Muscat: Oman's insurance sector continues to compare unfavourably 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 $700 million per annum, according to a research report on the Sultanate's insurance industry conducted by Business Monitor International.
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) region, 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," noted the report. The regulatory regime dates back only to 2004. To date, Oman's insurance sector has not participated in the growth of takaful ó a key factor in the expansion of the much larger industries in the United Arab Emirates and Saudi Arabia.
Nevertheless, the Capital Markets Authority has given an in-principle approval for the establishment of the Sultanate's first Sharia-compliant insurance company.
"Taking the longer-term view, we do not see obvious catalysts for an increase in either non-life penetration or life density." As of mid-2013, it is clear that conditions have been mixed for the major players in both segments.
In the non-life segment, it appears that Al Ahlia, the local subsidiary of RSA, has been gaining market share at the expense of the other companies.
Health insurance products
In the life segment, National Life & General Insurance, the main subsidiary of ONIC Holding, has achieved substantial growth, thanks to greater sales of health insurance products, both in Oman and the UAE.
Other companies have reported declining premiums ó in some instances as a result of a deliberate policy to focus on profitability rather than growth.
Meanwhile, earnings from investments ó for most companies at least ó appear to have improved dramatically in comparison with the very difficult period that was 2011.
Overall, Oman will likely remain home to an insurance sector that is small, fragmented and highly competitive. Over recent years, premiums in both segments have been growing at low double-digit rates. Retention rates are low (often well below 50 per cent). Over the last year or so, motor-related claims have been unacceptably high. The insurers remain vulnerable to volatility in the underdeveloped financial markets of Oman and other countries in the region.