Country Focus, Featured, Oman

The Sultanate Of Oman

Two years on from Cyclone Gonu, the Omani insurance sector is back on solid ground.

Market size
Total insurance premiums in the Omani market stood at OMR208m in 2008, compared to OMR168m the previous year. The latest available figures suggest that 2009 was also on course for solid premium growth, with total premiums during the first three quarters of 2009 reaching OMR184.1m, compared to OMR159.9m over the same period in 2008.

Motor remains the largest class of business in the market at OMR89.8m, followed by life (OMR40.8m) and property (OMR37.4m), based on 2008 figures. Marine accounted for OMR12.8m, with “other” lines of business (including commercial, industrial and energy) at OMR31.5m.

Total assets of insurance companies in 2008 were OMR423m, with investments of more than OMR251m. To some extent, the investment portfolios of Omani insurers have been shielded from the worst effects of the global economic turmoil due to Capital Market Authority (CMA) restrictions.

According to Murtadha Al Jamalani, head of the Oman Insurance Association (under formation): “Such investments are governed by the Insurance Companies Assets Investment Regulation issued by CMA, which require that the cash shall not be less than 40 per cent. Investments in shares shall not exceed 30 per cent and real estate 20 per cent of the allowed investment abroad.”

Competitive conditions
CMA has welcomed further competition in the market over the past few years, with the number of insurance companies growing to 23. This includes what the regulator classes as 11 national companies and 12 foreign companies. National Omani companies generate well over two thirds of total non-life net premiums, while foreign-controlled insurers operating locally generate the remainder.

The largest player in the market is Dhofar Insurance Company, with OMR46.8m gross premiums in 2008. Other big players by premium volume include: Oman United Insurance (2008: OMR31.9m), Al Ahlia Insurance Company (2008: OMR25.3m) and National Life Insurance & General (2008: OMR19.4m). Relatively new players on the scene include Vision Insurance and Arab Orient Insurance.

Recent developments
The launch of Oman Re, the country’s first domestic reinsurer, marked the culmination of many years of discussion and planning. Enjoying strong financial support from the market leader, Oman Re will seek to stem the tide of premium flow to reinsurers. Insurers currently cede around half the country’s gross premium income to reinsurers abroad.

Another significant development has been the launch of a joint motor/traffic database between insurance companies and the Royal Oman Police. The project aims to mitigate insurance risks, ease procedures in the event of accidents, and enable insurers to underwrite more accurately based on the availability of individual accident records. On a related note, this initiative was complemented with the issuance of a unified motor vehicle insurance policy.

The CMA continues to proactively monitor the insurance sector and issue new guidelines and regulations. Recent circulars have covered guidelines for submitting new general insurance products (including a code of professional conduct) and drafting insurance policies in Arabic. The CMA emphasises that the design and rating of products should be on sound and prudent underwriting principles, and that the risks insured should be clear and transparent, without ambiguity.

Looking ahead, agricultural insurance (including coverage for greenhouses) will be a new area of focus for the industry – the chamber of commerce is in discussions with three local insurers on a pilot project. Another industry initiative under discussion is a flood zoning study to build on the lessons learned from Cyclone Gonu in 2007, which caused more than OMR3bn of economic loss – of which OMR245m was insured. Funding for this study is currently being sought from Omani insurers.

Regulatory Overview
Insurance regulator: Capital Market Authority (CMA)
Governing legislation: Royal Decree 12/1979
Capital requirements: Branch – deposit with the CMA at least OMR150,000 if transacting insurance in one class of insurance business or OMR300,000 if transacting business in more than one class.
Locally domiciled insurer – OMR5m (US$13m).
Foreign ownership restrictions: Branch – 100 per cent foreign ownership permitted.
Locally domiciled insurer – foreign ownership limited to 49 per cent, although it may be increased to 70 per cent by approval of the CMA. Any foreign shareholding above 70 per cent would require approval of the Council of Ministers.

Only insurers licensed by the CMA can write direct Omani risks, although there is no restriction on foreign companies writing reinsurance of Omani cedants.

Currently, there are no restrictions on insurers writing both life and general insurance business in Oman. There is a requirement that 25 per cent of each Omani insurance policy is reinsured with an Omani reinsurer.

Regulatory overview provided by Clyde & Co