With the introduction of Islamic financial products, regarded as allowing the sultanate to retain valuable investment dollars, the emergence of new takaful (Islamic insurance) firms raises the question of how new insurance providers can thrive in a small market.

Oman’s insurance sector has become crowded in recent years, with local and global players competing for a limited number of customers. However, the successful initial public offerings (IPOs) of two new takaful companies in late 2013 and a third due in early 2014, as well as growth in health insurance policies, shows that demand still exists, and could rise in the coming years. As insurers look to avoid a price war, the possibility of compulsory health insurance legislation is viewed as a potential avenue to expand the market. Indeed, with Dubai joining Abu Dhabi in making health coverage compulsory in late 2013, a precedent has been set; introducing similar rules could help Oman protect its residents and ease the industry’s growing pains.

Growth Versus Quality

The Omani insurance market has shown steady growth in recent years, with the total number of insurance policies, including motor vehicle, life, property and transport, jumping 49.66% between 2010 and 2012 to reach 1.1m, according to the National Centre for Statistics and Information (NCSI). This trend is set to continue as the sultanate prepares to welcome new takaful providers, after allowing Islamic financial products to enter the market for the first time in 2011. Before their entry, the sector comprises 21 insurers, 29 brokers, and one reinsurer operating in Oman, of which 10 are local. While this offers consumers choice and price points, in a country of 3.83m the market has become competitive and profit margins smaller, particularly after a moratorium on new insurance licences was removed by the CMA in 2007.


“The past few years have been challenging for the sector,” Lloyd East, CEO of Al Ahlia Insurance (AAI), told OBG. “The industry’s increasing competitiveness has caused companies to adjust their prices. Motor insurance has been greatly affected by this.”

Owing to the large number of firms in the sultanate, development in the sector has been somewhat stunted. Firms are competing for premiums worth less than $700m annually. Local companies in particular are at a disadvantage, lacking in both global expertise and financial backing, compared to international firms like AAI, an affiliate of global firm RSA Insurance, which is owned by large international shareholders. The emerging takaful segment could offer new opportunities for local providers, however; Takaful Oman, which plans to list its shares in January 2014, having closed it IPO in early December 2013, announced it expects to break even by the end of next year, and will distribute dividends from its fourth year onwards.


Holding even more potential is health insurance. “There is a growing trend of locals, expats and companies investing in private medical insurance. Employers are beginning to realise the benefits and their employees are content with the service,” AR Srinivasan, general manager of Falcon Insurance, told OBG.

Oman classifies medical policies as life insurance, the number of which has shown significant growth, with the NCSI reporting that listed life insurance policies in the sultanate grew by 66.5% in 2012, up from 18,312 policies in 2011 to 30,487. However, life insurance represents just 2.8% of total policies, as per NCSI data, compared to 88.5% of policies for motor vehicle insurance, which is compulsory. Obligatory health insurance legislation could boost these figures.

In Oman, compulsory health insurance is still under study, according to Ahmed bin Mohammed bin Obaid Al Saeedi, the minister of health. In early 2013 he told local media that the government is considering different financing options to enhance revenues in the health sector, including the introduction of mandated health insurance, which bodes well for squeezed brokers.

“Some suspect that compulsory medical insurance will be issued in the near future. When this happens, medical insurance in Oman can be expected to experience an accelerated growth curve,” Srinivasan told OBG.