Manal Alahmadi from Jeddah
The capital of a number of insurance companies continues to be eroded continuously, despite the change in capital. Therefore, specialists stressed that administrative weakness and the determination of companies to develop temporary solutions are behind the worsening losses in the capitals. They pointed out to the "Economists" that the coming period may witness mergers between insurance companies to avoid liquidation or bankruptcy. They explained that raising capital is not a cure for the crisis.
Ahmed Al-Ali, a financial analyst, said that the erosion of the capital of insurance companies cannot be solve with raising capital due to the heavy losses This confirms the weakness of the management of some companies, which led to the suspension of trading in the stock market.
He mentioned that it is sometimes wrong when investors insist on changing capital, which is a temporary solution. This indicated that raising the capital increased the losses of those companies, which made them spin in a vicious circle.
He emphasized that the most important problems of insurance companies are rejecting the diversification in their fields and the introduction of new products. These companies did not work to develop their services and some of them were slow to solve the dilemma of mismanagement, as they suffer from the lack of experience and efficiency and determine the extent of risks and fluctuations due to multiple risks.
He added that the sector needs citizens to recognize the importance of insurance, in addition to finding other solutions, except raising prices to compensate for losses and avoid the exit from the market.
He stressed the need to improve governance, disclosure, and transparency, and to ensure the interests of the customers. He indicated that it is important to detect frauds that occur in some cases, which cause other losses. He called on companies to find solutions in times of volatility due to the multiplicity of risks that the companies may expose to and to provide fast service. He stressed the importance of auditing and follow-up of administrative and financial reports by the specialists in the company.
Mohammed AlOmari, a financial analyst, stated, "The insurance sector is the largest in terms of the number of listed companies in the Saudi stock market. But, it needs to upgrade the level of service and raise the level of customer's satisfaction and customer's confidence and trust, at a time when companies are weak in the popularity of their products."
He argued that transparency is the most important factor to correct and adjust the financial situation, in addition to working on risk management and control through evaluation, development, and reviewing the management method; the size of salaries, bonuses, and expenses; the search for radical solutions to stop losses and increase profits and the knowledge of the causes of losses; and find solutions to the Market volatility and the high loss rates.
Abdulkarim al-Tamimi, a specialist in the insurance sector, explained that the merger between the insurance companies would be the next stage to avoid liquidation or bankruptcy. He pointed out that the Boards of lost companies bear the responsibility of loss and have to carry out administrative and organizational reform and improve services and results.
He added, "The market suffers from the lack of culture of insurance." He noted that many insurance companies in the Kingdom are facing difficulties and accumulated losses. Thus, it is difficult to emerge from this crisis, and the only solution is to introduce new ideas and variety.
