Omani insurance industry: Opportunities and challenges


Like any business, insurance and reinsurance are practised in a world of change. The last few years have witnessed unprecedented changes in the types of risks that the insurance industry is called upon to handle, in the organisation of insurance and reinsurance markets, and in the economic, social and political environments in which insurers and reinsurers have to operate. Such changes present new challenges and opportunities to insurance industries, and not least to reinsurers.

The ability to understand the implications of change and to respond to them depends upon a sound knowledge of the principles that lie behind the practice. It must not be thought that an understanding of the principles will provide clean–cut answers to practical issues.

The world’s financial markets have experienced unprecedented volatility, and financial institutions and indeed countries in the world over have been impacted. Past performance is not necessarily a guide to future performance. What may have been manageable before was not manageable now!

Capital Market Authority (CMA) of the Sultanate of Oman continues issuing insurance market reports on an annual basis, proceeding from the awareness of the importance of modern statistical data and comprehensiveness in the decision-making sound and rational policy–making.

Recently published Insurance Market Index for the year 2021-2022 edition 2023.

Insurance contribution to the GDP of Oman
Oman’s total population is now exceeding 5 million inhabitants and increased in the value of the total assets.

The insurance industry’s contribution to Oman’s Gross Domestic Product (GDP) in the last year 2022 was 1.23%, compared with 1.45% in the year 2021 and 1.87% in the year 2020.

Insurance & Reinsurance is becoming a “National Security Industry”.

Market Gross Written Premium, Premium Retentions & Claims Settlement.

The earnings of the insurance companies in the Sultanate and GCC are dependent to a large extent on the reinsurance commission and direct insurance receive as a significant portion of the business is not retained i.e. fronting insurance transactions and proportional reinsurance treaties. A very high proportion of the premium is ceded to the foreign reinsurer abroad in most cases (business outflow) to the foreign companies in the foreign countries. This is a big challenge. This is illustrated and described in the insurance market index published by Capital Market Authority edition 2023.

A- Gross Written Premium, Premium Retention & Claims Paid
Oman’s Market Gross written premium (GWP) in the year 2022 was OMR 541,326 million compared to OMR 479,857 million in the year 2021. (Increase by 12.8%). GWP in the year 2020 was OMR 465,895 million. Compared with the amount of OMR 486,582 million in the year 2019 (Decreased by 4.3%).

The premium retention ratio of insurance companies in the year 2022 was 55.7% of GWP, compared with 55.5% in the year 2021. In the year 2020 premium retention ratio was 56.52% of GWP

The total claims amount paid by Insurance Companies in the year 2022 was OMR 317,035 million. The ratio to GWP is 59%. Compared to the amount paid OMR 289,834 million in the year 2021 (Increased by 9.4%). The ratio to GWP was 60% and 62% in the year 2020

The Health & Motor Insurance class of business is continuing to dominate the market insurance index.

B- Health Insurance
The last year 2022 Health Insurance GWP amounted to OMR 191,517 million. The ratio to the GWP was 35%. In the year 2021, Health Insurance GWP amounted to OMR 163,866. The ratio to the GWP was 34% and in the year 2020GWP amount to OMR 155,193 million. The ratio to the GWP was 33%.

The Health Insurance class of business market retained premium in the year 2022 was 79% of GWP; in the year 2021 was 76% in the year 2020 was 74%.

Health Insurance Claims paid in the year 2022 amount to OMR 146,538 million. The ratio to the GWP was 76.5%.  In the year 2021, claims paid the amount of OMR 120,123. The ratio to the GWP was 73.3% and in the year 2020 claims amount paid OMR 120,749 million. The ratio to the GWP was 77.8%.

B- Motor Insurance
The last year 2022 Motor Insurance GWP amounted to OMR 106,543 million. The ratio to the GWP was 19.7%. In the year 2021, GWP amounted to OMR 102,598. The ratio to the GWP is 21.4%. In the year 2020, GWP amounted to OMR 113,364. The ratio to GWP was 24.3%.

The Motor Insurance class of business market retained premium ratio to the GWP in the year 2022 was 90.66% compared to 91.2% in the year 2021 and 90.1% in the year 2020.

The Motor Insurance class of business Gross claims amount paid in the year 2022 was OMR 82,649 million (Ratio to GWP was 77.6%). Compared to the year 2021 was OMR 78,150 million. The ratio to GWP was 76.2% and compared to the year 2020 was OMR 67,728 million. Ratio to GWP 59.7%.

Environment, risk management and insurance products
The economy in Oman and other GCC countries is dominated by the Government as a result insurance industry tends to get a substantial part of its business from the government & semi-government entities in line with the national structure of the economy.

Source of business transactions Direct Selling by the insurance companies, or/and thru insurance agents, Bancassurance& insurance brokers and Electronic Channels “e-commerce”.

Analysers can observe from the Insurance Market Index Editions Years 2022, 2021 & 2020 evidence of unbalanced insurance business portfolios represent big challenges to the insurance industry.

Private insurers need to suitably amp up their risk management capabilities going forward. When they insure businesses and their operations, they need to have the requisite knowledge and capabilities to identify and assess the risks their clients face and accordingly provide them with insurance coverage.

Risk management is a discipline that insurance firms must be conversant with. Significantly, major reinsurance companies are averse to offering competitive business terms and conditions to the markets due to two key factors: adverse claims experience and low retention of risk.

Insurance products
Fisher Community Protection
The fisher community at the heart of one of the Sultanate of Oman’s biggest economic sectors will benefit from tailor-made insurance coverage to secure them, their equipment and assets, from an array of perils when operating out at sea.
The customized insurance policy will bring an estimated 25,000 Omani-owned fishing boats (including traditional boats and dhows) within the protective ambit of Article 17 of the Law of the Protection of Living Aquatic Resources promulgated by Royal Decree 20/2019.  Its coverage encompasses 25 fisheries ports and jetties distributed across the country’s coastline and in coastal waters extending from Musandam in the north to Dhofar in the south.

We at the Oman Chamber of Commerce & Industry assembled a working team with representatives from the Capital Market Authority; Ministry of Agriculture, Fisheries and Water Resources; Ministry of Transport, Communications & Information Technology, Royal Oman Police (Coast Guard), and Central Bank of Oman, among other agencies, to design a customized & tailor-made insurance policy and operational manuals for use by the Oman Fishermen Association. I was heading, Finance & Insurance Committee at the Oman Chamber of Commerce and Industry (OCCI) for the period years 2018-2022 and a Head of the Working Team of the project responsible for implementing the Fishing Boats Insurance Protection Recommendations.

The policy’s impending roll-out – 30 years since it was first mandated under the Sultanate of Oman’s Maritime Law promulgated by Royal Decree 35/81 on April 15, 1981 – is the culmination of a concerted, multi-year effort involving multiple government agencies, regulatory bodies and other stakeholders.

The Capital Market Authority – the regulator of the insurance sector – has approved this innovative approach to the implementation of minimum insurance standardized tailor-made Insurance Policy for Fishing Boats and Vessels in the Sultanate of Oman.

It’s anticipated and expected to impart new impetus to the growth of the traditional fishing sector, which contributes the bulk of fresh fish harvests annually. With insurance coverage, local banks will be more amenable to providing funding support to fishermen for their purchases of new boats and equipment. Additionally, more young Omanis will be encouraged to consider fishing-based livelihoods once lending by banks is less cumbersome.

To shape a market that is attractive to the insurance and reinsurance industry, the working team decided to add yachts and other vessels to the scope of the customized insurance policy, as well as procedures for registering such boats and vessels. This integration contributed to competitively-priced premiums, thus meeting a key prerequisite for the overall initiative’s success.

Business community protection
Any construction company or contractor or small, medium enterprises (SMEs) requires surety bonds when a contractor bids or as a condition of the contract awarded. Most Governments or Others have a similar requirement. Many private owners & entrepreneurs in our country approach the Banks only because only the banks are authorised to sell “Performance Bonds”.
Whereas, surety bonds products are in most countries of the world both “Banks & Insurance” Companies can sell.
A surety bond is a promise to be liable for the debt, default, or failure of another.

There are four types of contract surety bonds:
Bid Bond
Performance Bond
Payment Bond
Warranty Bond (also called a Maintenance Bond)

During my chairmanship of the Finance & Insurance Committee at the Oman Chamber of Commerce & Industry in the period years 2018-2022.For the benefit of the national economy and to enable us to assist “SMEs”. We requested the Capital Market Authority & Central Bank of Oman to consider authorising the insurance industry to transact activities of selling surety bonds. The market is yet to receive the permission.

Natural perils and common protection
The nature of the topography and landscape of our country, with a lengthy seafront that is exposed to extreme weather events, contributes to an unbalance insurance portfolio that does not easily appeal to international reinsurance players. Consequently, the centralisation of reinsurance locally becomes key support to the local direct insurance companies.

Furthermore, with the government playing the role of both producer and consumer – across multiple sectors, notably Oil & Gas, Mining, Agriculture & Fisheries Wealth, Health, Tourism, Aviation & Maritime Transport, Logistics, Housing & Infrastructure, and so – its large portfolio of high-value assets and infrastructure must be suitably safeguarded against disasters. A centralised reinsurance entity can play a part in mitigating the cost burden on the government if these assets are damaged in any calamity. In the event, the proposed centralised reinsurance entity becomes the captive reinsurer for the nation – one buyer for reinsurance protection or retrocession protection, a feasibility study report shall be prepared accordingly, he added.

Notable is a recommendation for the creation of a National Central Reinsurance Company (NCRC) as a Public Private Partnership (PPP) initiative to support, among other objectives, premium retention, cash flow management and foreign currency inflows into the country.

Health insurance
Separately, the Health Committee at Oman Chamber of Commerce & Industry has discussed in the First Committee Meeting the introduction of a classification system covering all private hospitals in the Sultanate – a scheme that would allow for healthcare tariffs and prices to be structured based on their grades.

* Murtadha M J Ibrahim Al Jamalani “Chartered Insurer-UK” is the Vice Chairman – Health Committee at the Oman Chamber Of Commerce & Industry

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