VZCZCXRO0749
PP RUEHDH
DE RUEHRH #1050 2241515
ZNR UUUUU ZZH
P 121515Z AUG 09
FM AMEMBASSY RIYADH
TO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 1378
INFO RUEHDH/AMCONSUL DHAHRAN PRIORITY 0161
RUEHJI/AMCONSUL JEDDAH PRIORITY 0254
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS RIYADH 001050 
 
SIPDIS 
 
PLEASE PASS USTR FOR JASON BUNTIN 
 
E.O. 12958: N/A 
TAGS: BEXP ECON EFIN EINV ETRD WTO SA
SUBJECT: SAUDIS DELAY JOINT VENTURE APPROVAL FOR TWO US 
INSURANCE FIRMS 
 
¶1. (SBU) On August 10 Representatives from American Life 
Insurance Company (ALICO) briefed Emboffs on their meeting 
earlier that day with Saudi Monetary Authority (SAMA) 
Insurance Supervisor Mohammed Al-Shayea. 
 
¶2. (SBU) Al-Shayea gave the ALICO reps gave no inkling 
when/if a royal decree sanctioning the ALICO/AIU joint 
venture with Arab National Bank (ANB) would be forthcoming, 
nor did he agree to issue an extension beyond August 24.  The 
one bright spot is that he said  it would be useful, to 
have a letter from either Treasury or the New York Fed 
addressing AIG's solvency issues.  (Embassy Note: Treasoff 
has conveyed this point to Treasury.  End Note) 
 
¶3. (SBU) ALICO has had a branch operation in Saudi Arabia 
since 1954, AIU since 1986.  ALICO and AIU are units of AIG. 
In 1996, KSA issued regulations requiring insurance companies 
to work only through banks.  ALICO and AIU submitted a joint 
venture application with ANB (ALICO 20%, AIU 20%, ANB 30%, 
and 10% for an IPO) to SAMA in October 2007.  Since October 
2007, SAMA has issued new licenses to nearly 20 other 
insurance firms, formed under the new regulations, but has 
only granted ALICO and AIU extensions.  The most recent 
extension expires on August 24th. 
 
¶4. (SBU) In lieu of an extension, SAMA has suggested to 
ALICO/AIU that they sign a Letter of Commitment to stop 
writing new policies on August 24th.  Such a letter would be 
a sign of  good faith,, SAMA said.  ALICO and AIU are 
unwilling to make this commitment, because it will take 6 to 
12 months to launch the joint venture, even if the JV were 
approved.  It is not clear to ALICO/AIU exactly how the 
expiration of the deadline will affect them since SAMA has 
not yet drafted the relevant implementing regulations.  In a 
worse case scenario, the two firms might have to cease 
writing new policies, which would cause them to suffer up to 
$100 million in lost premiums and to lay off up to 200 
employees. 
 
¶5. (SBU) On August 2 Emboffs  met with the SAMA Deputy 
Governor for Technical Affairs Abdulrahman Al-Hamidy for 
clarification about the ALICO/AIU JV application.  While 
alluding darkly to the uncertainties surrounding AIG and 
complaining about a &lack of commitment8 from ALICO/AIU, 
Hamidy insisted that ALICO/AIU should discuss this issue with 
SAMA directly, not with U.S. regulators.  At Emboffs' urging, 
he agreed that Insurance Supervisor Al-Shayea would meet with 
the two firms within a week. 
 
Comment: 
--------- 
 
¶6. (SBU) It is clear that SAMA is very concerned about the 
solvency of AIG.  Though it has stopped short of giving this 
as the reason for stopping the ALICO/AIU JV, preferring 
instead to allege, as far as we can tell, unsubstantiated 
irregularities by ALICO/AIU.  In this regard, AIG reportedly 
angered SAMA during the WTO accession talks by insisting on 
insurance branching rules (which KSA has still not 
promulgated).  In any case, SAMA is conveying the impression 
that it is intent on driving ALICO/AIU from the market. 
ERDMAN