Recent years have been challenging for insurers worldwide as they grappled with the impact of the Covid-19 pandemic, supply chain disruptions, turbulent oil and gas prices, and uncertainties concerning economic growth. Despite these challenges, Oman’s insurance sector has demonstrated robust growth.
Looking ahead, recovery in the wider economy, regulatory improvements and signs of market consolidation herald further steps towards growth. The prospects are further enhanced by significant efforts to improve digitalisation and training, with the government and regulator-backed Tamkeen programme turning out more professional insurance graduates. At the same time, the rollout of the Dhamani electronic platform, Oman’s compulsory national health insurance initiative for the private sector and visitors, reached a key milestone in 2022, with the registration and onboarding of delivery stakeholders. (see Education & Health chapter).
Structure & Oversight
The Capital Market Authority (CMA) is the insurance sector regulator, a role it has played since 2004. Prior to that, what was then called the Ministry of Commerce and Industry oversaw the sector. The change of regulator was part of a plan to restructure and develop the sector, which included regulatory upgrades issued by the CMA to align insurers and takaful (Islamic insurance) operators with international best practices. The companies are obliged to comply with International Financial Reporting Standard 17 (IFRS 17). All insurers and takaful operators have completed the second phase, preparation and design, for IFRS 17 (see global analysis).
The CMA also switched to a risk-based capital approach for calculating insurance companies’ solvency margins, with audited financial statements for 2022 seeing the first implementation of this new policy. In 2021 the sector was divided into 17 conventional and two takaful insurance companies, with conventional accounting for 83% of all business and takaful for 17%, according to UAE-based SHMA Consulting. In addition, there were 30 insurance brokers, 161 insurance agents, two health insurance third-party agents (TPAs) and one reinsurance company, with the Oman Insurance Society acting as the professional body. Another entity involved in the sector is the Oman Unified Bureau for the Orange Card, which is responsible for providing Omanis with cross-border motor insurance around the Arab world.
Dhamani Programme
The CMA is spearheading the rollout of Dhamani, a platform for health care providers, TPAs, and other entities to supply and manage the compulsory health insurance scheme. Only Oman-licensed insurers will be able to participate in this programme, which provides a basic level of coverage. The mandatory health insurance law of February 2020 sets this at a maximum of OR4500 ($11,700) in terms of financial spending, with in-patient treatment limits capped at OR3000 ($7800) for the policy year. This creates an opportunity for top-up coverage in certain areas such as maternity care, where private insurers may offer separate packages to their clients.
At the same time, GCC countries have access to free public health care administered by the Ministry of Health (MoH). Significant changes are under way that will eventually affect all residents, citizens and visitors to Oman. Indeed, these developments are part of a five-stage universal health insurance plan, which begins with foreign visitors, followed by foreign workers, companies by size and industry, and nationals and their dependents in the fourth and fifth stages.
In 2021 Oman’s population reached 4.5m, according to the World Bank. The population is expected to expand significantly in the coming years, with the total population estimated to increase to 5.4m by 2027. This indicates significant scope for future growth, with investment banking advisory Alpen Capital forecasting an insurance penetration rate of 1.5% by 2026 and an insurance density of $274 in a February 2022 report. The report also found that life insurance penetration stood at 0.2%, and non-life at 1.7% in 2021, while the density rates were $31.40 and $241, respectively.
Market Players
Under amendments to the insurance law brought in by the CMA in 2014-15, a three-year grace period was instituted for all Omani insurers to list on the Muscat Stock Exchange (MSX) and establish a minimum paid-up capital of OR10m ($26m). The move was made to boost transparency, as listing would require mandatory reporting standards, while ensuring more robust financials and encouraging consolidation. At the time, 22 insurance companies were operating in the market – 11 of which were branches of international companies – with only four listed. By the start of 2022, 10 domestic insurance companies were active and all had been listed.
In December 2022 an agreement was signed between Oman Qatar Insurance (OQIC) and Vision Insurance (VI), whereby the latter would merge into the Qatar Insurance Company’s subsidiary. In a similar move, in late December 2022 Al Ahlia Insurance said the CMA had approved its merger with National Life & General Insurance Company (NLGIC), the largest Omani insurer, with a 47.5% stake. Upon completion of the deal, Al Ahlia would de-list and both companies would likely restructure. In July 2022 NLGIC also acquired a majority stake in general insurer RSA Middle East, which had operations in Oman and elsewhere in the GCC.
NLGIC, a subsidiary of OMINVEST, represented a 35% share of the local insurance market in 2021. It was also a major player in terms of the share of gross written premium (GWP) in the two leading lines of business in the sultanate: health (34.2%) and motor (21.4%). NLGIC is a major player in the UAE insurance market, generating around 45% of its total premium.
Another major player is Dhofar Insurance, which controlled 13% of the market in 2021. However, OQIC reported that it had achieved a 15% market share in the first half of 2022, a figure set to increase after a merger with VI, which itself had a 6% market share in 2021. Al Madina Takaful had a 10% market share in 2021, declining to 7% in the first half of 2022, according to the Omani investment firm Ubhar Capital. Other players include Oman United Insurance (8%), OQIC (8%), Takaful Oman (7%), Al Ahlia Insurance (5%), Arabia Falcon Insurance Company (5%) and Muscat Insurance (4%).
There are two local takaful providers active in the market: Al Madina Takaful and Takaful Oman. In 2021 their combined business lines accounted for 17% of the total general insurance market – both conventional and Islamic – 24% of the family and life market, and 8% of the health market. In the TPA segment, Green Line Insurance was the first Omani-owned company to enter the market after the CMA issued regulations in 2020 and licensed four entities in 2021. Further growth in this segment is expected, as the universal health insurance scheme rolls out in the year ahead. Oman Re, established in 2008, is the sultanate’s sole entity in the reinsurance segment. The firm listed on the MSX in November 2021 and recorded a GWP of OR27.6m ($71.7m) that year, when it also opened at the Qatar Financial Centre, anchoring its regional profile.
There are 10 foreign firms active in the local market: Bahrain-based GIG Gulf, Saudi Arabian Insurance, New India Assurance, US-based American International Group and MetLife; Iran Insurance, India-based Life Insurance Corporation International, and Dubai-based Cigna Middle East and Orient Insurance, as well as Oman Insurance from the UAE, which has now rebranded as Sukoon. Foreign banks are also involved in the segment through partnerships with local banks on offering bancassurance. For example, Bank Muscat offers home insurance policies through a tie-in with GIG Gulf.
Overall, the sector contributed around 1.5% to GDP in 2021, down from 1.9% in 2020, according to the CMA. This decline coincided with a significant increase in the country’s GDP – from $74bn in 2020 to $85.9bn – due to rising oil and gas prices. Insurance premium rose over the two years, from OR 466m ($1.2bn) in 2020 to OR479m ($1.2bn) in 2021, while per capita insurance expenditure increased from OR104 ($270) to OR105.8 ($275) over the same period. Health and motor have long been the largest lines of business, with the former accounting for 34.1% of total premium and the latter 21.4% in 2021. Property insurance accounted for 15.9%, followed by life (11.9%), engineering (5.1%), and liability and transport (2.7% each).
Human Resources
The insurance sector is subject to Omanisation, a government-backed drive to increase the number of nationals working in each sector, with quotas set for each industry and level of management. The quota for insurance is 75%, and the sector is close to meeting this target, with 2463 Omanis employed in the sector in 2021, out of a total workforce of 3006. Omanisation was 81.6% in national companies and 82.8% in international firms, and as high as 97.8% among insurance agents. The lowest rate is among workers employed as brokers for insurance companies, at 70.5%.
This highlights the robust approach of the CMA and other stakeholders to training and educating insurance sector employees. “Awareness of the importance of the insurance sector is growing in Oman at all levels,” Sunil Kohli, CEO of Dhofar Insurance, told OBG. “However, constant work is required to increase knowledge among the public so that insurance is purchased as a planned risk mitigation process and not only when compulsory.”
Regular programmes undertaken as part of the Tamkeen initiative are helping to increase the number of qualified employees, build their competencies and train newcomers. In 2022, 10 training programmes were launched in the sector, qualifying 320 trainees. While the training has been an overall success, continued efforts are expected to yield better results. For example, the sector’s senior management had an Omanisation rate of 59% in 2021, and middle management had a rate of 76% in the corresponding period.
Performance
Per capita insurance expenditure, along with total insurance premium, grew consistently between 2016 and 2021. Indeed, in 2017 per capita insurance expenditure was OR98.93 ($257.12), a figure that rose to OR105.8 ($275) in 2021, while total premium increased from OR451m ($1.2bn) to OR479.9m ($1.3bn) over the same period. In 2021 overall GWP rose 3%, with the largest increase seen in life insurance, which expanded by 6.6%. Health insurance was also strong, seeing 5.6% growth while general insurance showed lower expansion (0.7%).
The sector’s loss ratio increased from 59.2% in 2020 to 61.3% in 2021, with that of domestic companies rising from 60.4% to 62.6%, a higher level than the 52.3 to 53.6% faced by international players due to an increase in incurred compensation for nationals. The stronger performance of the health segment partly compensated for losses elsewhere. Health accounted for OR163.9m ($426m) in GWP in 2021, up from OR155.2m ($403.4m) in 2020, with Omani companies accounting for a bulk of this figure, at OR149.9m ($389.6m) in 2021. Indeed, while GWP for national companies rose to 8.7%, that of international players fell by 19%.
The life category, which consists of family takaful policies and conventional life insurance, also saw growth in GWP, from OR53.8m ($139.8m) to OR57.3m ($148.9m), over the 2020-21 period. GWP of local firms increased by 8.5% and that of international companies by 3.6%. Despite this expansion, the CMA reported that the sector’s net profit fell 47% between 2020 and 2021, from OR48.5m ($126.1m) to OR25.8 ($67.1m).
A number of factors have affected the motor segment in recent years, such as competition driving down premium to the economic slowdown in 2020, as well as the rise in the cost of petrol. This also affected new car sales and the retention of existing motor policies. At the same time, the number of road accidents increased, worsening the motor segment claims ratio.
Catastrophe Pool
Tropical Cyclone Shaheen, which hit Oman in 2021, led to an increase in claims for damage to property and infrastructure, as well as motor vehicles, particularly in the governorates of South Al Batinah and North Al Batinah. In December of that year the CMA reported that insurers reported OR161m (161.1m) worth of claims related to the disaster. According to the CMA, some OR13m ($33.8m) was paid out in cyclone claims in 2021, with OR48.3m ($125.5m) under settlement. With the number of natural disasters increasing in severity and frequency due to climate change, in March 2023 Oman Re announced it was working to establish the sultanate’s first natural catastrophe insurance pool and sent its proposal to the CMA.
Policies
The number of policies issued in 2020-21 increased by 8.6%, from 1.6m in 2020 to 1.8m in 2021. Domestic firms issued 86% of these policies. Broken down by line, local players accounted for 88.9% of general, 63.6% of life and 79.5% of health insurance policies.
The 2020-21 period saw a slight fall in the retention ratio, from 56.5% in 2020 to 55.5%. The drop was least pronounced in the motor segment – with compulsory third party and comprehensive policies seeing the retention rate fall from 91.5% to 89.6% among local insurance companies, while increasing for international, from 95.1% to 95.7%. Oman’s takaful companies, meanwhile, saw their combined gross direct written premium grow by 9.1% between 2020 and 2021, from OR64.8m ($168.4m) to OR70.8m ($184m).
The strongest growth was seen in health, growing 16.7%, from OR11.3m ($29.4m) to OR13.1m ($34m). Family takaful grew 10.8%, from OR12.2m ($31.7m) to OR13.5m ($35.1m), while general takaful grew around 6.6%, from OR41.4m ($107.6m) to OR44.2m ($114.9m).
In the first nine months of 2022 GWP was up 12.2% year-on-year, from OR305m ($792.7m) in the first three quarters of 2021 to OR343m ($891.5m) in the same period of 2022. With this figure, not including assumed premium written, health was the largest line of business, accounting for 34%, followed by motor, with 21%.
The trends observed in 2021 continued in 2022, with net insurance claims rising from OR113.8m ($295.8m) to OR149m ($387.3m) – a 30.9% increase and a faster rate of growth than seen in GWP. Indeed, the system-wide loss ratio increased to 68% in the first quarter of 2022 and up to 70% in the third quarter of the year. This had a dampening effect on the growth in underwriting profit, which reached 10% between the first three quarters of 2021 and the corresponding period in 2022, while net underwriting premium increased from OR40.7m ($105.8m) to OR44.8m ($116.4m).
While insurers’ investment income rose slightly from OR18.1m ($47m) to OR19.4m ($50.4m), this was not sufficient to blunt an overall fall in net income for the sector, from OR22.7m ($59m) in the first nine months of 2021 to OR17m ($44.2m) in the corresponding period of 2022.
Digitalisation
The CMA is prioritising the digitalisation of insurance services. CMA services are being digitised, and insurance players are being encouraged to boost their offerings of e-services. “An important factor for the digital transition in Oman’s insurance sector is to ensure that the online experience is as user friendly as possible,” Kohli told OBG. “As the demographics of the country change, there will be more digital engagement with clients, particularly for standard products.”
Relevant government and public sector entities such as the MoH, the Ministry of Transport, Communications and IT and the Royal Oman Police are also connected through the platform. In addition, the CMA has set up an insurance information bank on its website, with data on all insurance companies active in the market from 2004 to present day. An electronic system for licensing TPAs has also been launched. Parallel to this, individual insurers have been pursuing digitisation strategies to bolster their ability to reduce costs and increase efficiency – a process that has been heightened by the pandemic and the shift to online services. Al Madina Takaful, for example, contracted Tunisia’s DigiConstat for digitising motor claims processing in April 2020.
Outlook
While recent years have seen the economy affected by low oil and gas prices alongside other external headwinds, 2022 brought sustained recovery, with robust GDP growth recorded that year. This may be further fuelled given that the government is moving ahead with an expansionary budget for 2023, with spending up 7% in comparison to the previous year.
These factors bode well for the insurance sector, which stands to benefit from increasing underwriting requirements for new projects, while overall economic growth is expected to lead to greater demand for products. Investment income is likely to benefit from rising interest rates in the year ahead, which in turn should boost the performance of fixed-income securities, the preferred investment option for insurers looking for stable long-term returns as companies that turned to in international equities made losses.
The consolidation trend is set to continue as market imperatives and regulatory needs demand a trimming, as the space is crowded given the size of the market for both insurers and brokers. This is expected to create a more robust sector, where the drive to reduce costs is already spurring efforts in digitalisation and collaboration. The future will therefore be more profitable and leaner, with companies able to benefit from growing demand. Therefore, Omani insurers – all of which are listed on MSX – will be of interest to foreign investors in coming years.
