Omanisation targets and health care requirements support capital markets

Final yearly results for Oman’s insurance market suggest that the sector has been growing at a subdued pace. However, upcoming regulations, such as those mandating compulsory health care insurance for Omanis and expatriates alike, and the required level of national Omanis working in the insurance sector, should help boost premium uptake and tackle high unemployment among nationals, bolstering overall sector activity. In 2017 the insurance sector accounted for 1.6% of GDP, down from 1.8% in 2016.

Sector Performance

Gross direct insurance premiums in 2017 remained stable at OR451.6m ($1.172bn), compared to OR450.2m ($1.169bn) in 2016. While direct gross general insurance premiums increased by 1.9% from OR382.6m ($993.6m) to OR390.2m ($1bn) over the same period, direct gross life insurance premiums decreased by 9.2% from OR67.6m ($175.6m) to OR61.4m ($159.5m). Within the general insurance segment, which represented 86.4% of total gross premiums in the insurance sector, motor insurance had the highest share of premiums at 34%, followed by medical insurance with 30%. The overall retention ratio for the sector rose from 56.5% in 2016 to 57.5% in 2017. For national insurance companies, the retention ratio was 55.1% in 2017 compared to 52% in 2016, whereas the retention ratio for foreign companies dropped from 70.1% in 2016 to 66.23% in 2017.

The takaful (Islamic insurance) segment has continued growing since it was formally launched in the sultanate in 2014 to account for around 10% of total gross direct premiums in 2017. Gross direct premiums of takaful companies increased by 9% from OR42.1m ($109.3m) in 2016 to OR45.8m ($118.9m) in 2017. In 2017 general takaful business rose by 8% to OR40.5m ($105.2m) and family takaful business increased by 20% to OR5.2m ($13.5m).

Total paid claims grew by 14% from OR268.3m ($696.8m) in 2016 to OR305m ($792.1m) in 2017. The net profit of insurance companies increased by 171% from OR8.7m ($22.6m) in 2016 to OR23.7m ($61.5m). Over the same period, total investment of insurance companies rose from OR564m ($1.46bn) to OR581.3m ($1.51bn) and were concentrated in banking deposits, which dropped from 71% to 69%, and listed shares on the Muscat Securities Market, which also contracted slightly, from 71% to 69%.

Mandatory Health Insurance

The implementation of compulsory health care insurance will take place in early 2019. It was initially planned to cover expatriates in the private sector, but has been expanded to include Omanis working in the private sector as well. The mandatory health care insurance will cover around 2m Omanis and expatriates, excluding their dependants.

As of November 2018 there were around 412,000 individuals in Oman with health insurance cover. Total written health insurance premiums grew by 16% to reach OR134.4m ($349m), accounting for about 30% of the total insurance market. In the first half of 2018 health insurance premiums continued to grow by around 18% year-on-year to reach OR98m ($254.5m). Between 2013 and 2017 the annual growth rate of health insurance premiums stood at approximately 18%.

Omanisation

In April 2018 the Ministry of Manpower issued a decision specifying the required Omanisation percentage in the insurance sector from 2018 to 2020. The required level of Omanisation in the sector by the end of 2018 is 70%, and by 2020 the required level should be 50% across all management levels. In 2017 the total number of Omani employees in the insurance companies was 1936 out of a total of 2923 employees in the sector, giving an Omanisation ratio of 66%. Within national insurance companies, the Omanisation ratio was 57% of total employees in the sector, while it was only 12% among foreign insurance companies.