Growth to accelerate in Oman's insurance sector


The Omani insurance market has witnessed robust growth in recent years, which has helped gradually boost penetration rates. As in many countries, compulsory motor insurance has long been the leading branch in the sector, but previously underdeveloped segments including life and health are now expanding rapidly; the former has seen significant gains as foreign insurers expand their presence, while the latter is set to receive a further boost as the obligation for private companies to provide health coverage for their employees is enforced. Additionally, new regulations for companies and brokers, which may add to confidence in the sector, have been implemented.

Industry Players

According to the Central Bank of Oman (CBO), 22 insurance companies operated in Oman in 2016, but this fell to 20 in 2017 as the result of two mergers. The largest company by market share in 2016, the latest year for which data is available, was National Life and General Insurance Company (NLGIC), which accounted for 22% of gross direct premiums, according to industry regulator the Capital Market Authority (CMA). The firm, a 98%-owned subsidiary of local holding company Oman International Development and Investment Company (Ominvest), has increased market share rapidly over recent years – in 2013 it held only 15% of the total – and is particularly dominant in life coverage; in 2016 the firm claimed 74% of the sector, up from 65% in 2015.

Dhofar Insurance, holding 12% of total direct premiums in 2016, held the second position in the market after NLGIC. The oldest of the major players, Dhofar had been the market leader in the sector as recently as 2013, when it held 17.3%. Leading shareholders in the company include Dhofar International Development and Investment Holding Company, with a stake of 25.1%.

Axa Insurance, the local subsidiary of the French company, was the third-biggest player in the country with 11% of direct premiums, making the firm the largest foreign insurance company operating in the market by premium volume. Axa, which held only 5.6% of the total market share in 2013, making it the sixth-largest firm, has made significant gains in recent years.


Oman Reinsurance, established in 2008, is the only domestic firm operating in this segment. It registered premiums of OR9.1m ($23.6m) in 2016, up 19% on the previous year. Bahrain-headquartered Trust International Insurance and Reinsurance is the main shareholder in the firm and upped its stake to a majority position in December 2016. Oman Reinsurance has made losses in recent years, however, it showed a significant reduction in its loss ratio in 2016, from 98% in 2015 to 55%, which could augur a return to profitability in the near future.


In 2016 per capita premiums, comprised of non-life premiums of $231 and life premiums of $31.50, stood at $262, according to figures from Swiss Re Sigma’s most recent report, “World Insurance in 2016”. This ranked Oman 57th in the world and last of the five GCC countries for which data is provided (Bahrain was not included in the report). Kuwait was listed as second lowest in this category amongst the GCC countries with a figure of $280 in per capita premiums and Qatar the highest with $1228. Moreover, Oman’s penetration as a percentage of GDP was 1.83%, showing a positive trend from 1.57% in 2015 and 1.3% in 2014. The 2016 figure places the country at 67th in the world and third in the GCC, behind the UAE and Qatar at 2.87% and 1.86%, but ahead of Saudi Arabia and Kuwait at 1.55% and 0.89%, respectively.


The value of total gross direct premiums stood at OR450.2m ($1.2bn) in 2016, up 2% on the previous year, according to CMA figures. Non-life contributed to 85% of that figure with sales of OR382.6m ($993.5m), down 2% from 2015; while the life segment comprised OR67.6m ($175.6m) in premiums, showing an increase of 28% from the previous year. Overall market growth in 2016 was down on the previous year, most likely as a result of the country’s oil price-linked economic downturn. However, the sector showed a robust compound annual growth rate of 10% in the medium term, between 2011 and 2016.

Growing Foreign Presence

Omani insurers dominate the market, accounting for 73.5% of total gross direct premiums in 2016, according to the CMA. This was due to their leading position in the general insurance segment, in which they held a market share of 79.7%. However, foreign insurers controlled the life segment, holding 62% of the market with premiums of OR42m ($109m), indicative of an increase that more than doubled 2015’s figure of OR20.7m ($53.8m). Foreign firms also saw better top-line performance in 2016, with overall premiums rising by 9%, compared to a decline of 1% by national firms. As a result, foreign companies’ national market share grew to 26.5% of total premiums sold in the country from 24.7% a year earlier.

Leading Lines

Motor was the largest policy line in the sector in 2016, accounting for 35% of premiums, a decrease from 37% the year before, the CMA reported. Total motor premiums declined 3% from 2015 to OR157.9m ($410m), a fall that was driven by a 13% drop in the value of comprehensive motor premiums to OR94.1m ($244.3m), but mitigated by an increase of 16% in third-party insurance to OR63.9m ($165.9m). The drop in the overall value of motor was likely in part a consequence of falling new vehicle purchases, due to the oil price-related economic downturn. Imports of passenger motor cars fell in value from OR1bn ($2.7bn) in 2015 to OR582m ($1.5bn) in 2016, according to the National Centre for Statistics and Information.

The second-largest segment of the coverage market was health, making up 26% of the total, up from 23% in 2015. This was due to a 13% rise in the absolute value of health premiums, to OR116m ($297.7m). The sector will surely develop as the mandatory coverage by employers, started in 2018, takes effect (see analysis).

Life Insurance

Life insurance made up the third-largest portion of the segment in 2016 with 15% of total insurance premiums, up from 12% a year earlier. The segment has registered consistent gains in recent years, with a compound annual growth rate of 44.4% for the period between 2011 and 2016, though this is also indicative of the ample room life has to grow in the country. The value of group life premiums fell 19% in 2016, to OR34.5m ($89.6m). However, this was more than made up for by a 211% rise in the value of individual premiums, to OR33.2m ($86.2m), resulting in a 28% rise in overall life premiums. This boost in sales of individual coverage was fuelled by foreign firms, which jumped ahead of national companies with a 302% increase from 2015. Meanwhile, group sales declined by 7%, giving foreign companies a 103% increase on the previous year of all premium sales. Comparatively, domestic firms rose 7% in individual sales, while declining 24% in group, resulting on an overall 21% fall from 2015. Axa, by far the largest player in the segment, recorded life insurance premiums of OR29.3m ($76m), or 43.3% of total life sales in the country in 2016, according to CMA figures. Life insurance is the only branch in the sector in which foreign companies have the largest market share, though national companies still dominate group sales.

“The life market is looking up, though the sector is still disproportionately dominated by life products taken out to cover mortgages and other loans,” A R Srinivasan, CEO of Arabia Falcon Insurance, told OBG. “Uptake of savings-based products by contrast remains low, due to factors such as the downturn in the economy and cultural issues. However, in five to eight years, as the country moves into a different part of the economic cycle and the nuclear family becomes more developed, the propensity to save will likely grow and boost the popularity of savings products.”


There are two insurance companies operating in Oman in the takaful (Islamic insurance) segment. Al Madina Insurance Company and Takaful Oman opened in 2014, after the sultanate’s decision in 2011 to allow the Islamic finance sector to have a regulatory distinction between conventional and sharia-compliant functionality – unlike in the banking sector, other firms are not allowed to operate Islamic windows. While Takaful Oman was launched as a new entity, Al Madina had existed as a conventional provider since 2006.

The market developed rapidly to start with: gross direct premiums rose from 6% in 2014 to around 8.8% in 2015. However, takaful share growth slowed in 2016 to 9.3% of total national premiums, or OR42.1m ($109.3m). Al Madina accounted for 64.6% of segment premiums in 2016 and Takaful Oman for the rest. Even more so than conventional insurance, the Islamic segment is currently dominated by general business, which accounted for 90% of premiums, versus 10% for family premiums. The segment’s retention ratio is slightly below that of the market as a whole, at 53.6%. In discussion with OBG in January 2018, the CMA expressed confidence the takaful segment would grow as it moved beyond this initial stage, citing that for the first three quarters of 2017 their contribution was approximately OR34.4m ($89.3m) with a total market share of 9.4%.

“Oman is very much a price-driven market, and if conventional insurers offer lower prices, which is generally the case, clients will tend to go for that. However, there are exceptions, and takaful companies benefit from some advantages such as the fact that Islamic banks only work with their firms,” Philip K Philip, CEO of Muscat Insurance Company, told OBG.


The industry is regulated by the CMA, which is a government entity but has administrative and financial independence. In 2014 considerable changes to the sector’s legislative framework were implemented – national insurers were obligated to become public joint stock companies, hold public stock offerings and list their shares on the Muscat Securities Market (MSM) within three years; and capital requirements were doubled from OR5m ($13m) to OR10m ($26m). When asked about the new requirements by OBG in January 2018, the CMA explained that the move was to enhance financial capacity of firms, increase transparency through increased disclosure requirements and build confidence in them, which would also improve credit ratings. Moreover, the increase in capital requirements was not only to develop firms’ ability to retain risks on their books, but also to drive consolidation in the sector, which has a large number of insurers given the small size of Oman’s population and levels of penetration. The enhanced standards have led to the merger between Falcon and Arabia Insurance in May 2017, as well as the merger of Muscat Insurance and Muscat Life into their already listed parent company, Muscat National Holding Company – renamed Muscat Insurance – to comply with the rules obliging firms to be listed joint stock companies. Falcon and Arabia attracted combined premiums of OR19.6m ($50.9m) in 2016, which would rank the merged entity as the 10th largest in the sultanate. “All companies that are required to list on the MSM have now held, or are in the process of holding their initial public offerings [IPOs], and if there had been any intentions for further mergers, these would have happened before the stock offerings,” Muscat Insurance’s Philip, told OBG, while adding that he still believed that the number of companies operating in the industry was large for the size of the market.

Another important recent regulatory change was the announcement in August 2017 by the country’s Ministry of Health that legislation requiring private sector companies to provide mandatory health insurance for employees would be enforced from January 2018 onwards (see analysis).

Broker Standards

In April 2017 the CMA also issued new regulations for brokers, which include the imposition of a minimum capital requirement of OR100,000 ($259,670), changes to laws regarding insurance brokerage licences and a raise in minimum bank guarantee requirements. Additionally, corporate insurance premiums must now be paid directly to the insurance firm, which then pays the commission, to avoid situations where claims are made on policies of which the insurer has not received any payment. “Brokers have been known to keep premiums owed to insurance companies and some continue to do so,” Nasser bin Salim Al Busaidi, CEO of Oman United Insurance, told OBG. He said that regulatory change alone would be unlikely to resolve the problem and that insurance firms needed to take stronger measures to discourage the practice. The changes also seek to reduce conflicts of interest in the segment, by prohibiting brokerage founders from simultaneous employment with other brokers, insurance companies and insurance agents, and restricting the size of the equity stake a broker may hold in an insurance firm from 10% to 5%.

In January 2018 the CMA told OBG that, additionally, new investment regulations were under way concerning takaful and the underwriting process. Moreover, other legal changes in the pipeline include solvency law modifications to the risk-based model, as well as a complete revamp of insurance law to meet market needs and international best practices.


With four insurers – Dhofar, Oman United, Al Madina Takaful and Takaful Oman – already listed, the 2014 regulatory changes left seven insurers in need of floating shares on the MSM by the deadline of August 2017. Muscat Insurance and Muscat Life met their obligations by merging with their parent company in July 2017, leaving five firms. In order to facilitate the IPOs, in March 2017 the CMA announced that it would relax its minimum equity stake floatation requirement, from its standard rate of 40% to 25% for insurance firms listing on the MSM. The first IPOs to take place ahead of the deadline were those of Vision Insurance and Al Ahlia Insurance, both of which began in early July 2017. The Vision offering was subscribed at a rate of 50%, ahead of the firm’s listing on the MSM the following month. Al Ahlia’s IPO raised OR18.2m ($47.3m) or 2.43 times what it was seeking. The two were followed by Oman Qatar Insurance, which launched its stock offering in September 2017 with a subscription rate of 1.4. The largest insurance company in the country by assets, NLGIC, was listed in December 2017 with its IPO having closed subscription just before. Speaking in early November 2017, Srinivasan told OBG that Arabia Falcon’s IPO would probably happen towards the end of that month. However, as of early 2018 the IPO had yet to take place (see Capital Markets chapter).


The total value of investments held by the insurance industry stood at OR564m ($1.5bn) in 2016, up 12% on the previous year, according to CMA figures. The bulk of such investments, OR401.9m ($1bn), or 71.2% of the total, were held in the form of bank deposits. Equities accounted for 10.6% of the total, over 80% of which were in Omani shares with the rest invested in foreign companies. Other areas of investment included 6.7% in government bonds, 6.1% in corporate bonds and 4% in real estate. The value of returns on investment stood at OR12.6m ($32.7m), up 19% on the 2015 figure, for an effective overall return rate of 2.2%, compared to 1.2% the previous year.

Industry figures say that investment opportunities for local firms are limited, due to factors including restrictions imposed by the regulator – such as obligations to keep 75% of funds in liquid or semi-liquid securities, as well as a 25% cap on non-rial-denominated investments and a 20% cap on real estate investments – and a lack of liquidity of local markets. Holdings in bonds, equities and term deposits are all capped at 30% of total funds under investment, and those in mutual funds at 20%. “Insurance firms are very limited in terms of what they can invest in, and we have proposed that the regulator consider relaxing some of the restrictions by, for instance, allowing firms to invest more in foreign assets and real estate,” Philip told OBG, though he added that there was a good supply of bonds from local financial institutions. Speaking in November 2017, Srinivasan of Arabia Falcon told OBG that good rates had been available on term deposits with banks in recent times, but that these appeared to be falling as liquidity returned to the banking market (see Banking chapter).


The value of claims paid in 2016 fell by 7.7% on the previous year, to OR268.3m ($696.7m), according to the CMA. This was driven by a 10% fall in the value of general insurance claims to OR237.7m ($617.2m). However, firms’ outstanding reserves rose, suggesting anticipation of a rise in claims. While motor claims were up slightly by 2% from the previous year, other non-life segments saw sharp falls; property, marine and engineering fell 85%, 44% and 16%, respectively. Meanwhile, life and health claims were up by 11% and 30%, though this reflects growth in the segment more than a proportionate rise in claim rates.

While the number of motor claims rose minimally in 2016, their cost has gone up. “The value of compensation awarded by courts for injuries is increasing dramatically, giving rise to awards that are higher than the amounts insurance companies have been budgeting for claims,” Srinivasan told OBG.

Moreover, in 2016 motor coverage had a high net loss ratio, about 77% of premiums earned were paid back in the form of claims; meaning that motor disproportionately dominated payouts, accounting for 56% of the total, while only taking in a 35% share of premiums, the CBO reported. Nevertheless, there may be other factors affecting the motor segment not seen in the numbers. “The authorities recently introduced new penalties for traffic violations, increased fines, and installed new equipment such as radar traps and speed cameras, all of which have reduced the number of accidents,” Philip told OBG. “However, severity is more of an issue for the sector than frequency, and severe accidents continue to take place.”


Profits in the industry have been declining in recent years. CMA figures put total industry net income at OR8.74m ($22.7m) in 2016, down 44% from OR15.6m ($40.5m) the previous year, from a sector which had earnings ranging in the previous three years from OR24.1m ($62.6m) to OR29.3m ($76.1m). This decline was underpinned by a sharp rise in net loss ratios, from 57.4% in 2015 to 69.5% in 2016. Third-party motor, property, health, marine and engineering all saw jumps in net loss ratios of 10 percentage points or more. The rise in such ratios appeared to be driven largely by increases in insurance companies’ net outstanding claims reserves for general insurance, largely in the motor and health segments, from OR86.4m ($224.4m) in 2015 to OR98.9m ($256.8m) in 2016, suggesting that claims are set to rise. The decline in returns was mostly amongst Omani insurers, who saw profits fall from OR12.2m ($31.7m) in 2015 to OR3.4m ($8.8m) in 2016, with loss ratios rising from 57.8% to 70.2%. By contrast, the profits of foreign insurers have held reasonably steady since 2012, and in 2016 exceeded those of national insurers for the first time in at least five years, standing at OR5.3m ($13.8m).


Overall insurance firms retained 57% of premiums in 2016, up from 56% the year before, passing the rest on to reinsurance companies, according to the CMA. Foreign insurers, mostly backed by international companies with more financial capability, were able to keep more risk on their books, with a retention rate of 70%, in contrast to 52% by national providers. As would be expected, firms largely kept smaller, diversified contract values on their own books – for example, 83% of motor premiums were retained and 58% of health – while passing on the bulk of risk in segments dominated by high-value individual contracts such as property, marine and engineering insurance to reinsurers. The inability of firms to keep such contracts damaged profitability in 2016, as these latter segments had amongst the lowest claim rates in the industry.


Insurance companies operated 176 direct branches across the country in 2016; agents, 132 branches; and brokers, 77. Brokers, of which there were 37 active in Oman, collected premiums worth OR113.6m ($295m) in 2016, or 25.2% of the total value of national premiums. The figure was down on 2015 levels by 9%.

Bancassurance is emerging as an increasingly important and developing distribution channel. For instance, Ominvest, which owns a 98% stake of NLGIC and a share in Al Ahlia Insurance, also owns a 51% stake in Oman Arab Bank (OAB) and holdings in two financing firms. OAB in mid-2016 signed an agreement with NLGIC to offer six new bancassurance products. Additionally, in 2014 Bank Muscat, the country’s largest financial institution, and AIG entered into a 10-year agreement to market non-life products, which was bolstered in December 2016 when they launched a phone payment service for motor bancassurance.

However, the channel is not without its challenges. “Banks tend to be willing to insure widely, and proposal forms aren’t always completed properly, which sometimes leads to conflicts between insurance firms and clients signed up by banks,” Al Busaidi told OBG, emphasising the need for insurance firms to be selective of clients and to follow proper procedures. Furthermore, products that tend to dominate bancassurance markets elsewhere, such as monthly life insurance savings products, are not well developed in Oman, further holding back the channel’s growth.


In the near-term growth in the non-life sector has been tempered by the economic situation. However, other segments including life and health have been witnessing strong growth in recent years that appears set to continue, in particular, given plans for the compulsory rollout of health coverage schemes by private sector employers (see analysis). “Overall, the next one to two years should be positive for insurance firms, driven by growth in lines such as life and health, and most companies are making plans to expand,” Sameer Kattiparambil, associate vice-president for research at stock brokerage EFG Hermes, told OBG.

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The Report: Oman 2018

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