A number of new initiatives being taken by the Capital Market Authority are expected to boost the insurance sector in Oman

The Sultanate’s insurance regulator, Capital Market Authority (CMA), plans to introduce several new initiatives this year, which are expected to strengthen insurance players.

After dropping an earlier proposal to introduce compulsory health insurance for companies employing more than 100 workers, the insurance regulator is planning to introduce compulsory travel insurance for those coming on visit visa, which is expected by the end of 2018. This will be followed by mandatory employee-medical insurance for branch operations of foreign companies in Oman and subsequently, the same will be extended to class one companies.

Life and health insurance

The insurance market continued recording reasonable growth rates, although the growth rate is marginal. The increase in insurance premiums was spurred by positive turnout for individual life insurance products and health insurance and other insurance products.

Omani insurance firms have maintained the gross written premiums marginally up by 0.3 per cent at RO451.57 million in 2017 compared to RO450.24 million for the previous year. Also, the number of policies issued by different insurance firms stood at 1.72 million, a 4 per cent growth over the previous year. And the average growth of insurance premiums in the last five years was 5.8 per cent with motor insurance and healthcare insurance having higher shares to the tune of 34 per cent and 30 per cent, respectively.

Although Islamic insurance firms – Al Madina Takaful and Takaful Oman Insurance – are late entrants in the insurance arena in Oman, Sharia-compliant insurance schemes are gaining popularity. However, additional efforts are needed to create awareness among the public on the importance of Sharia-compliance insurance schemes. The success of takaful insurance firms depends on the ability of takaful players to gain people’s trust, ability to offer affordable and competitive premium and quality of service. Takaful insurance premiums rose by 9 per cent to RO45.76 million in 2017, while Islamic insurance firms have a share of 10 per cent in gross direct premiums and 19 per cent of total paid indemnities last year.

Also, the total capital of insurance companies surged ahead by 16 per cent to RO248.46 million in 2017, while total asset base soared by 22 per cent to RO1.05 billion. Retention ratio of insurers has increased to 57.46 per cent.

IPO drive

After strengthening capital base to RO10 million, at least five Omani insurance companies have floated shares on the Muscat bourse in the second half of 2017 and the first quarter of this year, while two mergers have reduced the number of players. Five insurance firms – Al Ahlia Insurance Company, Vision Insurance, Oman Qatar Insurance, National Life and General Insurance and Arabian Falcon Insurance – have already listed shares on the Muscat bourse.

Although the Sultanate has more than 20 insurance companies, only nine companies — Dhofar Insurance, Oman United Insurance, Al Madina Takaful, Takaful Oman, Al Ahlia Insurance, Vision Insurance, Oman Qatar Insurance, National Life and General Insurance and Arabian Falcon Insurance — are listed.

Insurance firms need a solid capital base to achieve sustainable growth and for retaining a major portion of the business within the country. With this aim, the Oman government in 2014 asked national insurance firms to float shares on the Muscat Securities Market (MSM) within three years, besides raising their minimum capital to RO10 million from RO5 million.

The regulations mark a new chapter in the Omani insurance sector, as local companies will be able to withstand competition by strengthening their financial, technical and human resources. Further, a higher capital base will make these institutions large enough to underwrite more risks and retain premiums within the country.

Agriculture insurance

In a major move, the Capital Market Authority has also allowed insurance firms to launch agricultural insurance policy for the first time and the same will be extended to cover livestock and fishermen.

The new-policy scheme, which is the first phase of the whole programme, is for covering the risks of vegetable farmers in Oman. Four insurance companies – National Life and General Insurance, Dhofar Insurance, Al Madina Takaful and Arabia Falcon Insurance Company– are offering insurance cover for farmers and the insurance schemes are reinsured with Oman Reinsurance (Oman Re).

All major risks associated with cultivation, including natural fire and lightning, flood, landslide storm, hailstorm, cyclone, typhoon, tempest and hurricane are covered under the scheme. But losses to farmers due to drought and areas frequently affected by strong winds are not covered under the scheme.

Another promising segment for Omani insurance firms is healthcare insurance, thanks to the recent trend among the corporate sector to go for group medical insurance for their employees.

Alpen Capital in a recent report said that the insurance markets in Oman and the United Arab Emirates (UAE) are anticipated to grow at the fastest annualised average pace of 12.1 per cent between 2016 and 2021. The premium growth in Oman is likely to be driven largely by the introduction of mandatory health insurance and that in the UAE by new motor insurance pricing regime. In fact, macro factors like population growth, infrastructure developments and revival of business activity will aid growth across the countries. While the market rankings of the countries are not expected to change through 2021, the share of UAE and Oman are likely to expand and that of others may contract.

Alpen Capital also noted that the GCC insurance sector maintains resilient growth, given the significant penetration gap compared to the advanced economies. Nevertheless, developing regulations, economic diversification efforts, mandatory health insurance and favourable demography present a bright outlook for the sector.