Oman’s insurance regulator Capital Market Authority (CMA) has urged local insurance firms to strengthen their capital base to retain more business within the country and to withstand competition. Although the stipulated minimum capital for conventional insurance firm in Oman is RO5 million, the insurance regulator is contemplating to have a RO10 million paid up capital for takaful (Islamic insurance) firms, when they start operation.
“We have been encouraging insurance companies to enhance capital base. This will give the companies an ability to retain more business within the country and withstand competition,” CMA Executive President Abdullah bin Salem bin Abdullah al Salmi, told Times of Oman.
“If the insurance companies do not have strong capital base, they have to depend on reinsurance companies. This is neither good for the companies nor helps the national economy.”
Al Salmi also said that local firms should go for merger for achieving economies of scale. “Our markets are opening up (for foreign players) and therefore, we need to have big firms.” The Sultanate has 21 insurance companies – 11 locally incorporated companies and ten branch operations of foreign firms, according to CMA statistics. However, majority of the players is relatively small firms. Echoing a similar view, S. Venkatachalam, general manager of National Life, said raising minimum capital for insurance companies is a good move, which will give more capacity for local players to retain more business within the country. However, he noted that it should be done in a phased manner over a period of time to avoid strain on insurance firms. Oman’s insurance companies have achieved a 12.2 per cent growth in gross premium income at RO281.73 million for 2011, from RO251.07 million for the previous year. However, the overall net premium (or business retained in Oman) was much lower at RO141.86 million for 2011.
Meanwhile, captains of the industry are disputing on the basis or criteria for ranking insurance companies. A section of top-insurance industry officials believe that net premium should be taken into account for ranking insurance companies, while another section is of the opinion that it should be based on gross premium On a net premium basis, New India Assurance led the market with its RO21.57 million. This was followed Al Ahlia Insurance (RO18.92 million), Dhofar Insurance (RO15.34 million), Oman United (RO13.93 million) and National Life (RO13.26 million).
However, if gross premium is considered, Dhofar Insurance led the market with its RO52.23 million premium, which was followed by National Life at RO35.21 million, Al Ahlia Insurance at RO29.52 million, Oman United at RO29.31 million and the New India Assurance at RO23.75 million.
The investment in infrastructure and better demand for motor and medical insurance are driving the growth in premium income.
As the government has boosted its investment in infrastructure projects, demand for insurance coverage from contracting companies has been showing a robust growth. These are mainly for insurance protection for their ongoing projects, especially for developing ports, airports and roads.
Though Oman has a long way to go in terms of total business volume before it can catch up with its GCC counterparts and other developed countries, the country’s low insurance penetration of around 1 per cent, less even than developing countries like India, is being viewed as a positive factor for the development of medical insurance.