United Arab Emirates' Al Khazna Insurance Company has bought a 15 per cent stake in Saudi Arabia's Sanad for Co-operative Insurance and Reinsurance, state news agency Wam reported on Saturday.

Al Khazna bought 3 million shares in Sanad, gaining as a result two positions at its board of directors, Wam said without providing details on the value of the deal.

The transaction is worth 96.8 million riyals ($25.8 million) based on Sanad's closing price on Saturday. Wam did not name the seller.

The deal is 'a strategic step which would allow Khazna to enter promising insurance market services', Wam quoted Mohammad Jassem, Khazna's managing director, as saying.

Sanad was created in July with a capital of SR200 million, of which founders hold 60 per cent and the remainder is held by Saudi retail investors.

Saudi Arabia, one of the potentially most lucrative markets in the world, has licensed 26 insurance firms in the past two years and is considering applications by 10 others to try to open up the insurance sector in the world's top oil exporter.

The largest Gulf Arab economy is one of the world's most under-insured areas, partly due to a belief among some Muslims that insurance could indicate a lack of religious faith.

Saudi Arabia plans to make health insurance compulsory for both the indigenous population and expatriate workers.-Reuters