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Summary: Despite ongoing regulatory and competitive challenges in the insurance sector in the GCC countries, credit conditions for rated insurers remained strong and broadly stable in 2018

Insurance sector growth is highly dependent on government-driven initiatives such as infrastructure and development spending, new regulations and the introduction of new mandatory (medical insurance) covers.

While growth in insurance premiums are likely to be slower in some GCC markets this year compared with previous years, longer-term growth prospects of the industry remain satisfactory. A growing population, improving insurance awareness and the introduction of new compulsory medical cover for expatriates are driving the gradual growth of Omans insurance markets.

After strengthening capital base to RO10mn, five Omani insurance companies - Al Ahlia Insurance Company, Vision Insurance, Oman Qatar Insurance, National Life and General Insurance and Arabian Falcon Insurance floated their IPOs and got listed on the Muscat Securities Market in the second half of 2017 and the first half of 2018, while two mergers have reduced the number of players.

Although the Sultanate has more than 20 insurance companies, only nine companies Dhofar Insurance, Oman United Insurance, Al Madina Takaful, Takaful Oman, Al Ahlia Insurance, Vision Insurance, Oman Qatar Insurance, National Life and General Insurance and Arabian Falcon Insurance are listed.

Insurance firms need a solid capital base to achieve sustainable growth and for retaining a major portion of the business within the country. With this aim, the Oman government in 2014 asked national insurance firms to float shares on the Muscat Securities Market (MSM) within three years,besides raising their minimum capital to RO10mn from RO5mn.

The regulations mark a new chapter in the Omani insurance sector, as local companies will be able to withstand competition by strengthening their financial, technical and human resources. Further, a higher capital base will make these institutions large enough to underwrite more risks and retain premiums within the country.

Regional trends

Unlike in more developed markets where the proportion of premium income from life insurance is larger or similar to non-life insurance the majority of premiums in the GCC comes from the non-life sector. Motor and medical lines are key contributors of non-life insurance in the GCC, contributing at least 50 per cent of total non-life premiums. This points to opportunities for growth in life insurance.

The average insurance penetration across the GCC countries was about 2.3 per cent in 2017, below the average penetration in global emerging markets at 3.2 per cent and well below the global average of 6.2 per cent. However, insurance penetration in individual GCC markets differs greatly from country to country with the UAE average at 3.3 per cent, broadly in line with other emerging markets, and Kuwaits average at 1.3 per cent. This leads us to believe that as awareness about the importance of insurance increases and various governments gradually introduce policies, insurance penetration will continue to increase, albeit slowly.

The roll out of VAT across the GCC is expected to be a key challenge for insurance companies. Insurers in the UAE, where VAT was introduced from January 1, are facing a dual challenge when recovering an estimated VAT liability in excess of Dh700mn on policies written in 2017 and maturing in 2018.

Tailor-made solutions

DAMANA, is a leading insurance organisation in the GCC. Originally founded in 1964, DAMANA offers a wide range of insurance solutions for personal and corporate use. DAMANA provides tailor-made solutions for its clients in most sectors of insurance and services clients locally through seven offices in five countries in the Gulf and Lebanon. DAMANAs growth, is powered by its team of over 200 specialised employees. DAMANA received its inaugural financial strength rating by AM best in 2015 and today, DAMANA helps clients aim for success, overcome hurdles and achieve their business aspirations.

SAICOHEALTH, DAMANAs dedicated medical insurance division, has propelled the company to a market-leading position in the sector. Through its fully-owned administration platform and its one card solution, SAICOHEALTH commits to the provision of world-class, full-service health insurance coverage to clients across the GCC. DAMANA and SAICOHEALTH are registered trademarks for Saudi Arabian Insurance Company B.S.C.

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Publication:Oman Economic Review (OER)
Date:Dec 2, 2018
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