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Oman Insurance Report Q4 2011
Business Monitor International, Nov 2011, Pages: 64
Business Monitor International's Oman Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Oman's insurance industry.
- Oman’s insurance sector is small, crowded and fragmented.
- Conditions have been challenging for many players in 2010-2011, with a number of the leading companies ceding market share and absolute size in an attempt to boost profitability.
- Many of the catalysts for growth that exist elsewhere in the region, such as takaful, have been absent from Oman. Nevertheless, the Royal Decree of May 2011 that provides for the introduction of shari’a compliant financial services in the Sultanate is a positive development.
Oman’s insurance sector does not compare favourably with its peers in other Gulf Cooperation Council (GCC) countries. Twenty-one companies, including 10 local groups, are competing for total premiums that are still less than US$700mn per annum. As is the case in the rest of the region, none of the local companies have the benefits of economies of scale, nor, with the clear exception of al-Ahlia, which is an affiliate of global non-life major RSA Insurance, are any owned by major shareholders that have a clear competence in insurance.
In most countries in the Middle East and North Africa (MENA), small local groups tend to focus exclusively on non-life lines (particularly the ‘basic’ areas such as motor and home/contents insurance). Oman is unusual in that most of the local groups are composite insurers. Even al-Ahlia offers group life products.
The regulatory regime dates back only to 2004. To date, Oman’s insurance sector has not participated in the growth of takaful – a key factor in the expansion of the much larger industries in the UAE and Saudi Arabia: nevertheless, the Capital Markets Authority (CMA) has given an in-principle approval to the establishment of the Sultanate’s first shari’a-compliant insurance company.
A strength is that the market is clearly open to foreign players. Majors that are present include AXA Gulf, Chartis and, since October last year (through its purchase of Compagnie Libanaise d’Assurance), Zurich, as well as MetLife ALCIO. LIC and New India are serving Indians who live and work in Oman. There are also offshoots of much smaller firms based in the UAE and Lebanon.
Meanwhile, the H111 results that have been published by firms listed on the Muscat Securities Market tell a consistent and rather depressing story. Very strong growth in premiums achieved by Oman United Insurance and National Life & General Insurance (a subsidiary of ONIC Holdings) has been offset by a contraction in premiums at Dhofar Insurance, the leading company in the non-life segment with a market share of about 31%.
Consequently, BMI thinks that non-life premiums will grow by a respectable – but less than stellar – 15% over calendar 2011 as a whole. Retention ratios remain low. Underwriting profits have been constrained by rapid growth in motor-related claims. Both non-life and life companies have been over-exposed to fluctuations in global financial markets in general and in the local stock market in particular.
Company chairmen and management who express views on the prospects emphasise the general growth in Oman’s economy as the main driver of development of the Sultanate’s insurance sector. They do not focus on catalysts for growth in non-life penetration or life density.
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