Dubai: The Capital Market Authority of Oman’s (CMA) new regulations requiring Omani insurers to be listed on the Muscat Securities Market and maintain capital of at least OMR10 million ($26 million, Dh95 million), will strengthen the Omani insurance industry, says Moody’s Investors Service.
“The new CMA requirements will improve insurance companies’ access to capital markets, enhance transparency and stabilise the insurance market overall,” said Mohammed Ali Londe, a Moody’s analyst based in Dubai.
The Omani insurance industry produced insurance premiums of $0.95 billion in 2013, approximately 5 per cent of premiums written in the GCC. Oman’s insurance density of $321 and insurance penetration of about 1.1 per cent places Oman as the second smallest market in the GCC. With a compound annual growth rate (CAGR) between 2006 and 2013 of 14.1 per cent, the market is expanding, bust at a slightly lower rate than some other GCC insurance markets.
The growth in the sector is largely attributed to compulsory motor coverage as well as steps taken by the regulator CMA to increase insurance awareness following the recent natural disasters, such as cyclones Phet and Gonu in June 2010 and June 2007, respectively.
There were 21 licensed insurance and 1 licensed reinsurance companies in 2013. The split of local and foreign insurers is equal, however market positions were dominated by large local groups such as Dhofar Insurance Co, National Life & General Insurance Co. and Oman United Insurance. The market also includes a number of larger international insurance groups, such as RSA (which acquired Al Ahlia Insurance Company in 2010), New India Assurance, Zurich, Chartis and MetLife Alico.
“The 2013 average premiums per insurer approximates to $23 million, excluding the top five groups, which we believe indicates a considerable level of overcapacity in the industry given current insurance penetration, depressing the market’s overall performance. We think that further insurance awareness and growth is required to reduce market and pricing volatility driven by the competition,” said Londe.
Moody’s expect developments such as the issuance of takaful (Islamic insurance) licenses and increased capital-related regulation may reduce competitive pressures by encouraging growth in new market segments and/or by encouraging consolidation among some of the smaller players whilst posing a barrier to new entrants.
“We expect the market as a whole to benefit from the requirement to be stockmarket listed, as it will require periodic financial disclosures, enhancing transparency (a general deficiency in the market now) and improving companies’ access to capital markets,” said Londe.
Currently, only four insurers are listed on the MSM, namely, Al Madina Insurance Company SAOG (financial strength Ba2 positive), Dhofar Insurance Company SAOG (unrated), Oman United Insurance Company SAOG (unrated) and Takaful Oman Insurance SAOG (unrated).
