COOPERATIVE HEALTH INSURANCE July 2009, Issue 6

COOPERATIVE HEALTH INSURANCE July 2009, Issue 6 Mandatory Health Insurance for Saudi workers A step in the right direction Representative of the Ministry of Labor in Cchi: People s satisfaction is difficult to obtain Changing policies is a must for the successs of the mergers

Editor-in-Chief: Dr. Abdullah Bin Ibrahim Al-Sharif Secretary General of the Council of Cooperative Health Insurance asharif@cchi.gov.sa Asst.Editor In Chief Mohammed S. Al Hussain Asst. Gen.Secretary of Admin & Finance of the Council of Cooperative Health Insurance Consulting Committee: Dr. Mansour Bin Nasser Al-Hawasi (MOH) Deputy for Executive Affairs Member of the Council of Cooperative Health Insurance Dr. Mousaa id Bin Mohammad Al-Salman Dean of the Faculty of Medicine, King Saud University Member of the Council of Cooperative Health Insurance Mr. Sami Bin Abdullah Al-Moubarak Representative of the Ministry of Labor Member of the Council of Cooperative Health Insurance The General Secretariat of the Council of Cooperative Health Insurance PO Box 94764 Riyadh 11614 Phone: 920001177 Fax: 014870071 www.cchi.gov.sa Published on behalf of: The Council of Cooperative Health Insurance Managing Director: Editor-in-Chief: Associate Editor: Editors: Publisher: Rabih Al-Amine rabiha@gbcksa.com Mustafa Shehab mustafas@gbcksa.co Amira Hamadeh Said Al-Hasanieh Group Editor (English) K. Krishnakumar Sub-Editor: Ibtihal Al-Samaraie Editor s letter Insurance for a bright future There is no doubt that health plays an important role in the lives of peoples and communities and that the prosperity of any country is strongly linked to the health of its people. Knowing this, the Saudi government has made cooperative health insurance mandatory for Saudi nationals working for private companies. In the end, our health is our most valuable asset and it is very important to protect it as much as possible. As we say, a healthy mind is in a healthy body. Healthy people are the ones who are most capable of producing and contributing to the development of their society. An employee who is worried about his or his family s health will not perform as well as he could. Health insurance, therefore, is an important factor in guaranteeing the prosperity of a society. In this issue of Cooperative Health Insurance Magazine, our cover story focuses on the new cooperative insurance program for Saudis. We believe that this plan will have a positive impact on the public health sector as it will improve the quality of medical services within the sector, decrease the pressure on public hospitals, and reduce the government budget allocated to health care, allowing the state to divert resources to other important matters. Sami bin Abdullah Al-Mubarak, who represents the Ministry of Labor at the Council of Cooperative Health Insurance, shares with us the worries and perspective of the health insurance industry, foreign labor and the Saudization initiative. In Hot Topic, we explore the emergence in Saudi Arabia of stronger insurance companies and their impact on the local insurance sector. Our feature story discusses the importance of travel insurance, which is required by European countries in order to obtain a Schengen visa. We also shed light on the Malaysian experiment with public and private healthcare insurance. Our tourism section takes us to the wonderful city of Jeddah, the Bride of the Red Sea. We explore its history, old souks, mosques and museums. The lifestyle section considers the history of chocolate and melts some of the myths about the sweet treat s dark side. We also bring to you some of the world s most interesting stories and latest news about insurance. As always, we hope you find the information and topics presented in the magazine useful and insightful Best regards, Editor-in-chief Senior Designer: Hussain Mohamed Al-Bakri Distribution: P.O. Box: 301292 Riyadh 11372, phone: 0096614623632 e-mail: gbcksa@gbcksa.com The reproduction or reprinting of any part of this magazine must have the express permission of the publisher, who reserves the right to initiate legal action against any violation.

Insurance News 6 Program 34 Finance and Investment 36 Health minister approves amended health insurance regulations United Doctors: Hospital Focus on general care and breast cancer The United Doctors Hospital in the Saudi Arabian city of Jeddah provides a broad range of quality healthcare services to patients SAMA regulations against moneylaundering will help mitigate risks Though the risks are high, steps have been taken to limit abuse of the Kingdom s system Hot Topic 14 Competition or consolidation? Either way, Saudi insurance customers stand to gain Corporate Profile 18 Snippets 22 Technology 40 Lifestyle 42 Quality products compliant with Shariah Al Rajhi Company for Cooperative Insurance (ARCCI) is one of the leading composite insurance providers in Saudi Arabia Should health insurance cover faith healing? Those with difficult illnesses in the United States are increasingly turning to the various forms of alternative medicine CCHI electronic services will change the face of Saudi healthcare industry Social Responsibilty 24 The Academic Power of Social Responisiblity A fundamental part of Islamic principles The future looks sweet for the chocolate industry In a healthy $60 billion global industry, there is growing hunger for Arab brands among Gulf consumers Interview 26 Cover Story 30 Travel and Tourism 48 Around the World 56 CCHI reduces costs and improves quality, says Labor Ministry official Sami bin Abdullah Al-Mubarak urges businesses to employ more Saudis and reduce dependence on foreign workers Mandatory Health Insurance for Saudi Workers A step in the right direction Jeddah: The bride of the Red Sea The port city has been for hundreds of years the gateway to the Two Holy Mosques for millions of pilgrims Malaysia debates new health insurance scheme The Southeast Asian country is rushing towards reforming its healthcare services

Health minister approves amended health insurance regulations The General Secretariat of the Council of Cooperative Health Insurance (CCHI) recently held its 74th annual meeting, which was chaired by Minister of Health and Chairman of CCHI Dr. Abdullah bin Abdulaziz Al Rabeeah at the secretariat headquarters in Riyadh. During the meeting, Dr. Al Rabeeah approved an amendment to current health insurance regulations concerning medical insurance benefits. Secretary-General Dr. Abdullah bin Ibrahim Al-Sharif reviewed a detailed report on CCHI s performance and highlighted the latest developments in the cooperative insurance industry. Board members approved the amended insurance regulations and discussed the possibility of applying cooperative health insurance to Saudi nationals working in the private sector. We have approved some A delegation from Harvard University, led by Professor William Hacio and Professor Ioan Trquiliat, recently visited the CCHI Secretariat in Riyadh. (Name spellings?) The delegation was received by the Council s Secretary General Dr. Abdullah bin Ibrahim Al-Sharif and the Assistant Secretary Generals of the Administrative and Technical Affairs departments. Dr. Al-Sharif explained the Council's role and functions to the visitors and briefed them about the growth of the health insurance market, and the volume of investments in the insurance sector. The group visited the council s departments and commended the important role the council has played in developing the health insurance sector, one of the Kingdom s most important emerging markets. modifications to the health insurance regulations in order to develop effective mechanisms between the council and insurance companies after three years of introducing the cooperative health insurance, Al-Sharif said. The amendments included a number of items in the insurance policy and the benefits. Al- Sharif added that the new version will be announced after the completion of formal regulatory procedures. He also noted that the council discussed the new amendments with insurance companies and consulting partners in the health insurance industry. The cooperative health insurance policy currently covers all the expenses of medical examination, diagnosis, treatment and medicines, surgical operations, dental surgeries, and child delivery. The policy also covers the costs of preventive procedures as determined by the Ministry of Health. These include vaccinations, maternity care, childhood, and the expenses of returning the insured s body (in case of death) to his or her home country. Delegates from Harvard University visit CCHI MENA CEO summit underlines need for global standards The insurance sector across the MENA region must contribute to the region s economy, a panel of speakers said during the Third MENA CEO Summit. Speakers agreed that a safe, stable insurance industry is vital for encouraging stability and confidence in the economy. It was also stressed that all insurance and reinsurance companies in the Kingdom must meet international regulatory standards in light of increasing foreign competition. To boost the industry's growth, MENA Arab world represents 0.4 percent of the world insurance market Studies presented at the Third MENA CEO Summit showed that the Arab world represents only 0.4 percent of the world insurance market and that the contribution of insurance premiums to the gross domestic product of the Arab world does not exceed 0.1 percent. This compares with premiums contributing CEOs said that an appropriate regulatory framework is needed, along with an appropriate corporate governance framework and effective insurance supervision. Insurance companies should also implement sound accounting and solvency practices, as well as capital transparency. The CEO Summit aimed to set standards and boost professionalism in the MENA region while identifying solutions to nurture the growth of the region s nascent insurance markets. 7 to 17 percent of the global GDP in some European countries. The study also reported that the Arab insurance market reported an increase last year, though the average contribution from an Arab individual reached just US $46, compared to a world average of US$500. Insurance News RCCI study calls for regulating competition A recent study undertaken by the Riyadh Chamber of Commerce and Industry (RCCI) has called for a greater government role in expanding competition. The study warned that the increasing consolidation of health insurance coverage stifles competition and limits choices for consumers. The number of insurance companies traded on the Saudi stock market increased from 21 in 2008 to 25 during the second quarter of 2009. The RCCI also provided recommendations for improving the local insurance industry, including steps to increase competition between insurance firms and the establishment of private information centers. The study called for specialized bodies to resolve insurance issues and a more active role for courts and dispute committees. It also urged implementation of effective programs to raise insurance awareness within the community and stressed the need to introduce training courses tailored for the sector. The study concluded that there is a need to introduce other types of essential insurance, such as policies to cover damages from fire or injuries at work, in addition to standardizing prices and premiums among competing companies. There is also a need to establish formal channels of cooperation between the insurance companies in order to standardize procedures to reduce fraud and prevent the manipulation of insurance documents. 6 Rajjab 1430 JULY 2009 7

Experts expect rise of insurance premiums for natural disasters Employee of the month: Mr. Shabab AlOtaibi For the month of March 2009, the best performing employee at the Council for Cooperative Health Insurance (CCHI) is Mr. Shabab AlOtaibi, head of accreditation and follow-up. Dr. Abdullah AlSharif, the secretary general of the council, granted the award certificate to Mr. AlOtaibi in a small ceremony. Shabab AlOtaibi expressed his appreciation to the award organizers and promised to maintain his high performance and preserve the company s trust. AlOtaibi also thanked his colleagues for their excellent work, which he said was key to his delivering the results that led to the recognition. Employee of the month is a distinction awarded every three months to distinguished CCHI employees for excellent achievement and to motivate others to aspire to similar success. The recent earthquake in Saudi Arabia s western region is already pushing up insurance premiums for businesses and households there, and insurance experts are warning that further increases are likely. The pre-dawn quake caused no damage or injuries. But the government urged residents of five villages west of the Holy City of Medina to head to tent camps and shelters set up by authorities. Insurance companies in Saudi Arabia at one time covered losses incurred during natural disasters; fees were minimal compared to other types of insurance because the Kingdom was widely considered immune to powerful and dangerous earthquakes that toppled buildings and endangered lives. Experts, however, predict that in light of the recent tremors insurance companies will begin to raise the prices of insurance premiums for natural disasters. The Kingdom is located near active seismic borders, according to recent reports. Natural disaster policies are considered among the most complex types of insurance and are also among the most expensive. Such policies usually cover property and people. Natural disaster insurance is still very limited in Saudi Arabia, but the recent events are likely to prompt insurance companies to re-examine the situation and provide new insurance solutions,especially for commercial centers and areas of high population densities. Few insurance companies in the Kingdom are specialized in providing natural disaster insurance because of low demand. Insurance of buildings and commercial purposes have typically been covered by general insurance policies. Al Shaa and Alais -- 240 miles from Medina -- recently registered a number of earthquakes, one measuring 5.4 on the Authorities in Saudi Arabia s Eastern Province have barred several insurance companies from issuing and renewing insurance certificates for new and old cars, because the companies allegedly failed to pay insurance fees of SR 100 million to the Saudi Arabian Monetary Agency (SAMA). Major Ali Al- Zahrani the spokesperson of Traffic Department in the Eastern Province said in a press statement that the list of authorized insurance companies is updated in collaboration with SAMA. He said that citizens and residents wishing to be issued a new car insurance certificate must ensure that the company they deal with is approved by SAMA. Richter scale. Saudi Arabia witnessed two earthquakes in Makkah in 1994 and 1995, one measuring 4.1 on the Richter scale and the other 3.7. Neither resulted in damage or injuries. Companies barred from issuing car insurance certificates China seeks to provide health insurance to its massive population In 1951, China first introduced federally funded public health insurance to cover all public servants, members of the teaching staff in colleges, as well as students. Thirty million Chinese benefit from this insurance, a number that includes as much as three percent of the population. In 1952, the Chinese government issued a directive for employer health insurance, in which all institutions of more than 100 workers were required to provide health insurance for all employees. Smaller companies and factories, however, could provide voluntary health insurance. This 1951 directive also covered family members, who were required to pay as much as 50 percent of their medical bills. By 1990, this mandatory program covered 127 million, or approximately 11 percent of the population. Medical care provided was identical, with the same medical Nearly 89 million people more than one-third of all Americans under age 65 were without health insurance for at least part of the past two years, according a new report by the healthcare advocacy group, Families USA. The non-profit group used data from a US Census Bureau report that found 47 million Americans went without health insurance for all of 2006. Families USA estimated that 89.6 million people under age 65 approximately 34.7 percent of total population went without health insurance at some point during 2006-2007. It used a projection for the remaining months of the year. The report also suggested that many of those going without insurance were middle-class and employed. Texas had the most without insurance 45.7 percent of the non-elderly population. The report found that more than 79 percent of those without insurance facilities used for public insurance, but the program was managed and funded by organizations and companies, rather than the central government. Some larger enterprises with more than a thousand employees began to establish and manage their own health facilities, while micro-enterprises -- ones with 100 to 1,000 employees -- managed to establish their own outpatient clinics. Companies usually contracted private hospitals to provide health services and medical treatment within the hospitals. As part of China s effort to enter free trade talks in the 1980s, the government decided to expand its public health insurance. In 1993, nearly ten million people who had not been covered by public or employee-provided health insurance became insured under a new civilian health insurance program. In 2000, this number reached 80 million. The new program covered both civil were part of families in which at least one person had a job, 70.6 percent were themselves employed full-time, and 8.7 percent were employed parttime. President Barack Obama will reportedly ask for $634 billion over 10 years in his 2010 budget to pay for plans to establish wholesale healthcare reform that will give all Americans access to affordable insurance coverage. The size of the figure was the latest sign of the President's commitment to healthcare reform, a fiercely polarizing political issue that has bedeviled Democratic presidents for decades. It was unclear exactly how much money Obama would request for total healthcare spending in his 2010 budget. (perhaps one of these is correct?) Over 80 percent of Americans think the US health system is in need of a complete overhaul, according to Insurance News servants and retirees and also non-official personnel and their families. In the country s latest move to improve its healthcare system, China has declared it will expand basic health insurance from urban workers to all urban residents. Primary and middle school students, children and other unemployed urban residents all of whom are currently excluded from the basic insurance system could then choose to be part of this plan. China has said it will extend coverage to all citizens by the year 2010. 89 million Americans without health insurance Harris International. Access to care, better coordination between different health providers and better flow of health information were among the chief complaints of the respondents. 8 Rajjab 1430 JULY 2009 9

Insurance News weighs challenges By Faisal Al-Shaya SAMA Governor stresses the need for periodic risk assessment by insurance companies The Third Saudi Insurance Summit concluded on the 20th of May, following four days of panel discussions exploring emerging trends, the effect of the global financial crisis and analyzing the fastest-growing insurance market in the GCC region. The Kingdom s foremost insurance industry event, which took place during 1720- May at the Riyadh Marriott Hotel, attracted more than 300 key figures from the sector, including regulators and important decision makers. Attendees discussed the general status of the insurance market, including unique challenges and opportunities, especially those presented by increasing levels of competition and regulation. Discussions covered topics such as the effects of the global financial crisis on the international insurance market, the development of a competitive Saudi insurance industry, corporate risk and internal insurance management, the health of the Saudi health insurance market and the regional and local reinsurance and Takaful landscape amid a changing environment. The summit opened with a keynote address by His Excellency Mohammed Al Jasser, Governor of the Saudi Arabian Monetary Agency (SAMA). He said there are 21 insurance and reinsurance companies fully licensed to operate in the Kingdom, nine of which had obtained approval from the Council of Ministers and 59 insurance and reinsurance companies under the process of licensing. Despite the economic crisis, the insurance market in Saudi Arabia continues to flourish and is poised for impressive growth in the coming years, said Al Jasser, stressing the importance of implementing financial solvency and effective risk management techniques to stabilize the insurance market. The Saudi Arabian Monetary Agency has launched a number of management procedures to strengthen the financial solvency of the insurance companies operating in the Kingdom. Risk Analysis Al Jasser announced executive control and monitoring systems for cooperative insurance companies that would require that companies carry out risk analysis periodically and take appropriate action to manage the risks. He pointed out that the executive control system sought to regulate the investments of insurance companies under a conservative framework and that legislators must understand the importance of financial solvency for insurance companies so that they may fulfill their obligations to the insured. Al Jasser: We asked insurance companies to carry out risk analysis periodically, and take appropriate action to manage those risks 10 Rajjab 1430 JULY 2009 11

Insurance risks are far outweighed by the benefits of being better-placed to capitalize on the potential of the KSA insurance market. The insurance companies in the Kingdom are required to adhere to the rules listed under the regulatory framework. They include: A minimum capital of SR 100,000,000 for an insurance company and a minimum paid-up capital of SR 200,000,000 for a re-insurance company or an insurance company engaged at the same time in reinsurance activities. Insurance and re-insurance companies shall set aside no less than 20 percent of their profits as a statutory reserve until this reserve amounts to 100 percent of paid-up capital. The capital may not be altered without SAMA s approval. Each insurance and re-insurance company must set aside the necessary reserves for the insurance class they undertake, along with other reserves provided for in the implementing regulations. SAMA reserves the right to take necessary action, if it determines that an insurance or re-insurance company has violated the provisions of the insurance law or its implementing regulations, or has followed a policy that would seriously affect its ability to meet its obligations. The Agency is empowered to evaluate the assets of insurance companies to make sure they maintain the required solvency margin. The Agency can take corrective action when the margin falls below certain levels. Insurance companies must assess their functional allocations quarterly and must notify the Agency in the event of inadequate funds. CCHI views CCHI Magazine spoke with Dr. Abdullah I. Al-Sharif, Secretary General of the Council of Cooperative Health Insurance (CCHI), who participated in the summit. The third Saudi Insurance Summit is a great platform to meet with decision makers and regulators to share and exchange information and ideas that will shape the future of this thriving industry, he said. We discussed the legislative and operational aspects of the health insurance companies including service providers, intermediaries, information technology companies and those involved in servicing the insurance cycle. Dr. Al-Sharif noted, however, that this summit should have given a greater role to beneficiaries to discuss their experience and concerns to give a better picture to service providers. The number of business representation partners was below my expectations, he said. I must also note that most of the lecturers have focused on the operational aspects of the health insurance sector, rather than the strategic aspects in relation to insurance companies and service providers. Industry insights The summit was attended by more than 300 key figures, including regulators and key decision makers. Speakers included Prakash Abraham, Business Advisory Manager for Oracle, who discussed global insurance industry trends, including changing business models and working methods, increasingly tough regulations and rising consumer power. These findings help to provide a guide for insurance companies who wish to remain at the forefront of the sector and to provide a delivery platform for the next generation, Abraham said. Insurance risks are far outweighed by the benefits of being better-placed to capitalize on the potential of the KSA insurance market. Manar Sigma Financial Consulting Chief Executive Officer Chris Symeonidis and Director Deon Kotze discussed the growing importance of regulation in the Saudi insurance market. They gave an overview of SAMA s regulatory framework, examined how this is in line with international regulatory best practices and emphasized how the rapid growth of the insurance market in the Kingdom must be carefully managed in order to maximize the benefits for Al-Sharif: The Council for Cooperative Health Insurance was a partner in this summit, mainly responsible for the regulatory side industry players and their customers. David Anthony, Standard and Poor s Director of Insurance for MENA region, provided further insight into the increasing importance and huge potential of the Saudi insurance sector. Anthony provided an analysis and rating of Saudi Arabian insurers and reinsurers. Simon Fisher, Director for Insurance Management, Heritage London & Middle East, examined the positive outlook for captive insurers in the Kingdom. Additional key speakers at the summit included Dr Saleh Malaikah, Chairman of SALAMA; Ali Al Subaihin, CEO of Tawuniya; Ayman El Hout, General Manager of Medgulf; Tal Nazer, Managing Director of Bupa Arabia; Dr Abdullah I. Al Sharif, CCHI Secretary General;Zeed Al Rubian, Risk Management Officer, Saudi Telecom Company; Isaaq Awad Sahhar, Director Construction and Engineering Division, United Insurance Brokers Ltd.; and Sam Thanvi, Group Head Takaful of Bank Al Jazeera. The Third Saudi Insurance Summit was organized by IIR Middle East. Delegates came away from the summit informed of the challenges and opportunities facing the Saudi insurance market, with the benefit of expert knowledge gleaned from a range of important speakers. Kingdom of Saudi Arabia Council of Cooperative Health Insurance General Secretariat Alshafa Street, King Fahd Road. Fax: 4870071 P.O.Box: 94764 Riyadh 11614 Customer Service Center (IVR) w w w. c c h i. g o v. s a 12 Rajjab 1430 JULY 2009

Hot Topic The strong insitutions in the insurance section Changing policies is a must for the successs of the mergers By Mustafa Shehab Saudi Arabia s newly liberalized insurance market is poised for major growth. Though experts are optimistic about the long term they also predict that the next three to five years will be marked by intense competition. They say small businesses struggling to survive will continue to struggle, while a handful of big companies that already account for a growing share of the market will begin buying these smaller companies. The results could leave consumers with fewer options. Experts disagree about the exact ramifications of such mergers and alliances, but most agree that the insurance sector directly benefits from an increasingly developed supervisory regime led by the Saudi Arabian Monetary Agency (SAMA). This helps to create a supportive infrastructure where professionalism by insurance providers is not merely encouraged but demanded. All licensed companies must now provide appropriate levels of sales and claims handling service to those insured, while at the same time implementing advanced actuarial, risk management and operational practices. Some industry observers say that new mergers and acquisitions will happen very soon while others do not see such a trend emerging for at least three years. The problem is that some insurance firms have grown rapidly to become powerful entities capable of meeting the challenges thrown up by the economic meltdown. Small companies, meanwhile, failing to meet such challenges, have or will soon be forced to withdraw from the market or to merge with other companies. What does this all mean for you? Classic Insurance Cooperative Health Insurance Magazine met with Muhammad bin Fahd Al Omran, the head of Gulf Center for Financial Consulting. We asked about the number of insurance companies operating in the Some insurance firms have grown rapidly to become very strong entities, while other smaller companies failed to encounter economic challenges and had to either, withdraw from the market or forced to amalgamate with other companies Kingdom and whether the number is sufficient to meet the growing market s requirements. I believe that there is relatively a large number of companies operating in the Kingdom, but the total capital of those companies is also quite big, Al Omran said. Before regulating the sector, there were more companies than now, but their capital was not that big. Now insurance companies hold a large surplus by way of capital as a result of studies that exaggerated the capitalization requirements. Ahmed Abu Zeid, Vice General Manager, Gulf Union Cooperative Insurance, agrees with Al Omran. The current number of companies is sufficient, if we look at the classic and small insurance coverage that any company can provide and maintain a reasonable profit, Abu Zeid said. The resulting competition need not necessarily be a bad thing, they say, provided that pricing discipline is maintained. But other experts say the danger of aggressive competition in a well-capitalized market is that it can lead insurers who unwisely define success in terms of market share to pursue volume through increasingly uneconomic pricing. Such short-sighted tactics can temporarily spoil the economics of a marketplace. Insurance risk study SAMA s stipulation of minimum capital requirements helped establish strong balance sheets, with what for the present at least remain robust levels of solvency. It also helped in driving competition among insurance companies. Ahmed Abu Zeid noted that the minimum capital requirement is SR 100,000,000, which is a sufficient amount as long as the liability is limited, particularly for auto insurance and health insurance companies. But most companies maintain high-risk margin as per the agreement between them and reinsurance. Abu Zeid says that even if the capital is substantial, the main challenge is the company s ability to obtain an appropriate share of the market. The danger lies in the repetition of incidents 14 Rajjab 1430 JULY 2009 15

Hot Topic even if they are simple accidents, which could absorb the liquidity of the insurance companies, Abu Zeid said. On other hand, large amounts of capital could become a burden on the management if they had not been able to obtain an appropriate share of the market, diversify their products, study the possible risks and maintain a reasonable profit. Generally, a large company means a large amount of capital, good management planning, technical and management expertise and close contacts with international companies. But big isn t always good. Large amounts of capital without these components can be a hazard. Increased volumes in complex lines such as medical care can generate major operational and administrative burdens, which can also lead to losses. Al- Omran argues that it is appropriate to set capital requirements for insurance companies, though this flood of cash is not always encouraging. The entry of a large number of insurance companies with a lower capital base has created a disparity in the level of capital, which encouraged random speculation based on the number of traded shares, not on the fundamentals. Mergers and Acquisitions In the medium to long term, there will indeed be winners and losers in what promises to be a highly competitive domestic insurance market. Some companies may simply close to new business while paying off outstanding claims in an orderly manner. Others will succumb to takeover by richer, possibly more successful rivals. Yet others will buy time by raising additional capital to subsidize their continuing underperformance, and may even use some of that capital to acquire competitors. I expect that the insurance market will enter into a process of mergers and acquisitions, and this is normal for some companies in order to compensate for the lack of integration and liquidity; in this process of consolidation, each company will seek to protect its interests andthe interests of its shareholders, Al- Omran said. Abu Zeid partially disagrees with this view. I do not expect any major mergers or acquisitions over the next three years, he said. A merger between companies does not necessarily result in policy changes, so it will not add anything if a company continues to take the course that led to the merger in the first place. In other words, acquisitions may create the illusion of progress through increased market share and dilution of costs relative to premiums. However, real progress will only come when the merged entities capitalize on their synergies and help achieve a sustainable improvement in operating performance through greater operational efficiency. Large companies Many international insurance companies have entered the Saudi Arabia s insurance market. Al- Omran says that international companies have entered the Saudi market through strategic partnerships with local companies. The entry of large international entities will not cause a major change in the market, he said. The important thing is to have strong demand for their products with affordable prices. This could apply to local companies and large international companies. Ahmed Abu Zeid argues that foreign insurance companies can bring in needed capital and expertise. He says foreign insurance companies can also provide standard professional practices and expertise on corporate management, risk protection and Generally, a large company means a large amount of capital, good management planning, technical and management expertise and close contacts with international companies mitigation. However, these giant entities will not appear soon even with availability of capital. fulfill their obligations or failure to attract a sufficient number of customers. I do not know the exact number of insurance companies that have withdrawn from the market or disappeared suddenly. But it is not surprising to those who had been watching and monitoring the market, Abu Zeid said. Short-sighted tactics could lead insurers who unwisely define success in terms of market share to pursue volume through increasingly uneconomic pricing, which can lead to losses. Concentration risk is the sector s greatest weakness; companies need to diversify their products. The repeated incidents and the depletion of the company s sources will also lead to the collapse of the company. Fast cash could go away faster. Managed competition A recent SAMA report -- The Saudi Insurance Market Survey Report 2008 -- revealed the following: Ahmed Abi Zeid: Large capital could become a burden on the management if they had not been able to obtain an appropriate share of the market, diversify their products and maintain a reasonable profit In 2008, the insurance market in Saudi Arabia witnessed strong growth, with Gross Written Premium reaching SR 10.9 billion (US$ 3 billon), up from SR 8.6 billion in 2007, which represents an increase of 27 percent. Health insurance remained the largest line of business, accounting for 44 percent of total GWP in 2008, up from 36 percent in 2007. Motor insurance stood second in 2008, accounting for 23 percent of GWP. According to the report, 21 insurance and reinsurance companies are listed on the Saudi stock market, while nine insurance companies have obtained approval from the Council of Ministers and seven are under the process of licensing at the Ministry of Commerce and Industry. The number of brokerage firms reached 36, in addition to 10 companies that act as insurance agents, six insurance surveyors, six loss investigating companies, three specialized in claims settlement, five insurance consultants and one actuarial consultant company. The large number of companies operating in the market is the reason behind the increasing competition. In the coming years, some of these companies will be taken over by richer, possibly more successful rivals, which will create newer, even more powerful companies. Yet others will withdraw from the market or buy time by raising additional capital. In general, it is expected that the number of companies licensed and operating in the sector will increase in the short term. This is due to several factors, including the expansion of insurance coverage under the new mandatory cooperative health insurance initiative to include new segments of Saudi society and residents. The good news, though, is that come what may, Saudi customers will benefit. Never before have they had such a wide choice of high quality products and services from so many professional, well-managed insurers. 16 Rajjab 1430 JULY 2009 17

Al Rajhi Company for Cooperative Insurance Quality products in accordance with Sharia h principles The Al Rajhi Company for Cooperative Insurance (ARCCI) is one of the leading composite insurance providers in Saudi Arabia. In full compliance with Shariah principles, the company aims to provide premium insurance solutions to individual and corporate customers while establishing itself as one of the top insurers in the Kingdom of Saudi Arabia. ARCCI was established by royal decree no. M/35, dated 27/6/1429H, as a Saudi joint- stock company in accordance with the Council of Ministers resolution No (181) issued on 26/6/1429 AH, with an authorized capital of SR 200 Million. The founding shareholders have subscribed for 14 million shares, which represents 70 percent of the company s share capital. Their subscriptions have been deposited into the company s bank account at Al Rajhi Bank. The remaining six million shares were offered to the public at 10 riyals per share. Shariah Principles The Al Rajhi Company for Cooperative Insurance is Shariah compliant, with a dedicated Shariah Board staffed to oversee all financial matters, including productrelated operations and investments. All the products from the company carry a fatwa from the Board confirming their compliance with Shariah principles. The Shariah Committee and Board members have an understanding of Shariah rules, in addition to knowledge of the business environment and a familiarity with the company s client base. The committee verifies all matters related to Shariah compliance as they pertain to contracts and products. It is also assigned to conduct periodic reviews to ensure ARRCI s total commitment to Shariah aspects. The establishment of the Shariah Monitoring Department, a subsidiary of the Shariah Committee, aims to ensure that all the branches and departments are operating in compliance with appropriate rules governing benefits for stakeholders, which, in the case of Islamic financial institutions, also includes ordinary account holders. Corporate Strategy The Al Rajhi Company for Cooperative Insurance provides high-quality and professional insurance and reinsurance services and solutions, including property insurance, liability insurance, marine cargo insurance, travel insurance, vehicle insurance, medical insurance and insurance against accidents. The company also aims to provide specialty banking product insurance. ARCCI is committed to adding value to its clients and associates by delivering high-quality, personalized professional services at all times. Rather than reducing the cost of its products, it also intends to continue to grow and attract new customers by adopting an aggressive marketing plan that highlights the quality and value of its products. Al Rajhi believes that added-value is more important than the bottom line. two marketing strategies The Communication Strategy focuses on communicating with the target customers in an effective and friendly manner through advertising and marketing communications in newspapers and magazines. Additionally, the company is also in the process of developing high-quality and attractive marketing literature such as leaflets, pamphlets, and brochures, with the ultimate objective of helping customers better understand insurance products and services. Distribution points and sales channels target sales agents, brokers, insurance advisers, representatives of travel agencies, shopping and direct sales points. Operationally, ARCCI offers individuals and corporations a complete range of high-quality, flexible, integrated, Shariah-compliant insurance products and services. It follows a model of central administration in all its operations. ARCCI relies on the support of Al Rajhi Bank vast network of branches _ located in different locations across the Kingdom _ in its business plans. The marketing department has the responsibility of understanding customer needs and channeling information to the product development team so that required products and solutions can be developed and offered. The marketing department also manages campaigns to create and increase awareness of the Al Rajhi name and brand. To serve customers more efficiently in terms of claim management, the company has given some limited powers to the branch managers with regard to vehicle insurance in particular. It also plans to provide insurance and reinsurance services based on the principles of cooperative insurance and under the auspices of the Saudi Arabian Monetary Agency, which is responsible for overseeing the insurance industry. The Al Rajhi group is one of the largest providers of financial and insurance services in the region: The Al Rajhi Insurance Company, Al Rajhi Banking and Investment Corporation, Oman Insurance, Mashreq Bank, Commercial Bank of Dubai, Itjar for investment, Al Dhaheri Group-Abu Dhabi, Al Ghurair Investment Company and Qumet Alramtan. Corporate Profile Competitive Advantages The fact that ARCCI is the insurance arm of Al-Rajhi Bank, the largest Islamic Bank in the world in terms of market capitalization, provides a strong base for it to establish itself as one of the top insurers in the Kingdom of Saudi Arabia. ARCCI relies on the support of Al Rajhi Bank s vast network of branches, a strategy that has proven successful for insurance companies around the world. ARCCI also has a distinguished Board of Directors who are loyal and committed to the vision of the company, which aims to improve the cooperative insurance market in the Kingdom. The Board of Directors has given practical support to ARCCI s vision by selecting a qualified and experienced executive management team. ARCCI is keen to develop the insurance market through the diversification of its cooperative insurance products to serve different segments of Saudi society, individuals and corporations. Main activities ARCCI provides high quality and professional insurance and reinsurance services: 18 Rajjab 1430 JULY 2009 19

Corporate Profile Vehicle insurance Takaful Debts: This benefit covers death of the plan holder or a disability rendering the insured unable to earn income in any occupation, trade or profession during his remaining lifetime. Money insurance: The Money Insurance policy covers financial losses in any of the following situations: while in a locked safe, while in transit between the office premises and a bank, or due to theft, robbery or any other reason. Personal accident insurance Staff insurance Fire insurance Work injuries insurance Public Liability insurance Products liability insurance Marine cargo insurance, for shipments by sea, air and land transit Property insurance Machinery Breakdown Insurance Contractors All Risks Insurance Erection All Risks Insurance Health insurance Reinsurance Technical The Technical department s main task is to provide information to customers effectively and efficiently. This includes preparing insurance underwriting agreements, settling claims for all insurance categories -- except vehicle insurance and health insurance -- and managing reinsurance operations. The process of insurance underwriting includes the evaluation of risk assessment documents, the issuance of insurance policies, reevaluation of renewed documents, and the cancellation of some insurance documents. There are specific criteria the department applies when examining insurance documents before issuance. Before issuing any documents, the department relies on both expert reports and the information provided by the applicant. It reviews the documents before the issuance of the insurance papers and reviews them once again after issuance in order to ascertain the validity of the documents. The department also determines the percentage of risk in the related documents that will be covered by the Takaful portfolio, and makes plans for channeling the surplus ratio to reinsurance companies. Moreover, the technical department has to prepare a detailed statement with the insurance coverage and its limits. The subscription fee is calculated based on several factors, chiefly the calculation of re-insurance costs. Reviewing the insurance policies is also the responsibility of the technical department, which has to take the appropriate decision in terms of renewal, re-pricing, or cancellation. In the case of claims settlement, the technical department has to register and verify those claims, in addition to examining and evaluating the damage, and then notifying the re-insurance companies of those claims. They can also reject some claims if documents were inaccurate. Shariah The Shariah Department functions include: verifying any activity, product, service or contract upon the approval of the Shariah committee; reviewing documents, contracts and agreements before signing; and ensuring that the company, the branches and the interior and exterior departments are committed to the Shariah committee decisions. The Shariah department also conducts field visits to the Company s departments and branches to ensure full implementation of decisions issued by the Shariah committee. It also prepares periodic reports containing the results Creating awareness about Islamic economy in general and the system of cooperative insurance in particular, in all of the company s divisions is also the responsibility of the Sharia h department. of field visits and monitoring processes, all of which helps spread awareness about Islamic principles in general and the system of cooperative insurance in particular. Financial Out of its commitment to excellence in the field of cooperative insurance, ARCCI has collaborated with a specialized company to implement an innovative accounting system in accordance with the Shariah principles. The Al Rajhi Company uses an effective accounting system to ensure accuracy in all its financial statements, and provides a full accounting support for all departments. The auditors check the underwriting insurance documents and claims periodically to ensure that there is no breach of any of the methods or criteria. Additionally, the financial department develops clear strategies and investment policies to manage the investment portfolios in line with the guidance of the Saudi Arabian Monetary Agency, and also in balance with investment operations, levels of liquidity, commitments, and protection of investments. Vehicle Insurance The vehicle insurance department deals with everything related to vehicle insurance products. It manages vehicle insurance underwriting documents, and settles vehicle claims. The department aims to achieve the ARCCI s goals in terms of growth and diversification of its products. The management of vehicle insurance products is of great importance as the company at present largely depends on vehicle insurance in increasing the volume of expected sales. Health Insurance The health insurance department is responsible for all products relating to health insurance. It manages health insurance underwriting documents, and settles health insurance claims. The department also chooses the service providers, which must be registered with the Council of Cooperative Health Insurance (CCHI). The company is accredited by CCHI as one of the authorized Health Insurers in the Kingdom. By providing excellent service to customers, the health insurance department aims to establish an effective cooperation model between ARCCI and service providers in the Kingdom. Sales and Marketing The Al Rajhi Insurance Cooperative Company focuses on four segments in the market: large companies and institutions, medium-sized companies, small businesses, and individuals. The company proposes to mobilize insurance business in the Kingdom from its direct marketing efforts (through branches and sales team), brokers, and POS stations at banks and travel Agencies. ARCCI has developed effective marketing strategy to reach out to perspective and current customers. The strategy focuses on four key goals, which are: Distinguish ARCCI insurance products from the competition Raise public awareness of the company s products Reach the maximum degree of customer satisfaction Increase the company s share in the Saudi insurance market All the desired objectives must be achieved at minimum cost. IT department ARCCI has implemented one of the world s first fully web-enabled, component-based, Enterprise-Wide Insurance Management System systems. This system, capable of integrating the workflow of all departments, provides easy access through the web and manages data centrally. Moreover, the system offers robust management of security and high reliability, scalability and flexibility, thereby helping improve performance and response time and also automating the issuance of documentation and follow-up claims. Human Resources The Al Rajhi Insurance Cooperative Company believes that its future success depend on its ability to attract and motivate qualified personnel. Accordingly, the company is in the process of establishing training programs designed to increase the knowledge base and skills of the staff in a way that can help to support the company s performance and achievements. The recruitment process is the basis for any successful strategy; therefore, all the staff must enroll in comprehensive training after joining the company. ARCCI aims to recruit highly qualified Saudis at any place and any time, despite the lack of local expert personnel in the field of insurance. The company looks for potential candidates who share ARCCI s values, appreciate its culture, and have personal qualities such as good interpersonal and communication skills. Experience in customer service is also important, as providing excellent service and building a relationship with the customer is a key component of any employee s role. Internal audit ARCCI is in the process of establishing a Department of Internal Audit. This department will ensure a smooth functioning of financial and technical procedures. The department will report directly to the Board of Directors through the Audit Committee. 20 Rajjab 1430 JULY 2009 21

Should health insurance cover faith healing? Those with difficult illnesses in the United States are increasingly turning to the various forms of alternative medicine, otherwise known as Complementary and Alternative Medicine, or CAM. These are a group of health-related therapies and practices that are not presently recognized as part of modern medical science. They include such treatments as acupuncture, manipulative body therapies (chiropractic and massage therapies), biologic and herbal therapies, energy healing, mind and body mediations such as hypnosis, biofeedback and meditation, prayer and spiritual healing, among others. Lobbyists in the US are trying to pressure Congress to allow insurance companies to provide coverage for alternative medicine treatments. We re advocates for people who want access to spiritual treatment, said Phil Davis, a Christian Science practitioner and his church s Coffee taster s tongue insured for 10 million The tongue of coffee taster Gennaro Pelliccia has been insured for 10 million. Pelliccia is a professional coffee taster and he personally tastes piles of unprocessed coffee for companies around the world before it is roasted and sent to stores. My 18 years of experience enable me to distinguish between thousands of flavors, Pelliccia said. My taste buds also allow me to distinguish any defects, which enable me to protect and guarantee unique coffee blend. chief lobbyist. Our goal is to encourage Congress to think of healthcare as more than just medical care and to allow insurance companies to provide coverage for such treatments. The US military health plan already covers such services, while the Federal Employee Health Benefits program provides partial reimbursement for stays in Christian Science nursing facilities. Other experts have expressed their opposition to the idea and warned of the risks of including faith healing in health insurance plans. Critics say that such a move will open the door to controversial practices, resulting in an increase in the size of funds allocated to research alternative healing at the expense of modern allopathic medicine. But some experts suggest that the White House is warming to the new initiative and could include alternative medicine and faith healing in its list of treatments covered by the new federal health insurance plan. President Barack Obama recently said that acupuncture is effective for migraine prevention Mexican doctor sacrifices life for family to reap benefits A Mexican doctor hired his own murderer so that his family would receive 1 million Mexican pesos (approximately $76,000) worth of life insurance. The police chief of the State of Tamaulipas in the northwest of the country said that the hit man killed the doctor with one shot to the head in the Gulf of Mexico port of Tampico. The investigation led to the victim s wife, who revealed the identity of the killer. The wife also admitted that her deceased husband was suffering from money troubles and had devised the plan so the family could pay off debts with the proceeds of the life insurance policy. Police investigations continue. Insurance clearance comes after 7-year battle with cancer and death An Arab woman working in the public sector of an Arab country discovers she has cancer. She visits the health insurance company to determine how they will assist her with the expenses. Both the hospital and her employer also her healthcare provider tell her to wait. But she knew that if she waited, she would wait forever, so with great effort she paid for the chemical treatments herself. After seven long years, she passed away. The story is not over. One month after her death, seven years after first visiting the insurance company, her family received notice from the German court denies bald men state-funded wigs Bald men are out of luck in Germany! A German court ruled that state health insurance is not required to cover the expense of toupees for men after one bald man sought reimbursement of 440 euros (US $530) for his hairpiece. Although the state pays for wigs for balding women, the court ruled it hospital that her treatments would be paid for. She had at last made it into the system after seven long years of pain and suffering. is not considered discrimination to refuse coverage for men because male baldness is common and accepted as normal. The court says the state must pay only when the hair loss is so extreme that it ostracizes the person from society, which is an unlikely outcome given the common site of a man with no hair at all! Snippets Health insurance companies invest in tobacco A new Harvard University study published in the New England Journal of Medicine revealed that life and health insurance companies in the US invest heavily in tobacco companies. Tobacco use is a major cause of fatal lung diseases and cancer, and is known to elevate the risk for heart attacks and strokes. The study found that the American insurance company Prudential Financial, Inc. has $260 million invested in US cigarette makers, including Philip Morris and R.J. Reynolds. Sun Life Financial, Inc., which sells life, health and disability insurance, owns over $1 billion worth of stock in tobacco interests. Other companies have sought to dismiss the results of the study, claiming that they did not invest those funds for their own benefit, but in the interest of their partners. Although investing in tobacco while selling life or health insurance may seem self-defeating, said Dr. J. Wesley Boyd, the study s lead author and a faculty member of Harvard Medical School, insurance firms have figured out ways to profit from both. Insurers exclude smokers from coverage or, more commonly, charge them higher premiums. Insurers profit and smokers lose twice over. Despite calls upon the insurance industry to get out of the tobacco business by physicians and others, insurers continue to put their profits above people s health, he said. It s clear their top priority is making money, not safeguarding people s well-being. Tobacco products currently contribute to the deaths of 58 million people worldwide annually, a figure that is expected to rise to nearly 1.5 billion. Tobacco use is a major risk factor for stroke, heart attack, lung disease and cancer. 22 Rajjab 1430 JULY 2009 23

Social Responsibility The A fundamental part of Islamic principles, the concept of social responsibility is increasingly finding a home in Saudi Arabia s university curricula By Hani Nadeem The concept of social responsibility is being actively promoted in a number of countries around the world, and has also found acceptance in academic circles in Saudi Arabia. Several organizations and individuals have been involved in the efforts to promote the concept in Saudi Arabia, and they have been discussing with Saudi universities the need to incorporate ethics and social responsibility into standard curriculum Channeling funds into non-profit alliances and activities typically runs counter to profit maximization norms. But Corporate Social Responsibility (CSR) is fast becoming an essential part of business in today s global economy and has proven to yield benefits for the contributing company as well as for the local community. International reports suggest that companies that adopt the concept of corporate social responsibility have succeeded in increasing profits by as much as 18 percent compared to companies without social responsibility programs. Many initiatives point to this impressive statistic to persuade major companies and executive directors to support social responsibility programs and promote increased participation from the private sector. The argument is that social responsibility shouldn t of Social Responsibility be seen as a liability, but rather as a useful strategy to improve a company s competitiveness and marketplace image. In what has been described as the first effort of its kind, Saudi civil and public institutions have launched an initiative to promote social responsibility as a major course of study and discussion for economics and management students at the country s many top universities. The initiative will also include free courses for students and scholars to familiarize them with the concept of social responsibility. Asya Al-Ashaikh is President of Tamkeen Development and Management Consulting, the first Saudi company dedicated to CSR issues. She is a strong believer in the value of making CSR a fundamental part of her business model, having negotiated with three colleges to integrate social responsibility in their curriculum. So far, one public university has agreed to do so. The University of Lund in Sweden will initiate the draft version of the curriculum in cooperation with organizations in the Kingdom. She says that social responsibility also addresses the overarching goal of developing thoughtful, responsible and active citizens, noting that social responsibility programs should not only focus on charity work, but how to promote the public good, to advance the basic belief of society, and to contribute to its stability, strength and harmony. Social experts explain that promoting social responsibility in the classroom in the areas of volunteering, leading, participation, and cooperation is as important as academic, intellectual, and physical achievement. This move will also help in building a new generation that is able to absorb and develop modern social responsibility programs, which will ultimately help companies maximize their strategic impact, achieve their vision and improve their image among consumers. According to Saudi community service activists, there is a need to deepen and consolidate the concept of social responsibility and encourage the business sector to adopt enhanced community service programs. They also call for the implementation of a national project for community service carried out by the private sector under the rubric of social responsibility. Apart from the need to integrate social responsibility into the curriculum, Askar Al-Harthy, the Secretary-General of the Social Responsibility Council in Riyadh and the Director of Community Services Department, says that there is a need to establish social responsibility departments for colleges, and to provide specialized training programs for fresh gradates on how to plan and manage social responsibility programs successfully. Al-Harthy suggests that the government has to offer attractive incentives to the companies that prove to have strong CSR credentials, such as giving them priority while deciding on tenders, and establishing incentive schemes for customs exemptions. The government should also honor companies that have made extraordinary contributions to their communities and have excelled in promoting corporate values. CCHI Magazine met with Dr. Sulaiman bin Abdullah Al Aqeel, Professor of Sustainable Development and CSR at King Saud University, to talk about the broad concept of social responsibility. Dr.Al Aqeel believes that teaching social responsibility in colleges and universities is one of the most important ways of creating a qualified and knowledgeable generation. According to Dr. Al Aqeel, social responsibility in Saudi society is based on a set of general principles drawn from community, religion, history and culture. Natural, social and cultural environment plays a major role in a person s development. Social responsibility in its origin is a result of the social and religious formation of the community. He notes that social responsibility is at the heart of Islamic principles and says it is a set of raw principles Muslims exported to the West long ago. The West, he says, is simply re-exporting those principles back to Saudi under the name of corporate social responsibility. The social interaction and interdependence between the Prophet and his compassion is a living example of social responsibility concept, Dr. Al Aqeel says. The understanding and the commitment to the different aspects of social work is an important part in the relationship between the individual and the society, and the relationship between the society and the individual. Social responsibility is at the heart of the Islam principles and describes it as a set of raw principles that Muslims had exported to the West in early times, and now the West is re-exporting those principles to us under the name of corporate social responsibility Dr. Al Aqeel said Dr. Al Aqeel argues that human rights and duties may have been delineated in written form and with regulations and systems, in order to fight disruption, fragmentation, chaos, poverty, or ignorance that could negatively affect the society. But eventually, he says, it was social responsibility that helped build and sustain the cohesion and balance of the community. Regarding the integration of social responsibility into undergraduate curriculum, Dr. Al Aqeel points out that social responsibility helps in building an ethical society committed to justice, truth, compassion, humanity and right doctrine. Social responsibility helps in unifying the efforts of individuals and groups in the society and creates a shared set of values that support the common good, he said. 24 Rajjab 1430 JULY 2009 25

Interview People s satisfaction is difficult to obtain Sami bin Abdullah Al-Mubarak urges businesses to employ more Saudis and reduce dependence on foreign workers By Mustafa Shehab The new regulations set by the Saudi Council of Cooperative Health Insurance (CCHI), which made cooperative health insurance compulsory for companies employing more than 500 expatriates, represent one of the most progressive steps towards reforming the insurance market to one that is professionally managed and well regulated. CCHI Magazine met with Sami bin Abdullah Al-Mubarak -- a representative of the Ministry of Labor in CCHI -- to discuss the health insurance industry, foreign labor and the Saudization initiative, which encourages nationals to participate more actively in the private sector. Al-Mubarak is a graduate of King Saud University s School of Arts and Social studies. He has years of experience working at the labor ministry and in the private sector. He was Chairman of the Recruitment Office at the Labor Office in Riyadh and headed the Central Department of Inspection at the labor ministry. Al-Mubarak was also the Director General of the Labor Office in Riyadh. Currently he is the Director-General of private sector and labor market affairs in the labor ministry. Questions: Health insurance has become mandatory for all expatriates and nationals working in the private sector in the Kingdom. Can you shed more light on this initiative? Cooperative Health Insurance is now compulsory for companies having more than 500 expatriate employees in the country. The law aims to regulate Saudi health insurance and the provision consolidates health care for Saudi and non-saudi residents in the Kingdom. The council has instructed companies to furnish details of their health policies, as well as beneficiaries and dependents, to insurance companies. In order to ensure that employers provide preventive health care and treatment to all their workers, the labor ministry has included the health insurance law in its article no. (144). The ministry is also inspecting the Kingdom s private-sector establishments to verify they are obeying labor laws and regulations. Inspectors will also ensure that non-saudi employees working in the private sector have work permits and enjoy the full rights granted to them under labor regulations. Those who do not abide by the law will face certain penalties. What role does the labor ministry s representative play in the CCHI? The representative of the Ministry of Labor is mainly a link between the council and the labor ministry. The representatives use their expertise to explain the labor system and help overcome any obstacles confronting the health insurance sector. It is a huge responsibility, as you know; we have more than seven million Saudi and non-saudi workers employed by the private sector. The Ministry of Labor has been subjected to criticism by various groups and individuals. How do you handle such criticism? Like any other executive body, the actions of the Ministry of Labor do not always please everyone, especially since our policies and actions affect all segments of society: employers, workers, citizens and residents. We know that we cannot satisfy everybody, but the ministry is trying to reach out to both nationals and expats. It also keeps evaluating its performance, procedures and instructions in order to develop new strategies and policies and balance employment regulations and instructions against the needs and wishes of the people. You were the director of the Labor Office in Riyadh; if you could go back in time what would you change? In fact, I believe that I did everything I could. But I feel that I should have done more for my people and my country. I want to see more Saudi employed in the private sector. How do you see the role of the CCHI in implementing the health insurance system? The Council of Cooperative Health 26 Rajjab 1430 JULY 2009 27

Insurance was established by respected and knowledgeable figures, who played an important role in establishing and developing the health insurance industry in the Kingdom. I must stress also that the general secretariat of the council is playing a vital role in developing, reviewing and implementing the council s policies. What exactly do you want the council to achieve? I believe that the Council is progressing very well and I am very pleased with the way things have been going. The council has learned and benefited from the experience of countries that have preceded us in health insurance industry, both with regard to insurance companies and service providers. Do you think that the kingdom should reduce its dependence on foreign labor? Thanks to God, Saudi Arabia is one of the youngest and fastest growing countries in the world. The Kingdom has become heavily dependent on foreign labor, and this has hindered the development of a skilled workforce, to the degree that the private sector is unable to absorb new Saudi entrants. But new generations of Saudis do have the appropriate skills and are or will soon be available to occupy positions usually filled by foreign laborers. I want to express my gratitude to all the foreign workers and employees who have contributed to the Kingdom s progress, but there are categories of workers who can now be replaced by Saudis, and I think the expatriates in such categories should go back to their countries. What are the main issues concerning the rights of workers that you usually discuses with the Council? As you may know, the Cooperative Health Insurance system is already in effect for private enterprises with Saudis and non- Saudi employees. Therefore, our main focus is to ensure that companies are implementing this system fairly and that workers do not bear any additional costs and are aware of their rights. The health insurance system has imposed financial burdens on private companies; did they try to resist the new law? Implementing new systems always generates positive and negative reactions. However, I do not think the new health insurance system has in anyway affected serious businesses. Some companies, of course, are trying to undermine the law, sometimes in collaboration with some insurance companies. Nevertheless, the Secretariat of the Council is investigating those accidents in collaboration with the Saudi Arabian Monetary Agency. The labor office has at times reduced the number of visas granted to companies. What is the philosophy behind that? The labor office gets its directions from the Ministry of Labor. As I said before, the labor office tries to balance the regulations with market needs. The Labor Minister called for reducing the labor force coming from foreign countries, so the office must abide by his policy directive. According to the Saudi ministry, the foreign labor force in Saudi Arabia should not exceed one million individuals by the fall of the year 2030. To what extent has the Ministry of Labor, in cooperation with the concerned authorities, succeeded in reducing the unofficial employment? In collaboration with other bodies, we are doing all that we can to end illegal labor practices. The issue is growing faster in the private sector than the public sector, but with God willing, we will diminish any breach of the residence and employment systems. What are the main reasons behind the creation of a thriving black market trading in illegal visas? Illegal visas offer a quick access to the labor market. Some disreputable companies specialize in applying for block visa approval for large numbers of employees and then selling these slots on the black market to the highest bidder. This practice is illegal and exposes the workers and the companies they ultimately work for to penalties. What is the funniest accident you have faced during work? I do not remember facing such accidents. The majority of accidents I remember are sad or embarrassing and I prefer not to mention them. Are you satisfied with the labor and health insurance systems? I am satisfied, but I am afraid that Saudi nationals are being squeezed out of the labour market in their own country. We seek a situation where every private sector employer develops and implements a plan to aggressively recruit and employ nationals. I also hope that the umbrella of health insurance to cover all citizens Saudis and non-saudis as soon as possible. What are the challenges facing Saudi Arabia labor market? The Saudi Arabia labor market is very special and is full of opportunities. I think we need to focus more on the insurance market. What is your life philosophy? Beware the man who has received charity from you. How many children do you have and how do you deal with them? I have four children: two girls and two boys. I deal with each of them according to his age and behavior. I tried to raise my children as I was raised. With God s help, they will become good citizens who can be very useful for their country. COOPERATIVE HEALTH INSURANCE March2008, Issue 1 15,000 copies Distributed across the health insurance sector in the Kingdom A quarterly magazine issued by The Council of Cooperative Health Insurance For advertising: TOMORROW S WORLD Electronic network solutions Minimizing costs - saving time FROM ALL DIRECTIONS Between the cooperative an commercial insurance Creating contentment and building the economy Tel: +966 (1) 462 3632 Fax: +966 (1) 4612966 Riyadh, Kingdom of Saudi Arabia Email: gbcksa@gbcksa.com 15,000 copies Distributed to health insurance makers in the Kingdom A quarterly magazine issued in cooperation with The Cooperative Health Insurance Council For advertising: Tel: +966 (1) 462 3632 Fax: +966 (1) 4612966 Riyadh, Kingdom of Saudi Arabia Email: gbcksa@gbc-me.com COOPERATIVE HEALTH INSURANCE August 2008, Issue 2 Capital and Investment Insurance... The Potential for Revenues and a Promising Future COOPERATIVE HEALTH INSURANCE October 2008, Issue 3 supporting COmPAnIEs PREsEnT new InVEsTmEnTs In InsuRAnCE sector InsuRAnCE COmPAnIEs And banks: COmPETITIOn OR COmPlEmEnTATIOn? InsuRAnCE law between ThE monetary InsTITuTIOn And ThE InsuRAnCE COunCIl ThE EffECT Of medical InsuRAnCE On medical services: In All Directions The Public and Health Insurance What are the Benefits? Incidents and Treatments not Covered by Health Insurance! COOPERATIVE HEALTH INSURANCE January 2009, Issue 4 FInAnCE And InVEsTmEnT Global crisis: immunity or limited impact? Positive or Negative? 1 ThE KIngdOm s war AgAInsT smoking Issue dates: January April July October CORPORATE PROFIlE Allianz Saudi Fransi: Local knowledge, global reach and expertise COOPERATIVE HEALTH INSURANCE April 2009, Issue 5 SAudI InSuRAnCE SECTOR REmAInS uns CAT hed by global CRISIS 1 IS ThE SERVICE worth ThE PREmIum? minister Of health dr. Al-RAbEEAh ChAIRS CChI meeting 1 COOPERATIVE HEALTH INSURANCE July 2009, Issue 6 Mandatory Health Insurance for Saudi workers A step in the right direction Changing policies is a must for the successs of the mergers Issue dates: January April Representative of the Ministry of Labor in CCHI: People s satisfaction is difficult to obtain July October 28 Rajjab 1430 JULY 2009

Cover Story Mandatory Health Insurance for Saudi Workers By Faisal Al-Shaya There is no doubt that good health is the bedrock of good community. Cooperative health insurance is one of the best ways to insure that good health, concerned as it is principally with human health, not profit. After all, a country s prosperity is determined at least in part by the health of its people, and that health is partly determined by medical services provided to them. The implementation of a Saudi cooperative health insurance system has been a great benefit to the citizens and residents of the Kingdom. After making health insurance mandatory for expatriate workers, Saudi Arabia is doing the same for Saudi nationals and their families working in the private sector. The scheme will make health insurance compulsory for employees of 80 to 85 percent of small to medium companies bringing them in line with big private companies, which are supposed to be providing insurance cover for their workers. The new scheme will determine the family members benefiting from the policy as well as the rate of premium to be paid by beneficiaries as well as employers. According to Article XIV of the cooperative health insurance system upon the decision of the Council of Ministers No. 71 of 27/4/1420AH, the health insurance scheme will cover medical check-ups, medicine, preventive measures such as vaccination, child birth, laboratory and X-ray tests, surgical operations, dental surgeries, accommodation and treatment in hospitals and in-patient services. An employer who fails to pay insurance premiums for his workers will pay fines not in excess of the annual premium and will be barred from recruitment, both temporarily or permanently, according to the executive by-law. If an insurance company fails to fulfill the terms of its policy, the company will be required to pay compensation for the damages caused by the violation and a fine of not more than SR5,000 for each individual, the by-law states. Raise awareness Emad Yusuf, Director of the Medical Insurance Department at The Gulf Union Cooperative Insurance Company, says that the cooperative health insurance system succeeds by linking the system of health insurance currently applicable to all foreign residents in Saudi Arabia to the Residency Office. Therefore, the residency office does not grant or renew any residence permits unless the resident is included in the cooperative health insurance system. 30 Rajjab 1430 JULY 2009 31

Cover Story I personally hope this new policy will cover all age groups, from age one until retirement. Emad Yusuf said. Asked about private sector companies response to this decision, Yusuf said that it is not clear yet, but he believes the feedback will be positive because private sector companies, which have Saudi workers, already provide insurance for many of their workers. The question is how to ensure that private companies will cover Saudi nationals under their health insurance system as they did with foreigners resident in Saudi Arabia. I personally hope this new policy will cover all age groups, from age one until retirement, Yusuf said. But I think the government should not stop providing health care for its citizen at once. It should continue to exercise its role effectively and to bear part of the costs of health care insurance for Saudis working in the private sector. As you know, the nature of Saudi society is completely different from the nature of residents in terms of number of family members. The average number of members in a Saudi family range between 6 and 8, which could represent a huge burden on employers. Yusuf noted that this decision will have a positive impact on the It should continue to exercise its role effectively and to bear part of the costs of health care insurance for Saudis working in the private sector. public health sector as it will ease the financial burden, improve the quality of medical services, decrease the pressure on public hospitals, and free up government funds allocated to healthcare to address other important issues. Moreover, mandatory health insurance will help public hospitals join a network of service providers accredited by medical insurance companies. This will ease the financial burden on the government and provide investment opportunities for investors to establish new medical centers. Benefits Nadeem Harab, Sales Director, Medical Insurance Department at the Saudi Arabian Cooperative Insurance Company (SAICO), notes that the new mandatory health insurance program will cover up to 1.5 million privately employed nationals and their families. As they already have expats, private companies will surely commit themselves to insuring Saudis, Harab says. Harab points out, however, that the new decision does not specify precisely who will be covered. Nor does it include the whole family, parents, wife, and children who are over 23 years of age, university graduates, or just the insured and his wife. He noted that many insurance companies and service providers are confused, so they rely on the lists provided to them by the private sector companies or insurance agents, not on information from the insured himself. In my opinion, private sector companies must be committed to this resolution, Nadeem Harab says. This however cannot be applied to Saudi nationals working in the private sector, Yusuf says. Therefore, we need to link the cooperative health insurance system for Saudis working in the private sector with the common number in their ID cards in cooperation with the National Data Center. We also need to raise the awareness of the right of the worker to obtain the advantage of health insurance through radio, TV and print media, and inform them with the available legal channels to pursue in the event the employer refuses to include family members in the cooperative health insurance system, Yusuf says. The Council of Cooperative Health Insurance (CCHI) held a meeting to discuss expanding the program to include more Saudi nationals. The meeting was headed by Dr. Abdullah bin Ibrahim Al-Sharif -- the Secretary-General of the Council -- and attended by the representatives from the Passport Department, the Ministry of Labor, insurance companies and the National Data Center. During the meeting, Dr. Al- Sharif said that a mandatory health insurance policy would be expanded to Saudis working in private sector beginning on 20/6/1430 AH (14/6/2009). In my opinion, private sector companies must be committed to this resolution, Harab says. Related bodies such as the Bureau of Labor, the National Data Center of the Ministry of the Interior, the General Organization for Social Insurance, and CCHI must ensure that all private sector companies are committed to the new decision. Penalties should be meted out to companies that do not comply with this resolution. More important than avoiding fines, Harab says, companies that comply with mandatory healthcare for Saudis and foreigners will find that employee s performance improve. The government should help in the costs of health care insurance for Saudis working in the private sector, Harab says. This will ease some of financial burden on private sector companies; therefore, they will be willing to include all their staff under the umbrella of cooperative health insurance. The new decision would also affect the public health sector positively as it will decrease the pressure on the public sector, improve services and medical equipments as well as attract qualified doctors. 32 Rajjab 1430 JULY 2009 33

United Doctors Hospital Focus on general care and breast cancer The United Doctors Hospital in the Saudi Arabian city of Jeddah provides a broad range of quality healthcare services to patients. With highly specialized medical staff, the hospital is able to provide a vast array of services in order to deliver proper treatment to patients quickly and efficiently. For the last ten years, the hospital has focused on two major programs: general medical examination and the early detection of breast cancer. Under one roof, the hospital offers medical examinations of the highest quality, in addition to laboratory tests. These services include general physical examinations, which can require that the patient to fast up to 10 or 12 hours before the procedure. Based on the results of this exam, the physician will determine the state of the patient s health and the cause of any symptoms, such as pain or sudden and prolonged weight loss. In evaluating the origin of such symptoms, the doctor may inquire about the patient s workplace and home life, any medicines the patient may be taking, and the history of certain diseases in the patient s family. Benefits Medical examinations are one of the most effective methods of detecting and diagnosing illness and an important part of any first consultation. Every examination begins with a thorough recording of the patient s medical history. This, along with blood and urine tests to measure cholesterol, sugar and other health indicators, can tell the doctor whether the liver, kidneys, and other organ systems are functioning properly. United Doctors Hospital provides a number of medical examinations, which are designed to meet the needs of patients of all ages and backgrounds. Each medical examination package includes four basic elements: the patient s medical history, a physical examination, laboratory tests including blood and urine tests, in addition to radiology images, non-invasive electrical imaging of the heart, a stomach ultrasound, as well as medical consultations. Breast Cancer Breast cancer ranks first among cancers affecting women worldwide. Among cancers it is the leading cause of death, second only to lung cancer in some countries. Worldwide, 1 in 10 women is affected by breast cancer. The risk of developing breast cancer increases as women get older. One of the most important steps to fight breast cancer is to determine if an abnormality is benign, as is the case with 80 percent of women, or malignant. In view of the clinical similarities between them, every change in the breast must be evaluated carefully for early detection of possible pre-cancerous elements. Breast Cancer continues to be one of the most common cancers among women in the Kingdom. In spite of ongoing efforts, women (and their families) still need to be better educated and made more aware of the need for regular checkups and the power of self-exams. United Doctors Hospital provides a special program for early diagnosis of breast cancer, including medical and surgical consultation, mammography and ultrasound. Symptoms and tests At United Doctors Hospital, specialists explain to patients that early breast cancer usually does not cause pain. Still, a woman should see her health care provider about breast pain or any other persistent symptoms. The earlier breast cancer is found and diagnosed, the better the chances of beating it. Common symptoms of breast cancer include: Painless lump or thickening near the breast or in the underarm area Change in the size or shape of the breast Changes to the surface of the breast, such as a dimple or skin that looks like an orange peel A yellow or bloody fluid that comes from the nipple A change in the color or feel of the skin around the nipple, or areola Program The United Doctors focuses on two major programs: General medical examination, as an important part of the first consultation, and early detection of breast cancer, which is one of the most common cancers among women in the kingdom Most breast changes are not due to factors other than breast cancer. If, at any age, a woman feels a change in her breast, she might need to have a number of early detection tests, including some or all of the following: Examination of your breasts by a doctor, which must carried out once a month to examine any changes in the breast or skin color. The examination should be done after two or three days following the end of the menstrual period. Periodic examination of your breasts by your doctor, if the woman suspects any changes in her breast or nipple Mammography is very important in early diagnosis, as well as ultrasound, which diagnoses small tumors For women between 20 and 35 years, the hospital provides a breast cancer screening program, which includes monthly doctor s examinations and clinical examination by a physician every 3 years. For women between 35 and 50 years, the hospital provides a program of monthly examination, annual clinical examination, and mammography and ultrasound every two years. For women over the age of 50 years, the program includes monthly selfexamination, annual clinical examination, and annual mammography and ultrasound. The United Doctors hospital provides a range of treatments for breast cancer, which include surgery, radiotherapy, chemotherapy and hormonal therapy. 34 Rajjab 1430 JULY 2009 35

Finance and Investment Anti-Money Laundering: Helping Insurance Companies Mitigate Risks The phenomenon is very limited in the Kingdom By Amira Hamada The insurance market in Saudi Arabia has undergone major reform in recent years. Favorable economic conditions and the expansion of compulsory motor insurance and health insurance have all been crucial in driving growth. Concurrent with this period of growth, responsibility for the oversight of the insurance industry was formally entrusted to the Saudi Arabian Monetary Agency (SAMA), which is taking steps towards enforcing new money laundering and counter-terrorist finance laws, regulations and guidelines. Money launderers tend to seek out areas in which there is a low risk of detection due to weak or ineffective anti-money laundering programs. As the objective of money laundering is to get illegal funds back to the individual who generated them, launderers usually prefer to move funds through areas with stable financial systems. Insurance products provide an attractive and simple means of laundering money. To this end, organized crime groups take money made from illegal activities and convert that cash into permanent life policies, annuity contracts and other insurance products that have a fixed value. The criminals then redeem the policies before they reach maturity. Typically, a money launderer buys five or six insurance policies worth several million dollars and redeems them just before they mature. The insurance company s bank writes a check for the redeemed amount in the name of the money launder and the proceeds of the crime are thus transformed into clean money. For the trick, the criminal is willing to forfeit 10 percent of the policy value to secure early redemption. Strict regulations Abuse of the world financial system is rampant. The International Monetary Fund estimates that money laundering accounts for somewhere between two and five percent of the world s gross domestic product (GDP). Many countries, therefore, have put in place comprehensive and coordinated regulations against such practices, especially as they relate to the financing of terrorism. The Kingdom of Saudi Arabia is no exception, and has adopted a variety of initiatives, including judicial measures, to respond to international developments. The Saudi Arabian Monetary Agency (SAMA) recently began developing new money laundering and terrorism financing regulations for Saudi Arabia s insurance companies. The objective of this strategy is to ensure that insurance and reinsurance companies and their subsidiaries are complying with basic rules and procedures all of which are designed to prevent abuse. According to SAMA s general provisions, insurance companies must reassess all of its strategic activities, organization structure, customers and transactions. SAMA s directives to insurance companies include: Develop written policies and procedures to combat money laundering and prevent terrorist financing Ensure that all company officials and employees understand the content of those rules, and that they have taken all necessary measures to combat money laundering and terrorist financing. Regularly review policies and procedures to insure effectiveness, including the review of policies and measures relevant to anti-money laundering and counterterrorist finance policies. Develop and implement customer relations policies and procedures, develop due diligence procedures, taking into consideration the risks of money laundering and terrorist financing, according to the type of the customer, their transactions, and working relation with the customer. Companies must set a minimum value for transactions that require an inquiry into possible money laundering or terrorist financing. That minimum value should not be less than SR 10,000. The company must take all necessary measures to document essential and accurate customer data. It must not provide products or services to persons having anonymous or suspicious names or persons with whom dealings are forbidden. The company s board is responsible for supervising the establishment and adoption of an anti-money laundering and counter-terrorist finance program, as well as naming a compliance officer. Companies must designate a compliance officer, whose mission is to oversee compliance within the company. The role of the compliance manager consists of identifying and investigating suspicious transactions and ensuring continuous compliance with anti-money laundering and counterterrorist finance policies, measures, and restrictions. These regulations are part of legislation initiated by SAMA to supervise and oversee insurance companies and to support the government s efforts to control and combat money laundering and terrorist financing. Money laundering regulations: A necessity It is important to put in place comprehensive anti-money laundering regulations in order to deter criminals and terrorists from trying to use the financial system; and to make it easier to catch and punish those who do, said Ali A. Al-Subaihin, the CEO of Tawuniya. Al-Subaihin added that these regulations are part of legislation initiated by SAMA to supervise and oversee insurance companies and to support the government s efforts to control and combat money laundering and terrorist financing. There are more than 20 nationalities working in the Kingdom from different cultures and with different interests, he said. The Kingdom is an influential country in the Gulf region, and the world economy as a whole; therefore, such regulations will enable us to protect our economy and national interests. Such criminal activities damage the financial institutions that are critical 36 Rajjab 1430 JULY 2009 37

Finance and Investment to economic growth; the criminal activities also reduce productivity in the economy s real sector, he said. Effective anti-money-laundering policies, on the other hand, reinforce a variety of good-governance policies that help sustain economic development, particularly through the strengthening of the financial and insurance sectors. Mark Sotiklev, head of the financial operations at BUPA Arabia, agrees with Al- Subaihin. A strong rule of law governing financial institutions is a fundamental prerequisite for economic growth, Sotiklev said. Anti-moneylaundering policies are a constituent element in the good-governance policies that form a solid rule-of-law environment. He noted that BUPA Arabia has made every effort to ensure compliance with regulations to control money laundering and terrorism financing. Cooperation with SAMA Insurance companies must develop policies and procedures that outline reporting procedures for communicating with SAMA. These policies and procedures are to include: Information about the means of communication with the official responsible for anti-money laundering and counter-terrorist finance measures at the company. The development of communication processes adopted for cases by SAMA, as well as the ways of submitting reports to SAMA. BUPA Arabia continuously monitors the payment activities of our customers, and continues to review and develop its systems and processes in order to identify any suspicious transactions, Sotiklev said. We do not accept any cash amounts of more than SR 10,000. We also update our database frequently to ensure that none of our customers are linked to any terrorist organization. Sotiklev does note, however, that the process of obtaining information about customers is a significant and timeconsuming challenge. Al-Subaihin said that Tawuniya is following all SAMA regulations, including resolution No. 3 / 430, adopted on 6/1/1430 AH, which he said will have a positive impact on insurance companies, as it will help build a culture of risk management and encourage greater attention to financial risks. Al-Subaihin pointed out that Tawuniya was the first insurance company in Saudi Arabia to implement regulations first established on 22/12/2003 -- to combat money laundering and terrorist financing. He said that the company s policies were updated in January 2006 and reviewed in 2009. This has helped Tawuniya to apply effective mechanisms to combat money laundering and terrorist financing and to provide training to employees in order to detect any operations related to such activities. Personnel training As part of SAMA anti-money laundering and counter-terrorist finance regulations, official policies and measures must be made available to all employees at all levels in the company. Insurance companies must also make sure that the persons to be employed are tested according to their level of expertise, integrity, credibility, skills and competences, identities, personal data and CVs. Moreover, companies must determine staff positions that are most likely to be targeted for money laundering and terrorist finance purposes. These employees must be closely monitored in order to guarantee their credibility as well as their continuous application of proper policies and measures. Insurance companies must educate and train their employees, managers and Board members. We at Tawuniya provide comprehensive training courses to our employees to develop their abilities to classify insurance operations and customers, and thus detect any attempted fraud or laundering, Al- Sotiklev: BUPA Arabia continuously monitors payment activities of our customers, and continues to review and develop its systems and processes in order to identify any suspicious transactions Subaihin said. We have developed a system with many indicators to detect suspicious operations, including money-laundering. This system has proven its effectiveness in discovering many frauds, particularly with insurance claims. Our experience in combating money laundering is ahead of many companies in the market, Al-Subaihin said. We implemented a number of effective mechanisms six years ago, in line with the rules and regulations issued by SAMA, including the appointment of a risk management director to be responsible for developing and revising moneylaundering rules and regulations. Al-Subaihin also said that Tawuniya has succeeded in achieving a system of self-assessment and risk control in accordance with its strategy and corporate goals. The company holds annual workshops to assess our risk control system, particularly with respect to money laundering and the financing of terrorism, in the light of economic and social changes. Tawuniya has also assembled a special team responsible for financial analysis, particularly in the property and casualty sectors, in order to achieve safety and risk reduction in the company s compensation centers in Riyadh, Jeddah and Dammam, and the new headquarters in the central region. We have bolstered our information security and we continuously check our insurance operations each quarter, Al- Subaihin said. We thank God that so far we haven t discovered any money laundering activity in the company. Mark Sotiklev said BUPA Arabia was enjoying similar success. Our staff is fully aware of the requirements and needs to report any suspicious activity to the finance department, but so far, we have not recorded any suspicious activity that required us to report to SAMA. Risk-based capital Some insurance companies are applying the so-called risk-based capital method, which measures the minimum amount of capital that an insurance company needs to support its overall business operations, a figure that is used to set capital requirements according to the size and degree of risk taken by the insurer, all in order to protect the value of the insurance market from any risks. Al-Subaihin believes that this approach is not adequate to address financial risks. We need strict rules and regulations to control financial risks, he said. Whatever the total amount of capital, it will not be enough to cover certain types of major crimes. While Sotiklev says that moneylaundering activities are increasing worldwide, Al-Subaihin argues that this phenomenon is very limited in the Kingdom because of the considerable efforts undertaken by relevant ministries and other governmental bodies to control such activities. Money laundering is considered an extremely serious financial crime because of its impact on individuals, society and institutions. It is also an extremely complicated problem to combat. Therefore, financial institutions and insurance companies must take steps to address such activities. The companies must understand that failure to observe new legal responsibilities in combating money-laundering may expose them to criminal prosecution and subsequent adverse publicity. 38 Rajjab 1430 JULY 2009 39

CCHI revolutionizes healthcare insurance industry through launch of electronic transaction services Aldhasi: The new program will eliminate the need for paper-based insurance processing with fast, secure electronic transactions By Sayeed Al-Hasanieh The Council of Cooperative Health Insurance (CCHI) is revolutionizing the transaction process for the local healthcare insurance industry by replacing paper-based insurance processing with fast and secure electronic transactions. The initiative was designed to enhance connectivity between different insurance bodies and improve the performance of both medical services and insurers. The Saudi Health Insurance Bus (SHIB) program aims to electronically link health insurance companies, service providers and the Secretariat of the Council in order to better serve patients, increase efficiency, and improve supervision. The state-of-the-art program will enable health insurance companies to reduce their paperwork and move entirely towards electronic transactions. The new system will help the health insurance sector move to an online platform to process medical approvals, claims as well as digitizing the process of validating insurance policies, determining coverage limits and checking beneficiary coverage information. Information technology and connectivity are important factors that will help the growth of the Saudi insurance sector, which has just begun to play a significant role in the national economy. But leading experts caution that the insurance sector here is still an emerging industry. As such, there is an urgent need to implement global standards for information technology and a growing need to connect health insurance departments to one another in order to improve the quality of services. SHIB Program We are focused on promoting the concept of electronic services for all healthcare-related transactions, replacing traditional and time-consuming processes, said Eng. Wael Al Dahasi, the Director of the Technical Department at CCHI. He says the new electronic system aims to link the council to insurance companies, government agencies and non-governmental insurance bodies. The goal of this system is to improve the quality of medical insurance in the Saudi private sector, Al Dahasi said. The SHIB Program is a unified electronic system that aims to facilitate the exchange of information for all transactions between the insurance companies, customers and service providers under the auspices and regulations of the Council. The system aims to improve the quality of healthcare provided to patients in the private sector and to handle the growing number of insurance transactions. The digitization will also help regulators and supervisors to define electronic standards that will protect patient data and to ensure its accuracy and validity. Moreover, the system will more easily allow the collection and review of performance indicators that will be helpful for insurance services and national research plans alike. With the fact that the number of insured members will increase dramatically with the implementation of new medical insurance regulations in Saudi, problems of time-consuming processes, claims rejections and delays in payments will negatively affect the providers, cash flow, operations and customer care, Al Dahasi said. It is crucial for healthcare firms and hospitals to optimize and automate a very important part of their business processes, especially as they relate to payment cycles, which will in turn result in higher productivity, profitability and better cash flow. The SHIB Program offers many operational benefits, including the possibility of integrating applications and amendments, managing approvals and treatment, managing claims and payments, improving the supervision of insurance services, and managing any irregularities in payment or financial reporting between insurance companies and service providers. The system applies rules according to international standards. The council is committed to encouraging the healthcare insurance industry to break free of paper transactions, which slow the development of companies that are operating in an aggressively growing and vital sector. The SHIB Program is a more efficient means of working with hospitals, sparing them the time-consuming procedures endemic to healthcare facilities in the Arab world. The Council is also working on expanding the scope of the insurance companies covered by this system, in order to enhance productivity, efficiency and profit. Medical coding The Secretariat of the Council recently organized a special meeting attended by World Bank health insurance expert and Director of the e-government project Professor Dennis Streveler, who was to help examine the new system. Attending the meeting were more than 43 insurance companies, a number of medical care service providers and companies specialized in information The system aims to improve the quality of healthcare provided to patients in the private sector and to handle the growing number of insurance transactions technology, in addition to a number of members of the Saudi Association for Health Informatics. During the meeting, Dr. Abdullah Al- Sharif -- the CCHI Secretary General -- said that the council relies on the use of the latest techniques for the exchange of health information, including the use of international medical coding (the Australian version in particular), medicine coding, and therapeutic interventions coding. New website Saudi Arabia s Minister of Health, who is also the Chairman of CCHI, recently inaugurated the council s new website. The website offers several features that will help improve the performance of the healthcare insurance sector. Available services include the licensing of health service providers, subscription renewal and payment management. The website is enabled to receive public feedback as well as complaints. It aims to link Technology The health insurance market is expanding and both payers and providers have to work towards decreasing their operational costs and improve their customer service, Al Dahasi said. insurance companies to healthcare providers and the insured, and provides information, such as regulations, names of qualified firms and names of accredited health service providers. Al-Sharif said that the Council will continue to provide outstanding services and create effective programs through investment in modern technology. This will contribute to the growth of the health insurance sector in the Kingdom. The Council is studying the feasibility of using SMS messaging in the near future. Customers and others also have the option of contacting CCHI through its call center (920001177) or by fax (01-4870071). CCHI and Al Alam Company signed an agreement in early 2006 to implement a new electronic registration service to link residency applications with the renewal of the Kingdom-based employment. The move has been successful in organizing the exchange of valid health insurance data and allows the council to send insured applications electronically to Al Alam Company, which transmits them to the immigration department at the National Information Center. The council was the first body to apply the concept of e-government in the Kingdom. 40 Rajjab 1430 JULY 2009 41

Lifestyle The future looks sweet for the chocolate industry In a healthy $60 billion global industry, there is growing hunger for Arab brands among Gulf consumers By Ibtihal Al-Samaraie Can something that tastes so good also be good for you? If we re talking about chocolate, the impossible is a reality. After all, chocolate not only tastes good but scientists at Oxford University have recently demonstrated that chocolate has unique anti-aging properties and can help in promoting good health. The Oxford study indicates that consuming three pieces of chocolate every month can reduce blood pressure in individuals with high blood pressure and can also lower levels of the more worrisome LDL cholesterol. The United States and Europe are among the world s largest per capita consumers of cocoa and chocolate. Switzerland, Austria, Ireland, Germany and Norway are considered Europe s biggest chocolatelovers. But don t count the Americans out: in the United States, the annual sales volume of chocolate is approximately US$10 billion, and the current annual consumption there is a staggering 5 kilograms per person. The history of chocolate provides some interesting insights on how it became one of the most popular foods in the world. The beginning: the cocoa bean The story of the cocoa plant begins in the forests between the Orinoco and Amazon rivers in South America. Some experts say that the cocoa plant grew there as early as 4000 years B.C., and its earliest documented use dates back to 1000 B.C. The original use of the fruit of the cacoa plant in no way resembles how we think of chocolate now. In the 14th century, the Maya are believed to have first consumed the cocoa plant as a beverage. The Mayans believed the cocoa tree to be of divine origin; cocoa is actually a Mayan word meaning God Food. They roasted cocoa beans and added herb and spices. The resulting drink was reserved for use in religious ceremonies as well as for drinking by the wealthy and religious elite. Christopher Columbus is widely understood to be the first European to taste chocolate. In 1544, after Prince Philip of Spain first received the gift of chocolate, the delicious food soon rose to a revered status among royals, who consumed it as a medicinal elixir. By 1642, chocolate had arrived in France for use by the Catholic leaders. Ten years later, chocolate houses were opening in Europe to serve up gallons of hot sweetened chocolate to the public at large. Chocolate soon gained a reputation as a way to prevent nearly every disease and disorder then known. Solid chocolate, similar to the form we now enjoy, was introduced to European emporiums as early as 1674. As more and more cocoa beans were imported from growing regions, the price began to drop to within the reach of the average person. Still, it took another 100 years from the introduction of the first solid chocolate in Europe until it was introduced in the United States. John Hanan and James Baker were the first to build an American chocolate manufacturing plant, where they began producing Baker s Chocolate brand. By this time, chocolate production and consumption were expanding rapidly. Robust chocolate industries had taken root in Switzerland, England, and Germany. Then in 1842, the Cadbury Company in England first released the chocolate bar as we know it today. Chocolate manufacturers started to try various recipes and flavors to create their signature flavors. In 1867, after eight years of toil and experimentation, a chocolate manufacturer in Switzerland developed the means of producing a combination of milk added to chocolate and sweetened with sugar. Milk chocolate, as it came to be known, soon began to fetch a high price and became revered as the tastiest chocolate treat. Perhaps the most famous experiment in chocolate came from an American named Milton Hershey, who was determined to develop his own milk chocolate. In 1902, Hershey s milk chocolate was offered to the public, where it was excitedly snatched up by eager consumers. It took a great deal of trial and error to create his special formula, and it s a recipe that s still in use today. Market worth billions In 2000, the global market for premium chocolate was worth an estimated US$60 billion a year. Experts believe that the size of the global chocolate market has doubled since then. Much of the recent growth in the market Though the chocolate industry here has been in existence for many years, this new and widespread popularity is remarkable, especially in the Gulf region. has resulted from the entrance of many of the world s leading chocolate suppliers into growing markets, helped by globalization and the wide-scale adoption of free trade policies. Consumer awareness is also helping chocolate sales. The reasons for this growth include the wider availability of chocolate at the retail level and the possibility of purchasing different chocolate brands through the internet. Additionally, Easter, Christmas and Valentine s Day in addition to other religious holidays -- are increasingly becoming essential sales drivers for the chocolate market. Even though there is an almost endless variety of chocolate, just a handful of large companies such as Nestle and Mars -- control 60 percent of total worldwide sales. Next to these behemoths, smaller companies even if they aren t as well known and sell quite well -- attract less attention from media and research groups and spend comparatively tiny amounts on marketing and advertising campaigns. Arab world: A lucrative chocolate market The Middle East s growing taste for chocolate and sweets is developing the region into one of the most dynamic sectors of the global food market. Some of the growth factors include the influx of more foreign chocolate products from Belgium, France, Germany, Italy, Switzerland, the United States and Turkey, among others as markets with growing buying power open to foreign businesses. Though the chocolate industry here has been in existence for many years, this new and widespread popularity is remarkable, especially in the Gulf region. Alongside western brands, chocolate manufacturers from Lebanon, Syria and Egypt have also succeeded in creating quality chocolate brands such as Patchi, Kabbani, Grawi and Anoush. In Saudi Arabia, annual chocolate consumption is estimated to be worth as much as 500 million riyals (US$133.32 million), a number that is expected to increase by 25 percent in 2009, according to Al-Watan newspaper. There are more than 3,000 chocolate shops and manufactures in Riyadh alone, according to the newspaper. In the Arab world, chocolate sales spike during the holy month of Ramadan and 42 Rajjab 1430 JULY 2009 43

also during annual Islamic feasts, when buyers crowd stores to buy large quantities of chocolate for large families typical to the region. Even in tough times, chocolate remains an affordable luxury and a favorite gift for weddings, engagement parties and birthday celebrations. Chocolate facts Many of the myths and common misperceptions about chocolate and health are crumbling under the weight of new scientific research. The onceprevalent belief that something that tastes so good just cannot be good for you has given way to a more balanced picture of chocolate and cocoa products and their relation to health and nutrition. Here are some random and interesting facts about chocolate: Recent reports have found that chocolate may help lower your cholesterol level and reduce the risk of heart disease. Eating chocolate makes you happy because it contains phenylephylamine, the same hormone the brain triggers when you fall in love. In the past, women were not allowed to drink cocoa; it was only consumed by men. There is no concrete evidence that links chocolate to weight gain. Rather, it is the sugar and other ingredients such as butter, cream and nuts added to the chocolate that cause an increase in weight. In fact, there are several different diets that recommend using chocolate as an aid to weight loss. There is no scientific evidence that links chocolate to acne or tooth decay. Chocolate is much lower in caffeine than coffee and tea. There is likewise no proof that chocolate is addictive, especially if consumed in moderation. If kept in a dry place, chocolate has about a year s shelf life. Demand from chocolate manufacturers is responsible for 20 percent of world nut production and 40 percent of almond production. Knipschildt Cost: $2,600 per pound (less than 1 kg) Location: America Noka Vintage Collection Cost: $854 per pound Location: America Delafee Cost: $504 per pound Location:Switzerland Richart Cost: $120 per pound Location: France Godiva Cost: $117 per pound Location: America 1 2 3 4 5 44 Rajjab 1430 JULY 2009

Feature Story Important? Holidays are one thing everyone likes about summer. In theory, traveling is a great way to forget the stresses of everyday life and have some fun. But if you forget to buy insurance for your journey, that dream of relaxation could be a nightmare of regret. Most people regard travel health insurance as an added expense or luxury. Many families in Saudi Arabia, however, are beginning to realize how essential travel insurance can be for a successful By Ibtial Al- Samurai holiday. After all, you just don t know what will happen. In recent history, most people applying for travel insurance in the Kingdom were doing so because it was a requirement to obtain a visa to visit a European Union country or the so-called Schengen countries of western Europe. If you are a non-u.s. citizen and intend to transit through or visit the Schengen countries, you have to obtain a Schengen visa from the Consulate of the country that will be your main destination. Schengen countries require such visitors to have valid medical travel insurance. The insurance must cover costs for emergency treatment, hospitalization, urgent ambulance transportation and medical evacuation back to the home country. Typical travel insurance packages include some of the following features: trip cancellation, lost baggage, dental coverage, emergency evacuation, baggage delay, travel delay, pregnancy, and accidental death coverage. Policies also include provisions for replacing lost travelers cheques, credit cards and visa and travel documents. A standard medical insurance policy also covers the costs of any hospitalization or medical treatments administered while abroad. Some insurance companies also provide travel insurance against terrorists acts such as airline hijacking. Peace of mind Travel insurance is an important type of insurance and a source of tranquility and peace of mind for travelers. It is also a visa requirement if you are applying for a Schengen visa to visit a European country or North America; mainly because the medical treatment in those countries is very expensive and the average traveler will not be able to bear the burdens of such treatments, explained Khalid Al- Shuweir, insurance sector, AXA Insurance Company. According to Al- Shuweir, European Union began requiring travel insurance in 2004 for all visa applicants so that insurance companies will pay the cost of any medical treatment in case the traveler was not able to do so. There are two types of travel insurance; first, medical insurance which only covers medical expenses up to US$ 40, 000. The second type is the Most people regard travel health insurance as an added expense or luxury. Many families in Saudi Arabia, however, are beginning to realize how essential travel insurance can be for a successful holiday. comprehensive travel insurance, which covers medical expenses up to US$1 million, in addition to the coverage of the civil liability towards others, and the loss of personal property, personal accidents. Comprehensive travel insurance can also provide protection against emergencies that are so specific to going abroad that they cannot be covered by your standard insurance policy. This includes trip interruption and medical transportation services, Al- Shuweir said. He notes that each insurance policy should identify the type of insurance coverage, the amount of coverage and the timeframe. The method of obtaining travel insurance is easy, he said. Travelers up to 75 years old only need to fill an application form for travel insurance at any travel agency. It takes no time. Increasing demand Botha Khan works in a travel agency in Riyadh and said that the demand for travel insurance is increasing, especially for summer vacations. Many of the families are starting to expand their travel insurance coverage from medical insurance to insurance against theft and loss of property. Khan says that the process of applying for travel insurance is easy because most travel agencies in the Kingdom are linked with insurance companies through a networking system. In order to apply for travel insurance, he says, the employee in the travel agency will ask the traveler to fill an application form that includes the type of the insurance, the timeframe, scope of coverage, the number of individuals to be insured, and the countries he/she wants to include in the coverage. The officer will register the applicant and then give him the insurance policy that he will present to the embassy. This service has made things very easy on travelers, Khan said. Now they do not have to go an insurance company to get the insurance policy then go to a travel agency to book their tickets. They can do everything at one place. I think this method has played a big role in raising the awareness of the importance of this type of insurance. By making all the necessary arrangements as part of your travel plans, Khan says, you will be able to relax during your vacation, confident that you are fully covered for any all eventuality. 46 Rajjab 1430 JULY 2009 47

The port city has been for hundreds of years the gateway to the Two Holy Mosques for millions of pilgrims Jeddah is a city of mystery, rich with tradition, history, culture and heritage. The importance of the city even predates Islam. Jeddah has long been a feature of travelers journals. Some passages describe it as a city surrounded by walls with beautiful markets and teeming with buildings while others refer to it as the small city on the Red Sea coast crowded with pilgrims. Though Jeddah has expanded and transformed into a metropolis, it still holds true to its original charm and uniqueness, making it a superb location for its residents and an essential destination for those visiting Saudi Arabia. Jeddah is known as a city that has historically offered warmth and hospitality to its native population, tourists and pilgrims alike. Even today, this cosmopolitan approach is evident. Consider Jeddah s wide variety of malls, restaurants and cafés: one can find all kinds of delicacies and traditional dishes, which range from local Mutabbaq and Harisa to the finest international cuisines. History: The coastal town s history can be traced back as early as 3000 years, when it was a small fishing village. It became more prominent in 647, when the fishing village was transformed by the Muslim caliph Othman ibn Affan into a port, making it easier for Hajj pilgrims to reach the Holy City of Makkah. Since that momentous decision, Jeddah has remained the main gateway city for Hajj pilgrims. Successive Muslim rulers, especially the Mamluks, had a significant influence on the growth and evolution of Jeddah. The Mamluks took several measures to protect Jeddah s trade and pilgrimage routes, and the Two Holy Mosques. In 1509, the Mamluks built the Jeddah Wall to protect the city from Portuguese and Dutch raids and attacks. Some historical sources indicate that the city remained independent in governance for most of the 15th century, until it came under a new rule. In 1510 Jeddah came under the Ottoman Empire. At the beginning of the Ottoman rule, Jeddah was attacked several times, first by the Portuguese fleet in the 16th century and then Dutch pirates in the 17th century. This all came with the growing popularity of the Cape of Good Hope route, a passage around the tip of Africa that allowed ships to bypass the Red Sea in their efforts to travel from the Atlantic Ocean to the lucrative trade of India and the east. This new shipping lane diverted ships from Jeddah s ports and caused a steep decline in the city s economic vitality. Were it not for the economic and cultural stimulus of pilgrims and Umrah performers, Jeddah may not have survived. It is said that Jeddah was named after Jiddah bin Jarm bin Quda ah, the Sheikh -- or head -- of the tribe of Quda ah. Jaddah also means maternal or paternal grandmother. The people of this city also attribute the city s name to Hawa a or Eve -- mother of all humans -- as they believe that she landed from heaven in Jeddah, and is buried there. Location The city of Jeddah is located on the west coast of the Kingdom (latitude 29.21 north and longitude 39.7 east), in the middle of the eastern shore of the Red Sea, south of the Tropic of Cancer. To the east are the plains of Tihama, which are considered the low heights of the Hijaz region. To the west along the beach, there are several parallel chains of coral reefs. Jeddah is considered the commercial and tourist capital of Saudi Arabia. The 2004 census estimated Jeddah s population at 2.8 million, out of which 52 percent were Saudis. It is the second largest city in Saudi Arabia after the capital, Riyadh Climate Jeddah is known not only for its seaside charms but also for its sometimes unforgiving climate of high temperatures and intense summer humidity. Temperatures can reach the into the 50s, when the city falls under the influence of a low seasonal zone with a solid and warm air mass. Humidity reaches its highest levels in summer because of the high temperature of seawater and it is lower in winter due to the impact of the moderate air mass associated with high pressure. The prevailing winds over Jeddah blow to the northwest due to the city s coastal location on the shore of the Red Sea. These winds are usually light-tomoderate for much of the year. However, sometimes Southern winds blow through winter, spring and fall, a pattern that is accompanied by a rise in temperature. These winds can be particularly active at times and their intensity can cause great sandstorms. Jeddah retains its warmth in winter, when temperatures can range from 15 degrees Celsius at midnight to 25 degrees Celsius in the afternoon. Summer temperatures are notoriously very hot and routinely break the 40-degree mark in the afternoon, while dropping to 30 degrees Celsius in the evening. Historic Sites The wall surrounding Jeddah was built by Hussain Al-Kurdi, who was one of the Mamluk princes. In order to protect the Red Sea town from attacks by Portuguese fleets the wall featured castles, towers, and cannons to repel the warships that assaulted the city. The wall was built with the help of the people of Jeddah. It had two doors: one on the side facing Makkah and the other facing the sea. It is said that the wall had six towers, each having a circumference of 16 Thiraa -- an Islamic measurement unit equal to approximately 50 cm -- and consisted of six doors: Bab Makkah, Bab Al-Medina, Bab Shareef, Bab Jadeed, Bab Al-Bantt, and Bab Al-Magharba. At the beginning Travel and Tourism of this century, a new door was added, which was called Bab Al-Subba. (Bab is the Arabic term for door). In 1947, the wall was removed to make way for the expansion of the city. Old Jeddah When the Suez Canal was opened in 1869, Jeddah became one of the main ports on the trade route between the Mediterranean Sea and the Indian and Pacific Oceans. As a result, the city s wealth increased dramatically, and Jeddah s inhabitants became more cosmopolitan. The merchants and dignitaries of the city harnessed builders and artisans to build their houses according to the coastal city s distinctive and ornate architectural styles. In its center, Jeddah still retains more than 500 old houses that have been restored by the government to preserve The history of Jeddah can be traced back to 3,000 years ago when it was formed as a small fishing village this architectural heritage. These houses were characterized by Mashrabiya -- or balconies -- which helped air circulation within the house as well as offered a sun shade for the wall exteriors, reducing the heat in summer months. The houses were built next to each other and had curved fronts to provide shade to each other. The city of Jeddah was divided inside the wall into several neighborhoods, which were each called Hara by the people of the city. These neighborhoods acquired their names from their geographical locations inside the city or through famous events. Harat Al-Mathloum was named after Abdul Karim Al-Barzunji, who was killed by the Ottoman government. Mathloum means innocent victim. Harat Al-Shaam is 48 Rajjab 1430 JULY 2009 49

Travel and Tourism located in the northern part, inside the wall in the direction of the Al-Sham region, which consists of Syria, Lebanon, Jordan and Palestine. Harat Al-Yemen is located in the southern part inside the wall, south of Al-Alawi Street. It gained its name because it faces the direction of Yemen. Hayy (district) el balad is the center for the commercial market and includes landmarks such as the Corniche, Mahmal and Faisaliah markets, in addition to the Ministry of Foreign Affairs and the National Commercial Bank. Hayy Al Ruwais is one of the oldest areas of Jeddah, and contains the oldest palace in Jeddah, which was built 150 years ago. Museums Abdulraouf Khalil Museum:The museum is divided into three main sections, each representing a historical era. One is devoted to Saudi Arabian heritage, the second documents the Ottoman empire and the third focuses on European contemporary art. The museum building s exterior follows the traditional architecture of each era, incorporating distinctive notes from each design heritage. The museum is open throughout week and charges a nominal entry fee Khozam Palace Museum:Located in the southeast of Jeddah, this palace was built by Mohammed bin Laden for King Abdulaziz. Completed in 1932, it is known as Khozama Palace because of the heavy presence of the Khozama -- lavender -- flower in the neighborhood. The palace is one of the most important museums in the Kingdom. Durrat Safeyah Bin Zagr Museum:This museum features works of the contemporary artist Safeyah bin Zagr as part of an overall effort to promote the preservation and documentation of Saudi heritage, customs and traditions. The museum houses paintings and eight pavilions, as well as a library containing many books and technical references. The House of Nassif: This house is an important example of architectural design in Jeddah and is one of its leading attractions. King Abdulaziz stayed at this house as the guest of Sheikh Omar Afandi Nassif. The building dates back to 1868, and was completed in 1877. Recognizing its importance, Sheikh Nassif donated the building to the Saudi government as a gift. Jeddah Science and Technology Museum:A science and cultural center located along the Corniche, the museum s slogan is education through entertainment. The museum reflects a commitment to spreading knowledge, both cultural and scientific, and exhibiting the world s latest technological breakthroughs. According to a study published in 2000, the museum had nearly 175,000 visitors every year. The Marine Science College Museum:This museum consists of a large exhibition hall with both live fish as well as fossilized fish. The College overlooks the Red Sea to assist students in organizing field visits and in conducting academic research. The most important exhibits in the museum are sharks, turtles and whales. Heritage Art Castle Museum: The museum consists of two floors: an annex for a library and a collection of Saudi archeological acquisitions, ancient tools, traditional dresses in addition to a wide range of cassettes and records from the musician Tariq Abdulhakeem in his early days. Abdulhalim Radwa Museum: The museum consists of a hall for display of plastic art paintings. It houses more than 3500 oil, water, metal and wood paintings by Dr. Abdulhalim Radwa. The museum has organized a number of art exhibitions around the world. Home Arts Museum: The museum was inaugurated between 1997 and 1998 and focusing on exhibiting examples of creative home furnishings, including a number of antiques, some of which date back 70 years. Tourist Attractions Tahlia Street: Called Prince Mohammed bin Abdulaziz Street today, this was once called Tahlia -- or desalination -- because of the presence of a water desalination plant. Tahlia Street is an important fashion and shopping spot in the center of Jeddah. It contains upscale restaurants, shops and boutiques, such as Prada, Gucci, Burberry, Chanel and Giorgio Armani. Tahlia Street is believed to be the heart of Jeddah and is also considered Saudi Arabia s wealthiest district. Jeddah Fountain: King Fahd Fountain, also known as Jeddah Fountain, is a famous landmark of modern Jeddah. It is the second tallest fountain in the world, and was donated to the city by King Fahd. The fountain is visible from all parts of the city. The water it shoots out can reach a speed of 312 miles per hour. Jeddah Islamic Port: The largest port in Saudi Arabia, it was established in the era of the third Caliph Othman bin Affan in 647 to replace the Shuaiba port. Jeddah Corniche: Jeddah Corniche is an integral part of sightseeing in Jeddah. The Jeddah Corniche stretches almost 100 kilometers and comprises 14 artificial lakes, 123 fountains, including the King Fahd Fountain in addition to 478 decorations and sculptures. The Jeddah Corniche also provides a wide gamut of recreational facilities. Obhur Creek: Also known as Sharm Obhur and The Creek, it stretches 17.5 kilometers in the form of a crescent. Visitors can enjoy year-round attractions such as competitions held at different periods of the year, including the Obhur Tourism Festival, Jet Ski and sailboat races in addition to numerous beach games and dolphin shows. Old Mosques Al-Shafe i Mosque: Situated in Harat Al-Mathloum in Al-Jame i market, this is the oldest of Jeddah s mosques. It is said that its minarets were built in the 7th centuryand it is unique for having a quadrangle with central open-air ventilation. The mosque has also been the subject of extensive restoration and maintenance and is still used to perform prayers. Othman bin Affan Mosque: Also called Ebony Mosque due to the existence of two ebony poles, this mosque is located in Harat Al- Mathloum and has a huge minaret. The mosque was built in the 9th century. Akkash Mosque: Is located on Gabel Street to the west of the city and was built in 1779. The construction of the mosque was planned by Akkash Abaza and the level of its floors was raised from the ground level of the street so that people use stairs to get into it. It remains in good condition and prayers are held in it until this day. Al-Basha Mosque: This mosque is located in Harat Al-Sham and was built by Bakr Basha, who was the governor of Jeddah in 1735. It has a minaret, which gave the city an archaeological and architected landmark. It remained unchanged until 1978, when it was demolished and another mosque was built in its place. Hanafi Mosque: This mosque is located in Harat Al Sham, and was built in 1899. It is considered the largest mosque in old Jeddah and has been the site of extensive restoration and maintenance. Festivals The Jeddah Summer Festival: One of the most entertaining and fabulous Jeddah events, the festival was launched nine years ago, in 2000, and lasts for 45 days. It features more than 250 events and tourist activities. One of the most entertaining and fabulous Jeddah events, the festival was launched nine years ago, in 2000, and lasts for 45 days. Obhur Tourism Festival: The festival starts on the second day of the Eid al- Fitr in Sharm Obhur. The festival is all about nature and marine heritage, and includes the Formula World Cup 2000, which is broadcast to all parts of the world through more than 30 satellite channels. The festival includes activities of the traditional village, a free fishing competition, and other events. Old Markets The approximate area within the walls of the city of Jeddah amounts to 1.5 square kilometers, which to this day maintains touches of traditional life. This is currently concentrated around the mosques and souqs (markets) where some of the popular shops and traditional crafts are found. Among the most famous traditional markets that make up the city s vital economic lifeline are: Souq Al Balad is made up of various small-specialized markets including Al Nada Souq, which specializes in gold and silver ornaments from the African, Arabian and Asian stables. Al Jamia Souq is a textile market where you can buy the rarest of fabrics. Gebel Street Souq is the most popular one in Al Balad Souq. This market sells a wide assortment of items including electronics, perfumes, spices, dates, honey and other household goods. Souq Al Alawi is the biggest amongst all markets in Al Balad Souq; it offers a wide number of commodities and goods; including clothes, spices, and household appliances among others. Souq al Bado (Bedouin) is located near Makkah gate, and specializes in selling spices, seeds and fabrics of all kinds. Qabel Souq is located in the old city, it has witnessed radical changes over time in the quality of the goods it sells, which includes fabrics, footwear, gold, and events decorations. Souq Al Nada (Dew) is one of the most important markets in the old city of Jeddah, and extends along the western part of the city wall and is known for its libraries, shoes and bags shops as well watch repair shops. Souq Al Kandra is a diverse market of goods, located in the southern district of Jeddah, and specializes in gold and wedding dresses. 50 Rajjab 1430 JULY 2009 51

strong growth of insurance sector Gross Written Premium touches SR 11 billion in 2008 Despite the global economic slowdown, the Saudi insurance industry sustained a robust performance in 2008 and continues to be driven by the expansion of the health insurance sector, which now represents 44 percent of the total insurance market, up from 36 percent in 2007, according to the Saudi Arabian Monetary Agency (SAMA). The growth is attributed to the compulsory health insurance law. SAMA s recent report titled The Saudi Insurance Market Survey Report 2008 reveals that in 2008, the insurance market in Saudi Arabia witnessed a strong growth, with gross written premium (GWP) reaching SR 10.9 billion (US $3 billon), up from SR 8.6 billion ($2.3 billion) in 2007. The report also notes that general and health insurance sectors represented 51 percent and 44 percent, respectively, of the total GWP, while the protection and savings insurance reached SR 594 million ($158 million). The market growth, according to the report, was driven mainly by the 57 percent increase in the demand for health insurance. 2005 2006 2007 2008 In SR Million sr % sr % sr % sr % )M( Total )M( Total )M( Total )M( Total Protection & Savings Health Insurance General Insurance Total 193 1.370 3.590 5.153 4% 26% 70% 100% 218 2.222 4.497 6.937 Penetration and density The level of insurance penetration in Saudi Arabia increased to 0.62 percent in 2008, marginally up from 0.61 percent in 2007. This slight increase in penetration is mainly due to the growth in the Kingdom s Gross Domestic Product (GDP) in 2008. The SAMA report showed that the insurance density GWP per capita has increased from SR 358 ($95.50) in 2007 to SR 440 ($117) in 2008, which represents an increase of 23 percent. However, the penetration and density of protection and savings insurance remain particularly low in absolute terms compared to general and health insurance at 0.03 percent and SR 24 ($6.40) per capita. GWP and NWP In 2008, approximately 67 percent of the total GWP was generated by lines of business for which insurance is compulsory by law, namely motor and health insurance. 3% 32% 65% 100% 327 3.065 5.191 8.583 4% 36% 60% 100% 594 4.805 5.520 10.919 5% 44% 51% 100% Health insurance remained the largest line of business, while motor insurance stood second in 2008, accounting for 23 percent of the GWP. Protection and savings and health insurance were the fastest growing lines of business, reaching a growth rate of 82 percent and 57 percent respectively. The slowest growing lines of business were motor and property insurance, which realized agrowth rate of 4 percent and 8 percent respectively, while accidents and liabilities and energy premiums fell by 8 percent and 32 percent, respectively. Compulsory lines of business, namely motor and health insurance generated approximately 85 percent of the total Net Written Premium (NWP) in 2008, according to SAMA. NWP is defined as the premium retained by the insurance company, after the subtraction of the premiums ceded to local or international reinsurers from the total GWP by line of business. Health insurance accounted for 51 percent of NWP in 2008 compared to 43 percent in 2007. Motor insurance remained in the second place in 2008, accounting for 34 percent of NWP, even after a substantial drop in the share of the market, from 41 percent in 2007. In terms of NWP, the fastest growing segment was 183 5.544 7.321 4.347 219 170 267 3.169 81 2.459 243 2.297 150 1.814 1.487 1.107 1.843 2.403 3.751 2005 2006 2007 2008 69 Report and Analysis 468 122 217 201 52 Rajjab 1430 JULY 2009 53

protection and savings, which achieved a growth rate of 75 percent in 2008. Retention ratio The overall retention ratio of insurance companies in the Saudi market was 67 percent. This was attributed mainly to the high retention ratios in motor and health segments, which collectively account for around 67 percent of total GWP. In 2008, the retention ratios for motor and health insurance were 97 percent and 78 percent, respectively. The weighted average retention ratio of other insurance lines of business was 22 percent. The lowest retention ratios were for aviation (4 percent) and energy (0.4 percent). Gross claims The total gross claims paid increased by 29 percent in 2008 to reach SR 5.2 billion ($1.39 billion) compared to SR 4 billion ($1.07 billion) in 2007. Health and motor insurance accounted for 77 percent of gross claims in 2007 and 83 percent in2008. Energy insurance achieved the highest growth rate in gross claims paid in 2008. Nationality 2008 Other Arab Other Non- Arab Saudi Total No of managerial Employees 2008 1.152 1.320 2.176 4.648 % 25% 28% 47% 100% No of Managerial employees 301 234 264 799 % 38% 29% 33% 100% Total No. of Employees 1.453 1.554 2.440 5.447 % 27% 28% 45% 100% Medical insurance companies licensed by the Council of Cooperative Health Insurance This advertisement is valid until 30/3/1430h (3/4/2009) BUPA Arabia Tel:8001160500 The Mediterranean & Gulf Insurance & Reinsurance Company Med Gulf Tel:01 /4055550 National Company for Cooperative Insurance (NCCI) (Tawuniya) Tel:800124999 Saudi Arabian Insurance Company SAICO Tel:01 /4759922 According to Article 40 of the Kingdom s insurance implementation regulations, newly licensed companies are required to adhere to a minimum retention ratio of 30 percent. Up to SR 50 M SR 50 M to SR 100 M SR 100 M to SR 150 M SR 150 M to SR 200 M SR 200 M to SR 500 M More than SR 500 M Shareholder equity (2008) Number of Companies Commissions The total commissions paid by insurance companies grew 34 percent, to SR 770 million ($205 million,) in 2008, compared to SR 576 million ($154 million) in 2007. Commissions related to general insurance accounted for 76 percent of the total in 2007 and 65 percent in 2008. Protection and savings insurance commissions witnessed the largest growth rate -- 256 percent -- between 2007 and 2008. 21 13 4 2 2 1 Capitalization of Insurance Companies With the entry of a large number of companies, most of which have a capital below SR 100 million ($26.7 billion), the Saudi insurance market has expanded considerably. The largest company in terms of market capitalization is Tawuniya, with total equity of SR 1.2 billion ($320 million) in 2008, down from SR 1.7 billion ($ 450 million) in 2007. The Cooperative Insurance Companies Law stipulates a minimum capital of SR 100 million ($26.7 million) for insurance companies and SR 200 million ($53.3 million) for companies that will undertake insurance and reinsurance activities. Employee breakdown The total number of employees in the insurance sector in Saudi Arabia reached 5,447 in 2008. Saudi nationals account for 45 percent of the total work force and Saudis hold 33 percent of management positions. Some companies have a high Saudization ratio while smaller companies have a Saudization ratio below 30 percent. According to Article 79 of the implementing regulations, the newly licensed insurance companies are required to ensure that 30 percent of their employees from the first year of operation are Saudi citizens. As of December 2008, 19 insurance companies were fully licensed to operate in the Kingdom and 21 insurance companies were listed on the Saudi stock market. In addition, eight insurance companies had obtained the approval from the Council of Ministers and seven were under the process of licensing at the Ministry of Commerce and Industry. Arabian Shield Insurance Company Tel:01 /4645943 Al Sagr Company for Cooperative Insurance Tel:03 /8302294 Arabia Insurance Cooperative Company Tel:01 /2153360 AXA Cooperative Insurance Company Tel:01 /4776706 Sanad for Cooperative Insurance Company Tel:8001191000 Allianz Saudi Fransi Tel:01 /8749700 Malath Cooperative Insurance & Reinsurance Company Tel: 8001280077 Ace Arabia Insurance Company Tel:03 /8324441 American International Group and Arab National Bank Tel:02 /2830555 Saudi United Cooperative Insurance Company (Wala a) Tel:03 /8652200 For more information visit our website www.cchi.gov.sa 920001177 Gulf Union Cooperative Insurance Company Tel:03 /8357722 United Cooperative Assurance Company UCA Tel:02 /6927085 Al Alamiya Insurance Company Tel:02 /2927085 Saudi Indian Company for Cooperative Insurance ( SAUDI INDIAN ) Tel:01 /2150983 Trade Union Cooperative Insurance Reinsurance Company Tel:03 /8994719 Al-Ahlia Insurance Company Tel:01 /2065635 Saudi IAIC for Insurance (salama) Tel:02 /6647877 Al Rajhi Company for Cooperative Insurance Tel:01 /4752211 Gulf General Insurance Company Tel:02 /6516610 Amana Cooperative Insurance Company Tel:01 /4781460 54 Rajjab 1430 JULY 2009 THE Note: The names of the companies that are listed above are arranged according to their date of registration at the Council of Cooperative Health Insurance, and not according to priority.

Malaysia debates new health insurance scheme The Southeast Asian country is rushing towards reforming its healthcare services Malaysia s healthcare system has at times been rated one of the best in East Asia. In 1993, healthcare services became available to 80 percent of the population, and Malaysia boasted of having a medical facility within 5 km of any point in the country. This growth in services gave Malaysia s villagers and city dwellers relatively easy access to clinics. The facilities were built almost entirely with budget allocations from the central treasury. Patients paid nominal sums to visit outpatient clinics and admission to hospitals. By Ibtihal Al-Samaraie Indeed, data compiled by the World Health Organization (WHO) shows that the overall performance of the Malaysian healthcare system has been remarkable. For example, the Health Adjusted Life Expectancy (HALE) at birth, a key indicator of a nation s state of healthcare, is 63 years -- comparable to that of developed countries. Moreover, maternal mortality rates in Malaysia have fallen ten-fold over the last three decades. But is Malaysia doing enough? While the country s accomplishments seem impressive, a 2005 United Nations report showed that the Malaysia government spends just 13 billion Malaysian ringgit (US $3.7 billion) on healthcare annually, which is only 3.8 percent of GDP. The private sector spends an additional 1.6 percent of GDP. Other indicators reveal a similarly under-funded picture. Dr. David Quick, head of the Malaysian Medical Association and a Cardiologist, argued that the government spending of 3.8 percent is low according to WHO standards, which recommend that national healthcare spending should be at least 8 percent of GDP. That is if we want to have access to effective medical care system that covers all segments of society, he said. Strong beginning The healthcare system in Malaysia has undergone a fundamental transformation over the last two decades. Its strongest performance was in the 1980s and the beginning of 90s, as the country was experiencing rapid economic and social development. Government spending on healthcare peaked during this period. Hospitals and health centers were equipped with qualified medical staff and specialists trained at outstanding medical institutions. Treatments were carried out at modern facilities that could be conveniently accessed by people. Then came the great 1998 collapse of the Asian stock market, which put a halt to the country s rapid economic growth. While the economy stalled, population growth remained steady. This increase in population has contributed significantly to a rise in healthcare costs, which in turn led to a decrease in the levels of healthcare The healthcare system in Malaysia has undergone a fundamental transformation over the last two decades. available. Despite this, however, the Malaysian government maintained the health sector as a top priority. Concurrent with government efforts, private hospitals and medical centers began to emerge. Mahathir Mohamad -- Malaysia s Prime Minister from 1981 to 2003 encouraged the growth of private sector in medical services. This, he hoped, would help meet the growing demand for healthcare. The policy sparked debates within Malaysian society as 80 percent of medical staff working in the public sector moved to the private sector, seeking higher wages and better work conditions and benefits. Some experts called this a brain drain, and the shift played a role in government hospitals declining quality of medical services. New national scheme A growing number of medical experts urged the government to adopt a national healthcare plan. In 2005, the Malaysian government proposed a new system called the National Health Insurance Scheme (NHIS). According to the plan, the NHIS would be managed by the National Healthcare Financing Authority and would require mandatory contributions from most citizens and eligible non-citizens. While the new scheme would mark the end of free universal healthcare in Malaysia, it was expected to provide better healthcare and medical facilities, and offer financial risk management for those facing high medical fees. The NHIS would be based on a community-based model, in which the cost of healthcare would be spread across the entire population, with the rich and healthy helping to subsidize the poor and sick. The details of the NHIS are still being developed, including issues such as the calculation of the mandatory contribution, the fixing of a contribution ceiling, the types of healthcare packages that will be available, and the mode of funding for hospitals. However, since most private companies provide healthcare to their employees, some private sector employers are concerned that this new scheme will place an additional and unwelcome financial burden on them. According to the Malaysian Employers Federation, 80 percent of private companies provide medical treatment to executives, 57 percent Around the World provide hospitalization coverage, and 53 percent provide dental benefits. Under the NHIS, private sector employees may also be required to contribute towards the scheme, regardless of whether their employer already insures them. In defense of NHIS Malaysia s Health Minister Dr. Chua Soi Lek defended the new system, saying that it will contribute to the integration of public and private sectors through a regulatory mechanism that helps all workers, whether they are working in public or the private sector. He pointed out that the NHIS will be managed by the National Healthcare Financing Authority and will provide better healthcare and healthcare facilities in Malaysia. The added that eight million employees working in the private sector will be required to make mandatory contributions to the system. Citizens who do not need to pay include one million civil servants, 200,000 disabled, 435,000 pensioners and 250,000 people under the poverty line. This means that the government will cover the cost of these nonpaying citizens, which will cost the state about 4 or 5 billion ringgit annually. The government will also continue to spend on preventive healthcare programs to reduce future expenses. 56 Rajjab 1430 JULY 2009 57

Opinion Till we meet again The Council of Cooperative Health Insurance (CCHI) has been implementing the mandatory health insurance scheme for non-saudi residents working for private sector companies. The mandatory health insurance law was framed to ease the financial burden on the Saudi government, which offers free medical services to over 22 million people in the country. We have received many inquires and questions from employers asking about the new scheme. I have sought to answer those queries through the imaginary dialogue below between an employer and the CCHI s Customer Services Department (CSD), which has received positive feedback from customers in recent months. Let me take this opportunity to note that, nine months ago, the CCHI established the CSD using IVR (Interactive Voice Response) technology. Employer: What is this new insurance scheme, and why it is linked to the Passport department? CSD: The mandatory health insurance scheme is not new; it was issued in 1999 and we have been working under this rule for years now. Since the Council first announced the system, we have been working to implement it gradually. Broadly speaking, the scheme requires that a general health insurance policy cover all non-saudi residents and their families and that it be applied through qualified health insurance companies in Saudi Arabia. And because the rules apply to non-saudi residents, the council linked the policy and enforcement to the Passport Department. Employer: Every day you come up with a new insurance scheme, and this means that we pay the new fees? CSD: No Sir, the new system will help you reduce and regulate your expenses, allowing you to buy affordable health insurance policies rather than paying unlimited medical bills for your employees all year. The new insurance scheme will cover all medical expenses and there is no longer any need to ask someone a favor to treat one of your employees. While I do not think the new regulation will have any negative impact on private sector companies, it is true that it still needs some time to be fully implemented. Employer: OK, but on what basis do you choose insurance companies, and who will benefit? CSD: My brother, the new system is not designed to benefit insurance companies or hospitals; our goal is to ensure that employees have full medical coverage and proper treatment, a system we think will ultimately help employers like you. Providing mandatory healthcare for your employees will have a positive effect on their performance and will also increase productivity. Take note, too, that the insurance companies operating in Saudi Arabia are all listed on the local stock market. Employer: If we have complaints against insurance companies and hospitals, who will help us? CSD: Rest assured that we do not expect no problems. But we will not tolerate any wrongdoing; our objective is to provide excellent medical coverage, and we are always ready to help resolve problems. Employer: If so, I hope things will be OK. CSD: Yes sir, everything will be OK, thank you for your patience and understanding. As I mentioned before, this is just an imaginary dialogue, in an attempt to answer some of the questions we receive. I thought this was the best way to share the answers with everybody. Mohammed bin Salman Al-Hussain Assistant Secretary General Financial and Admin Affairs Council of Cooperative Health Insurance IT SOLUTIONS FOR BETTER HEALTHCARE efficiency, quality, health 58 Rajjab 1430 JULY 2009 w w w. d h s a r a b i a. c o m