The Role of Insurance Development on Economic Growth in Saudi Arabia

Abstract

Insurance functions as a risk management tool which enables countries to redirect their accumulated savings into sustainable investments that promote economic expansion. The research investigates how insurance sector expansion affects Saudi Arabian economic development while supporting Vision 2030 objectives. The research uses quarterly data from Saudi General Authority of Statistics (GaSTAT) and Saudi Central Bank (SAMA) spanning from 2009 to 2023 to analyze life and non-life insurance premium data and real GDP performance. The cointegration test and Vector Error Correction Model (VECM) were used to establish the direction of influence between these variables. The research findings show a bidirectional causality link between the insurance sector and economic development in both the short and long run horizon. Furthermore, the results demonstrate that life insurance premiums create positive economic growth, but non-life insurance premiums do not affect economic development at a statistically significant level. These findings validate the feedback hypothesis which proposes that insurance market operations and economic expansion create a reciprocal relationship of support. The research provides statistical evidence about how insurance sector growth interacts with economic expansion in Saudi Arabia, which demonstrates how insurance sector development through life insurance can become a strategic growth accelerator for Vision 2030 and sustainable economic development. Furthermore, more awareness should be created through various media and policies regarding the importance of insuring non-life insurance properties activities in order to reduce personal and business losses

Keywords: insurance, economic growth, financial sector, cointegration, vector error correction model, Saudi Arabia

DOI: 10.7176/JESD/17-3-04

Publication date: April 30^th 2026