The insurance market in Oman has continued recording healthy growth despite the financial challenges and the impact of falling oil prices in the past two years. The market consists of 22 insurance companies, including a re-insurer company and takaful (Islamic insurance) companies which started operations in 2014. The overall industry has expanded at a compound annual growth rate (CAGR) of 9.6% between 2011 and 2016, and its total gross written premiums (GWPs) reached OR450.3m ($1.2bn) in 2016.
Oman’s takaful insurance segment was formally launched in 2014, and there are currently two firms operating in this segment. Gross direct premiums of takaful insurance companies stood at OR42.06m ($109.2m) in 2016, an increase of 8.7% compared to OR38.7m ($100.5m) in 2015. Takaful insurance represented 9% of the gross direct premiums of the total insurance industry in 2016.
The insurance sector in Oman is highly competitive and dominated by four local companies and one foreign company. Their combined contribution in the general and life segments stands at around 60%, and they control almost 60% of sector GWPs.
Insurance companies recorded 3% growth in gross direct premiums in the first quarter of 2017, reaching OR134.7m ($349.8m) compared to OR131m ($340.2m) in the same period of 2016. This growth is considered reasonable in light of the current economic situation and given the financial measures undertaken to minimise the impact of lower oil prices, which had led to a slowdown in government project executions and activities of the private sector.
General insurance represents 85% of overall GWPs, while the life segment accounts for the remaining 15%. The health and motor insurance segments are the largest, accounting for 26% and 36% of total GWPs, respectively. Other insurance segments such as engineering, construction, medical and real estate have experienced decent growth.
Insurance penetration in 2016 reached 1.61% of GDP (life insurance penetration was 0.24% and non-life insurance penetration 1.37%). National insurance companies had a market share of 73.5% of sector GWPs, while foreign insurers held a market share of 26.5%. The retention ratio of insurance companies stood at 57% compared to 56% in 2015. Meanwhile, the retention ratio of takaful companies increased to 53.6% in 2016 compared to 50% in 2015.
The Capital Markets Authority has also introduced steps to strengthen the financial position of insurance firms operating in Oman. Royal Decree No. 39 of 2014 enforced a minimum requirement for paid-up capital of OR10m ($26m) for national insurance companies and branches of foreign companies operating in Oman. The rule is designed to enhance the solvency of these companies.
In 2017 four insurance companies listed on the Muscat Securities Market through initial public offerings (IPOs), offering 25% of their share capital to comply with the requirements of Royal Decree No. 39 of 2014, which amended the insurance law requiring, among other things, licensed insurance companies to be established as general joint-stock companies.
These companies were Al Ahlia Insurance, Vision Insurance, Oman Qatar Insurance and National Life and General Insurance. Al Ahlia Insurance’s OR7.5m ($19.5m) IPO closed on August 2, 2017 and was oversubscribed 2.4 times, with strong demand from retail and institutional investors. The share price moved up by 10% on the first day after listing. Vision Insurance, which closed its IPO on August 7, 2017, attracted demand for only 49.48% of the total offering of 25m shares. Oman Qatar Insurance’s IPO closed on October 5, 2017 and was oversubscribed 1.4 times. National Life and General Insurance’s OR21.2m ($55.1m) IPO, the largest IPO among the insurance firms, closed on November 20, 2017 and was fully subscribed. Arabia Falcon Insurance Company’s IPO is expected soon.
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