RIYADH — With escalating geopolitical risks in the region and their impact on shipping, insurance, and reinsurance markets, Saudi Arabia is moving to establish a national insurance fund to help ensure the continuity of trade even amid a highly volatile maritime environment.
The recent decision of the Saudi Council of Ministers to establish the Saudi War Risk Insurance Fund for Goods and Ships will be instrumental in fortifying supply chains with national war risk insurance, according to experts. They pointed out that the fund reduces shipping disruptions and enhances the stability of logistics companies.
Minister of Finance Mohammed Al-Jadaan affirmed that the newly created Saudi Marine Insurance Fund is a specialized national mechanism designed to support the continuity of trade and supply chains through a partnership between the public and private sectors. He said that establishing the fund will directly contribute to enhancing the technical readiness of the local insurance market and expanding its capacity to provide the necessary insurance coverage in accordance with specific regulations and frameworks established by the Insurance Authority. “This approach supports the resilience of the national economy and helps ensure its stability in the face of regional and international crises and challenges,” he said.
The initiative aims to provide local insurance capacity to address risks that could drive up transportation and trade costs or constrain the ability of international insurance companies to provide coverage. It is intended to enhance the continuity of goods movement and support the operations of companies engaged in transportation and logistics.
The new initiative is particularly significant for Saudi Arabia given its expanding role as a hub for trade and logistics. The competitiveness of ports and distribution centers depends not only on handling efficiency and transportation costs, but also on companies’ ability to price and manage risks when geopolitical conditions change abruptly, Asharq Al-Awsat reported.
The experts stated that the economic value of the Insurance Fund will become particularly evident during crises, when insurance premiums surge or insurance and reinsurance companies tighten their acceptance of risks associated with specific regions. They noted that providing a stable coverage umbrella can give shipping companies, importers, and exporters greater flexibility to plan and sustain their operations.
Logistics expert Nashmi Al-Harbi stated that heightened shipping risks in the Red Sea and the Arabian Gulf have prompted some insurance companies to tighten their coverage requirements for vessels operating in the region. This makes the establishment of the Saudi Insurance Fund timely for local shipping and logistics companies, as it helps mitigate one of the most significant sources of uncertainty facing international shipping contracts.
Supply chain and logistics expert Eng. Khaled Al-Ghamdi emphasized that the importance of the Saudi War Risk Insurance Fund extends beyond providing insurance coverage for ships and goods. It addresses a deeper challenge facing companies: the difficulty of predicting the cost of risk when geopolitical conditions change suddenly.
Al-Ghamdi explained that having a national war risk insurance umbrella provides Saudi logistics companies with greater stability when planning voyages, concluding contracts, and setting prices. He stated that companies managing thousands of containers need to know not only the costs of fuel, transportation, and handling, but also have greater certainty regarding insurance costs, so that insurance risks do not suddenly become excessive costs or obstacles to the continuation of voyages.
He pointed out that the decision sends a message to international logistics companies that Saudi Arabia continues to build a business environment capable of operating even amid disruptions to shipping. He considered this a potentially additional factor in the decisions of global companies when selecting ports, distribution centers, and re-export facilities.
The Saudi Insurance Authority has identified four main objectives for establishing the insurance fund: enhancing the readiness of the insurance market and its capacity to absorb marine insurance risks; supporting the continuity of trade and supply chains; mitigating the impact of sharp fluctuations and rising reinsurance costs in global markets; and strengthening Saudi Arabia’s competitiveness as a pivotal logistics hub.
The fund’s coverage includes insurance for goods transported by land, sea, and air; hull insurance against covered damages and risks; charterer liabilities; and protection and compensation coverage, thereby providing broader protection for various parties involved in transport and trade operations.
Beneficiaries of the fund include exporters, importers, ship owners and operators, shipping and maritime transport companies, sectors related to the movement of goods, logistics, and supply chains, as well as participating national insurance companies.
