcile in a controlled system
Bordereaux reconciliation supports the last point by splitting premiums and claims across reinsurers by share and reconciling them against the records.
Key Terms
Insurance Authority (IA): The unified Saudi regulator for insurance, reinsurance and takaful, which took over insurance supervision from SAMA.
Minimum retention: The share of total premium an insurer keeps after all reinsurance. Saudi rules set it at 30% or more.
Local reinsurance offer: The requirement to offer at least 30% of treaty and facultative reinsurance business to domestic reinsurers before placing it abroad.
Domestic reinsurer: A reinsurer licensed in the Kingdom, which has priority to accept or decline the local share.
Article 42: The provision of the Implementing Regulations setting conditions for offshore reinsurers, including an S&P BBB rating floor or equivalent.
Circular No. 85: The 2025 IA circular requiring foreign reinsurers on Saudi risks to register on the IA platform.
Appointed Actuary reinsurance report: The annual report assessing reinsurance arrangements and retention by line, with recommendations to the board.
Quota share: A proportional treaty in which the reinsurer takes a fixed share of every policy's premium and losses.
Sources
The IA document library and the SAMA Rulebook restrict automated access, so the Article 40 and Article 42 wording was confirmed through official rulebook search listings. Confirm current text directly with the IA.
Frequently Asked Questions
What are Saudi reinsurance retention requirements?
Saudi reinsurance retention requirements are two linked tests. Insurers must retain at least 30% of total premium under the Implementing Regulations, and must offer at least 30% of treaty and facultative reinsurance business to domestic reinsurers under Insurance Authority instructions issued in late 2024.
Who regulates reinsurance in Saudi Arabia?
The Insurance Authority regulates insurance and reinsurance in Saudi Arabia. The Insurance Authority took over insurance supervision from the Saudi Central Bank (SAMA) and began operating as the sector's sole regulator in late 2023, later absorbing health insurance supervision as well.
What is the 30% local reinsurance rule in Saudi Arabia?
The Saudi 30% local reinsurance rule requires insurers to offer at least 30% of both treaty and facultative reinsurance business to domestic reinsurers. The Insurance Authority issued the instructions in the fourth quarter of 2024, and market reports put the start date at 1 January 2025.
Is the Saudi 30% retention the same as the 30% local cession?
The Saudi 30% retention and the 30% local cession are different tests. Retention measures premium the insurer keeps net of all reinsurance, while the local cession rule measures how much ceded business is offered to reinsurers licensed in the Kingdom.
What rating must foreign reinsurers have for Saudi insurers?
Saudi insurers placing reinsurance outside the Kingdom have historically needed reinsurers rated at least BBB by S&P or an equivalent under Article 42 of the Implementing Regulations. The Insurance Authority runs a no-objection process for reinsurers rated below the acceptable BBB level.
Do foreign reinsurers need to register with the Saudi Insurance Authority?
Foreign reinsurers participating in Saudi risks must register on the Insurance Authority's platform under Circular No. 85, with a reported deadline of 1 March 2026. Saudi insurers and brokers must verify registration before signing, and registration does not replace Article 42 checks.
How can a Saudi insurer raise its retention without more volatility?
A Saudi insurer can raise retention by keeping more of each quota share or surplus treaty, then protecting the larger net account with per risk and catastrophe excess of loss. That approach increases retained premium while capping the net loss from large events.
Who reviews reinsurance retention levels in Saudi insurers?
The Appointed Actuary reviews reinsurance retention levels in Saudi insurers. The Actuarial Work Rules require an annual report assessing reinsurance arrangements and retention by line, with recommendations the board is expected to consider alongside market conditions and risk appetite.
Hitul Mistry
CEO, Insurnest
An InsurTech leader with more than a decade of experience across insurance and technology, focused on solving business problems with the help of technology. Has worked with brokers, insurance carriers, and reinsurance firms across the India, UAE, and US markets.
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