Saudi Arabia’s insurance sector is running its current solvency framework alongside a new risk-based capital framework during 2026, ahead of the new regime’s scheduled start on 1 January 2027.
The Insurance Authority says insurers and reinsurers must calculate solvency under both frameworks during the parallel phase, using its guidance. The transition follows four simulation exercises and a fifth exercise based on year-end 2025 data.
Standard formula or approved internal model
Under the announced framework, a company may use the standard formula or develop a full or partial internal model, subject to the Authority’s prior approval. That distinction matters: an internal model is not simply a company’s preferred calculation. It requires supervisory approval and must reflect the risks and governance expected by the regime.
Risk-based capital links required financial resources more closely to the nature and scale of risks an insurer assumes. In practice, the calculation depends on the framework’s definitions, calibrations, eligible capital rules and treatment of diversification. A higher exposure does not translate mechanically into a known capital effect without those details and the firm’s own portfolio.
What the parallel phase is for
Running two calculations gives insurers and the supervisor a way to compare results, test data and controls, and identify implementation questions before the legal start date. It also helps boards, finance, risk, underwriting and actuarial teams understand where assumptions or responsibilities differ.
The Authority says it will continue issuing relevant guidance and updates. That makes the 2026 exercise an active implementation period rather than a finished rulebook frozen in April.
No sector-level announcement establishes the effect on an individual company’s solvency ratio, capital plan or earnings. Those conclusions require the final detailed rules, approved methodology and company-specific information.
Sources and methodology
This analysis uses the Saudi Insurance Authority’s 5 April 2026 announcement and IAIS material on transitions to risk-based solvency. Saudi dates and options come from the national authority; the IAIS material supplies global context rather than additional Saudi requirements.