LONDON, (Reuters) – Britain’s second-largest insurer Prudential has made its first move into wealthy but under-insured Saudi Arabia, with a deal to set up an Islamic life insurance venture with Bank Aljazira.
Prudential — which makes around 40 percent of its profit from its Asian arm but has a limited presence in the Gulf — said the two sides had signed a memorandum of understanding on Wednesday.
The UK insurer will take a 39 percent stake in a new venture that will buy Bank Aljazira’s existing Takaful Ta’awuni life insurance business. The venture, in which Prudential will be the largest shareholder, will list on the Saudi stock exchange.
Prudential declined to comment on investment behind the deal, which will also see it take an undisclosed stake in Bank Aljazira’s new fund management business.
It said the takaful, or Islamic insurance, operation in Saudi Arabia with Aljazira could become a platform for joint expansion in the Middle East and North Africa.
Prudential’s venture will join a cluster of other Saudi insurers currently listing on the Saudi exchange. Most are set to be oversubscribed because of the industry’s growth potential, strong appetite for new share issues and cheap listing prices.
Saudi Arabia, the largest Gulf Arab economy, is one of the world’s most under-insured areas, partly due to a belief among some Muslims that insurance indicates a lack of religious faith.
Conventional life insurance cover incorporates economic elements which are deemed forbidden for Muslims, including interest. Takaful, or Islamic insurance, resembles conventional mutual insurance and pools premiums.
Prudential, which already has an Islamic insurance venture in Malaysia, said it saw fast growth in the Saudi Arabian insurance market, currently worth just 800 million pounds ($1.60 billion) in annual gross premiums with 70 percent of that related to motor, property and medical insurance.