With participants showing strong growth in a highly competitive market, the sultanate’s insurance sector is now experiencing a period of both vertical and horizontal expansion. Stronger regulatory requirements on solvency and governance are also on the way, while a major new element, Islamic insurance – takaful – is also being added to the mix. The sector is thus in a period of change and future consolidation is expected, with plenty of opportunities for international investors to become involved.

Regulators & Regulations

Up through 2004, the insurance sector was overseen by the Ministry of Commerce and Industry (MoCI). Following a royal decree by Sultan Qaboos bin Said al Said at the end of that year, responsibility was transferred to the Capital Markets Authority (CMA). This was in line with efforts to develop the insurance sector into a significant part of the sultanate’s financial industry, as the CMA is a more fitting home for a mature industry. The CMA continues to work closely with the MoCI to coordinate the sector’s overall trajectory.

The CMA, which is also responsible for regulation and oversight of the capital markets, is the implementer of the Capital Markets Law, with a special section devoted to governing the insurance sector. The regulator oversees the issuance and re-issuance of licences for insurance companies and prospective takaful firms, while also studying the market and promoting awareness of the sector. The CMA continues to work on new regulations and amendments to the existing law pertaining to insurance companies and taking punitive action against companies found in breach of regulations.

Sector Upgrades

The CMA has been highly active in affecting sector change. In 2011 the authority began studying takaful insurance and its potential impact on the market following a royal decree that paved the way for introducing Islamic finance. The CMA also studied the underwriting methodology and calculation of technical provisions at several insurers and reinsurers with a view to upgrading these services across the country. Since then, the authority has played a leading role in encouraging the growth of a reinsurance industry in Oman.

On the administrative side, recent changes include a revamp of the Insurance Consultative Committee, where sector professionals meet with regulators, to ensure the organisation’s continued effectiveness in taking into consideration industry players’ views on the wider changes taking place. The authority also implemented a timetable to boost and clarify the Omanisation process within the sector. A circular was issued requiring insurers to meet a 65% Omanisation standard by the end of 2012, a target most industry actors have been well on their way to achieving the target since year-end 2010.

Another CMA achievement was the introduction of a unified orange card for Oman, back in 2006. Drivers displaying these cards are automatically covered in any country participating in the scheme and do not need to purchase additional policies when taking their cars into those countries. Oman was late in implementing this programme, which stems from the 1975 Arab Insurance Card Convention. Now the Unified Insurance Bureau can deal via the orange card system with any insurance claims arising in other Arab countries. In late 2011 the CMA intervened again to ensure fair pricing of the issuance fees on these cards, setting the price at OR2.00 ($5.21).

Better Accountability

Other recent CMA accomplishments include encouraging e-insurance systems among insurers, the first of which were already in operation by September 2012. The authority has also pushed for improvements in corporate governance. “Regarding corporate governance, we were probably the first country in the world to make this a requirement, rather than a best practice,”

Mohammed Taki Al Jamalani, vice-president of insurance operations regulation at the CMA, told OBG.

Indeed, in its role as regulator, the MoCI, introduced the first code of corporate governance for the sector back in 2001. This was the first stage of a longer programme and has now been implemented. “It’s time to update,” added Al Jamalani. “We have to improve now on the previous regulations.”

The CMA is also pursuing regulations to ensure the sector meets both international and national solvency guidelines. There is a major effort under way on the systems side to ensure that companies are in compliance with legal requirements and best practices. Indeed, since taking over responsibility for the sector, the CMA has used its position to identify gaps in local regulation or provision and provide a comprehensive framework, as well as to encourage industry players to enter the market with high-quality products. It has also undertaken the objective of helping widen and deepen the market, encouraging new listings by existing insurance players, promoting the creation of new products, such as takaful, and helping to strengthen existing firms in terms of their financial and prudential positions.

By The Numbers

The sultanate’s insurance sector has shown consistent growth in recent years, with most of the larger firms reporting double-digit expansion in both the life and general insurance segments. At the same time, the market remains small compared to those of Europe and North America. Alpen Capital’s 2011 “GCC Insurance Report” showed Oman accounting for around 6% of total premiums written in GCC countries, with an overall penetration rate of less than 2%. This equates to an insurance density of around $300 per capita. According to CMA figures, in 2011 gross premiums for the sector overall totalled OR281.7m ($734.1m), some 12.2% up on the 2010 total of OR251.07m ($654.3m). This was shared between some 21 registered insurance firms, 10 of which were local branches of international companies, while the rest were local.

Major Players

In terms of brokers, the CMA reported that at year-end 2011 there were 25 registered brokers, along with a number of agents, five of which were licensed by the CMA in 2011. Of the total, only a small number of the insurance companies are locally listed. The Muscat Securities Market (MSM) had only three insurance firms listed on its regular market board by the end of 2012: Dhofar Insurance, Oman United Insurance Company (OUIC) and Oman National Investment Corporation. The regular market board includes the most traded and active companies demonstrating the highest paid-up capital and a solid history of profitability.

However, the 2011 CMA figures showed several other companies as being highly significant players. In terms of share of gross premiums, while Dhofar came first with OR52.2m ($136m), National Life and General Insurance (NLGIC) came in second, with OR35.2m ($91.7m). This was followed by Al Ahlia Insurance, with OR29.5m ($76.9m), and with OUIC in fourth place reaching OR29.3m ($76.35m). The top four companies in terms of gross premiums held approximately 52% of the sector between them.

Overall net premiums, which reflect the amount that is retained in Oman, were significantly lower in 2011 than gross premiums, standing at OR141.86m ($369.7m). Broken down by company, net premiums also revealed a different ranking than CMA figures. Of these, New India Assurance (NIA) came first, with OR21.57m ($56.2m), followed by Al Ahlia Insurance with OR18.92m ($49.3m), then Dhofar Insurance, with OR15.34m ($40m). OUIC came in at fourth place with OR13.93m ($36.3m), followed by National Life, with OR13.26m ($34.55m). As a percentage of net premiums overall, the top five insurers claimed around 58.5% of the sector total.


Thus, while the Omani insurance market comprises many players, beyond the top tiers, most companies operate with a fairly small share of the market. This has led many analysts to point towards a need for consolidation in the sector, a view that appears to be largely in line with industry regulators. For example, changes in licensing procedures could encourage consolidation. Until now, an insurance company in Oman could be licensed on the basis of OR5m ($13.03m) in paid-up capital, while new takaful entrants will be required to demonstrate OR10m ($26.06m). However, moves are reportedly under way to bring all insurers up to the OR10m ($26.06m) level, which will likely have far-reaching consequences for some smaller players.

Listing & Governance

As only a limited number of insurers are listed on the MSM, maintaining up-to-date financial information is a challenge for regulators. Improving the flow of information is among the top priorities in the CMA’s push for improved corporate governance, with company listing seen as an important part of this process.

Growing Figures

Dhofar Insurance, listed on the MSM regular board, saw an expansion of its total premiums, net underwriting and investment results, and other revenues for the first half of 2012 compared to the same period in 2011, according to the firm’s most recent full financial report. Net profit was up from OR379,000 ($987,700) in the first half of 2011 to OR1.98m ($5.16m) over the same period in 2012. Preliminary figures released for the first three quarters of 2012 also showed net profit continuing to grow, with this reaching OR2.17m in ($5.65m) in the third quarter of 2012, up from a net loss of OR1.37m ($3.6m) during the same period in 2011.

Results from the first half of 2012 showed total premiums at OR31.47m, up from OR30.1m ($78.4m) in the first half of 2011, while net underwriting results rose from OR1.8m ($4.7m) to OR2.65m ($6.9m) in the same timeframe. Investment results and other revenues improved from OR1.1m ($2.86m) to OR1.96m ($5.1m) during the same period.

The company’s total assets, meanwhile, rose from OR120.7m ($314.55m) to OR126.04m ($328.5m). Dhofar also reported success with its Omanisation campaign, with the percentage of Omani nationals in its workforce rising to some 72% by the end of the first half of 2012, well above the government’s target rate. Dhofar also displayed strong performance on the MSM in the first six months of 2012, with a return on equity (ROE) of 19.14% and a return on assets (ROA) of 4.78%. The company’s price-to-earnings (P/E) ratio was 6.33.

On The Up

OUIC also displayed strong performance throughout 2012. Its third-quarter results for 2012 showed a OR2.23m ($5.8m) profit in the first nine months of the year. This was particularly impressive given that it had made a loss of some OR56,960 ($148,440) in the first three quarters of 2011. Company profit in 2012 came on the back of growth in both premiums and investment income. Gross written premium increased 25.3% from the third quarter of 2011 total of OR24.1m ($62.8m), to OR30.2m ($78.7m). Gross underwriting results were up as well, from OR1.97m ($5.1m) to OR2.6m ($6.8m) between the third quarters of 2011 and 2012, a hike of 30.7%. Investment income also rose, by 7.5%, from OR1.79m ($4.66m) to OR1.92m ($5m) in the same timeframe.

The company attributed these improved results to better performance in the buying and selling of shares, as well as in its non-motor business. Regarding the former, by the first quarter of 2012, MSM figures for OUIC showed an ROE of 33.5%, an ROA of 8.8% and a P/E ratio of 2.15.

In August 2012, global rating agency Standard & Poor’s (S&P) revised its outlook on the company from stable to positive, giving affirmation for a long-term counterparty credit and insurer financial strength ratings at BBB-. The upgrade was based on good operating performance and capitalisation. S&P noted OUIC’s gross written premium growth of 44% in 2011, as well as a strong first quarter in 2012 with 25.3% growth, and forecasting a further 10% rise in 2013 from estimated 2012 year-end gross written premiums of OR35m ($91.2m).


Among the non-listed companies, the National Life and General Insurance Company (NLGIC) was a pioneer in that it was the sultanate’s first life insurance provider, adding general insurance to its portfolio later on. As of August 2012, NLGIC holds a rating of B++ (good) by AM Best, an insurance sector ratings agency. The rating signals NLGIC’s financial strength on the basis of the company’s sound risk-adjusted capitalisation throughout 2011, with a capital base of OR12.8m ($33.35m). This was considered high relative to a low credit risk position.

AM Best also noted that NLGIC had significantly reduced its losses in the motor business in the first half of 2012, while net income had climbed to OR1.7m ($4.4m) over the first six months. The ratings agency also stated that NLGIC held around one-third of the life insurance market in Oman. The company is particularly strong in medical insurance, where it is estimated that NLGIC had a share of around 60-70% of the market at in the third quarter of 2012.

Al Ahlia Insurance SOAOC emerged as the result of a merger in early 2011 between Al Ahlia Insurance and Royal and Sun Alliance (RSA) Oman, after RSA acquired Al Ahlia for $49m the year before. The new outfit, which is involved in the non-life sector, won the 2012 Oman Insurer of the Year at the Middle East and North Africa Insurance Awards, a title it held the year before as well.

NIA, which originated in India in 1919, has operated in Oman since 1974. NIA exemplifies many insurers in the sultanate, whose operations are indicative of the strong links between Oman and India and Pakistan. Many companies originating in the subcontinent maintain a presence in Oman and have staff from across the Indian Ocean working locally.

As an international company, NIA suffered setbacks from the multiple natural catastrophes that occurred around the world in 2011. NIA is able to draw on its international network, providing it with a large capital base, and its significant investment income has enabled it to offset underwriting losses. The company has maintained a strong position, and was rated A- (excellent) by AM Best, giving it a stable outlook in 2012. In 2012 the company also began operations from a new office in Muscat, illustrating its commitment to the sultanate.

While these are the largest insurers, the sultanate is also home to a number of significant smaller outfits and international players. Most industry players reported similarly strong performance in 2012, with projections for further growth. Falcon Insurance, for example, told OBG in late September 2012 that it had seen 25-30% growth in gross premiums over 2011. New entrant Zurich Insurance recently opened offices in Oman and has announced plans for a major roll out in the sultanate in the year ahead. Zurich told OBG that it aims to be a top player in the local market, particularly in the life segment.

Enter Reinsurance

As part of the CMA’s overall strategy for insurance market development, the sector regulator also enabled the establishment of the sultanate’s first reinsurance company back in 2009. Oman Reinsurance, better known as OmanRe, began operations that year with a paid-up capital of OR5m ($13m). CMA officials told OBG that at the time, this level of capitalisation was deemed as adequate to encourage a market entrant, as the absence of a local reinsurer had been an issue the CMA was keen to resolve as smoothly as possible.

However, the reinsurer was required to increase that capital base every year by a further OR5m ($13m). As of late 2012, OmanRe was expecting its paid-up capital to reach OR20m ($52.1m) by the end of the year, with the aim of OR30m ($78.2m) in capital by the end of the firm’s fifth year of operations.

Scaling Up

OmanRe represents a well-capitalised player in the local insurance market. It can also draw on a range of robust shareholders, from Dhofar Insurance to the Oman International Bank and the Oman Chamber of Commerce. The firm is obliged by CMA regulations to list on the exchange, and in October 2012 company officials said this would happen within two years. OmanRe’s listing would be done via an initial public offering (IPO) of some OR10m ($26.1m), although the exact amount would depend on when the issuance takes place. At time of writing, CMA regulations require that 40% of the company should be offered at an IPO, although this may be altered downwards to around 25% in the future. Market conditions will ultimately determine the exact date of the IPO. A public listing is expected to be well received by the MSM, as well as by both Omani and foreign investors since it will further expand the liquidity and range within the sultanate’s capital markets.

OmanRe posted financial results for 2011 showing gross written premium of $21.2m, up from $17m in 2010 and $3.2m in 2009. Total assets grew over the three years from $15.66m to $42.3m and then $62.6m, while the net profit and loss results fluctuated considerably. In 2009 OmanRe made a net loss of $236,000, while in 2010 a net profit of $865,000 was recorded. In 2011 another profit was made, but less than in 2010, at $203,000.

Lines Of Business 

Like in many countries in the region, the non-life market in Oman is dominated by the motor segment. The Alpen Capital 2011 “GCC Insurance Report” showed that motor insurance held 62% of all business in the industry, compared to 29% in property and miscellaneous accidents, and 9% in marine and aviation. Third-party insurance is compulsory in Oman – the only form of insurance that is obligatory – and many insurers compete in this segment. However, profitability is low, partly because margins are tight in competitive markets, and partly because the claims rate is high, given the large number of road accidents (see analysis).

Currently, another major line of business – and a far more profitable one – is construction. “[ Construction] has a very positive outlook,” Sajith Kumar, senior vice-president and CEO of Marsh Oman, told OBG. The sultanate has allocated approximately $14.8bn to transportation infrastructure under its eighth five-year development plan (2011-15), including new airports, port expansions and major highways. “The government is spending a great deal on infrastructure, especially on roads, as well as on developing ports, such as Duqm. Between 2013 and 2014, we will see a great deal of action on these programmes,” Kumar said.

Meanwhile, another side of the construction sector – real estate development – also involves an expansion of the market for bank loans, as Omanis look for financing their new houses and business premises. As a result, loan insurance has become one of the main staple products in the sultanate’s life insurance sector, as well as within its bancassurance market. This expansion comes on the back of positive economic growth in Oman, which continues to increase and is widely expected to rise from 5.5% in 2011 to around 6% in 2012. Overall growth prospects have had a major role in feeding the expansion in the private sector in Oman. “The majority of Omanis are young, and as new market entrants they want to buy houses. The demand for real estate is rising, and need for real estate loans is growing with this trend,” Ammar Salem, senior research analyst at Oman Arab Bank, told OBG.

A strong construction industry is good for the insurance of major engineering sectors, and the expansion of the ports system that forms a major part of the sultanate’s development efforts has served to keep marine and hull insurance profitable in recent times. The country has long been a major maritime trading nation, and this is reflected in the robustness of the local marine industry. Recent improvements in security off the Horn of Africa have helped to keep premiums down, as acts of piracy in surrounding waters has significantly dropped in 2012, from 34 attacks carried out in 2011, to just nine by September 2012. However, some sector players suggested that margins were tight in this area, due to global competition.

Here For Life

One of the main challenges facing life insurance segment is to break out of this market in order to make a wider set of products popular. Among the obstacles barring this growth are certain traditional attitudes, such as some religious practitioners’ hesitance towards life insurance that they see as an interference with divine will, but it appears that such perspectives are beginning to change. “In life insurance, public awareness is driving growth,” the CMA’s Al Jamalani told OBG. “With so many younger people entering the workforce, traditions and habits may be changing.”

Such social changes may be behind growth in private health insurance too, despite the fact that Omanis are provided with free health care by the state. Pensions too may in future be a source of growth (see analysis). In the meantime, penetration rates remain small, albeit rapidly growing. The Alpen Capital 2011 report estimated that life would have a 0.24% penetration rate for that year, rising to 0.37% by 2015, resulting in a compound annual growth rate (CAGR) of 11%. The CAGR for premium growth, however, was estimated at 18%.

Gautam Datta, CEO of Al Madina Insurance Company, told OBG, “To boost penetration, we must increase awareness of the importance of insurance and build the service and distribution infrastructure. Currently, there is not enough money going back into the market for building awareness.”

Natural Disasters

On the public sector project side, programme size tends to rule out smaller investors and favour larger players with global links, particularly large international reinsurers. This was especially evidenced in the government’s response to Cyclone Gonu in 2007. In general, Oman has relatively low exposure to natural disasters. However, the northern region of Musadam Peninsula lies in close proximity to Iran, which suffers from periodic earthquakes. However, the main environmental challenge in the sultanate in recent years has been flash flooding, which was the reason behind much of the damage in the 2007 cyclone. Oman has very little by way of topsoil or vegetation, meaning that when rain does come (quite rarely outside of the Dhofar region) wadis, or dried up riverbeds, can quickly fill and sometimes flood the surrounding habitations. Following the 2007 cyclone, however, the government began requiring that insurers in the property and fire segments include storm coverage in their policies. The cyclone revealed that very few Omanis were insured against such catastrophic events.


Indeed, the raw numbers on penetration rates are far from the whole story in Oman. Rising per capita income, GDP growth on the back of high energy prices and a changing social profile are all contributing to new approaches and attitudes towards insurance. These developments are likely to continue contributing to significant sector growth in the years ahead. AR Srinivasan, general manager of Falcon Insurance Company, pointed to small and medium-sized enterprises (SMEs) as one potential area for growth going forward. “SMEs should be a primary target for insurance marketing campaigns. These smaller, higher-risk start-ups are a good market for smaller local companies to insure; they do not need the big internationals,” he told OBG.

Furthermore, the expansion of the industry with the introduction of takaful insurance schemes is also likely to be a major driver of growth going forward, since many abstaining from the current system are expected to be drawn in.

Meanwhile, the active role of the CMA and the MoCI in making sure that the sector develops in a well-regulated and professional manner will continue to ensure that Omani and foreign insurers operating in the sultanate remain in good standing and ready to compete in the local market in the years to come.