Saudi Arabia's Banque Saudi Fransi and French insurer Assurance Generales de France applied on Sunday to set up an insurance company in the kingdom, the bank said.
The world's biggest oil exporter, which has a population of 24 million, has approved laws to open up the insurance industry, which had officially been the monopoly of state-owned National Company for Co-operative Insurance (NCCI).
AGF Chairman Jean Philippe Thierry and Banque Saudi Fransi Chairman Sheikh Ibrahim al-Touq have signed a protocol setting out the terms of the planned joint venture, the bank said in a statement.
Both sides were optimistic about "the future potential of the insurance sector in Saudi Arabia, citing a vast potential for growth", it said.
Banque Saudi Fransi, which is 31.1 percent owned by Credit Agricole Indosuez, is Saudi Arabia's fifth biggest listed bank in terms of market capitalisation.
German insurer Allianz owns nearly 59 percent of France's AGF.
NCCI, which the government plans to partially float in the next few months, is the only official insurer in Saudi Arabia, although banks have been able to offer some services in partnership with international insurance firms.
Saudi Arabian Monetary Agency Governor Hamad al-Sayyari was quoted in London-based al-Hayat newspaper on Sunday as saying the agency plans to grant licences to many insurance companies and banks that have applied to work in the sector.
He said successful companies must have a minimum paid up capital of 100 million Saudi Arabia riyals ($26.7 million), or 200 million riyals if they are going to provide reinsurance services, a quarter of which must be open to public ownership.
Sayyari also urged firms currently offering insurance services to complete arrangements quickly to win an operating licence.
Access to insurance markets is one issue holding up Saudi Arabia's bilateral trade talks with the United States, aimed at securing the kingdom's entry into the World Trade Organisation.
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