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Oman Insurance Market Report 2020 2021

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Oman insurance

market update

2020-2021

Prepared by

Howden Analytics



Contents

Executive summary 5

Macro-economic overview 9

Insurance market 13

Pricing trends and drivers 21

Contacts 31



Executive

summary

The COVID-19 pandemic had a significant impact

on the worldwide economy, and affected the

individuals, societies and businesses in Oman.

Despite the challenges presented by the

pandemic, the well-managed response during

2020 has been reflected in the continued recovery

of the economy. Oman is returning to its upward

trajectory to achieve the goals outlined by the

Oman Vision 2040 initiative.

Oman insurance market update 2020-2021 5


The non-life insurance sector has

contributed 1.7% to GDP in Oman in 2020 1 .

3.2% decrease in gross direct written non-life insurance

premiums from 2019 to 2020 (USD 1.07 billion and USD 1.1 billion

respectively) 1 .

Health insurance still represents the largest share in gross

written premium of insurance companies, followed by motor

insurance with a share of 33% and 24% of the total premium,

respectively. National Life & General Insurance Company

dominated 34% of the total market share in 2020, followed by

Dhofar Insurance Company and Al Madina Insurance Company

with 10% and 9% of the market share, respectively.

Figure 1. 2020 Oman non-life insurance sector by segment

Source: CMA, Company annual reports, Howden Analytics, NOVA

$0.16bn

$1.07bn

$0.91bn

$0.70bn

(Top 5)

$0.22bn

(Others)

Non life insurance sector

of which are Foreign

insurers

of which are National

insurers

Top 5 insurer split

1. Capital Markets Association (CMA).

6 Oman insurance market update 2020-2021


Figure 2. 2020-2021 average rate change for Oman insurance

Source: Howden, Howden Analytics, Nova

25

20

15

10

25%

5

0

3%

For free of loss accounts

For accounts with loss experience

Note: Average rate change is calculated using a straight average across all lines of business.

The market has shifted to respond

to increased price sensitivity and

more cautious risk assessment

criteria, resulting in the withdrawal

of international capacity, and the

local listed insurers moving to fill

the space.

Pricing increased by an average of 3% for free of

loss accounts across all lines of business. The

hardening of rates for Financial Lines and Property

insurance have been counterbalanced by a

reduction in rates for Marine, Motor and Employee

Benefits insurance, resulting in a relatively stable

average rate change for free of loss accounts.

The hardening of rates for accounts with claims

experience to an average of 25% was underpinned

by the large rate increases for Financial Lines and

Property insurance during the last year.

Oman insurance market update 2020-2021 7



Macro-economic

overview

There has been an increase in trade rerouted

through Oman prior to 2020, which strengthened

and solidified Oman’s strategic position in the

global economy. Given Oman’s rich natural

resources and appealing geography, the

sultanate’s GDP was heavily reliant on exports

from its hydrocarbon sector.

Oman insurance market update 2020-2021 9


When the COVID-19 pandemic shocked the

worldwide economies in 2020, Oman’s overall

growth slowed and retreated following the

government-enforced restrictions on movement to

halt the spread of the virus 2,3 . The economy was hit

by a sharp decline in demand for natural resources

during the pandemic. The fall in global trade and

consumption was reflected in the large economic

contraction of the hydrocarbon sector in Oman 4 .

Alongside other targets, the initiative aims to

reinforce and leverage Oman’s active contribution

to international trade. There has been a movement

towards the development of the non-hydrocarbon

sector by diversifying the country’s main source

of income away from an over-reliance on the

hydrocarbon sector. The initiative aims to increase

Oman’s non-oil sector’s share of total GDP from

65% in 2019, to 90% in 2040 5 .

The timely response to the pandemic and the

successful vaccine roll-out has enabled the

continued lifting of restrictions, allowing the return

of economic activity. The removal of government

imposed measures is expected to trigger a healthy

recovery of the economy in Oman as it is expected

to recover by 2.3% in 2021 and 3.2% in 2022 2

(Figure 3).

Oman has outlined its long-term economic strategic

goals in its ‘Vision 2040’ initiative 5 . The movement

aims to build a productive and diversified economy

in order to leverage Oman’s competitive advantage.

The ‘targets’ of Vision 2040 aim to reinforce and

advance Oman’s economic and environmental

global position.

Diversification has been identified as a key factor

in sustainable economic growth in sectors such

as agriculture, mining, manufacturing, transport,

logistics, e-commerce, education and tourism.

There has been a significant movement towards

improving and expanding Oman’s infrastructure

and heavy construction projects which has

underpinned the increasing growth in the non-oil

sector of the economy. Oman has invested in its

roads, airports, seaports and logistics facilities

to enhance worldwide networks, capabilities

and productivity 3,5 .

The strategic initiatives, diversification

and trajectory of Oman reflects the

sultanate’s resilience as it paves the

way for sustainable economic growth

in the coming years.

2. Bloomberg.

3. Capital Markets Association.

4. Oxford Business Group.

5. Implementation Support and Follow-up Unit (ISFU).

10 Oman insurance market update 2020-2021


Figure 3. Gross domestic product forecasts

for selected G20 countries, UAE and Oman

Source: World Bank, Bloomberg

120

110

GDP index

100

90

2015 2016 2017 2018 2019 2020 2021F 2022F 2023F

France

Italy

UAE

Oman

Germany

Spain

UK

Oman insurance market update 2020-2021 11



Insurance

market

The Oman insurance sector is concentrated

primarily in national insurers, making up to 85% of

gross written premium in 2020. National Life and

General Insurance Company accounts for a third

of the sector’s premiums.

Health insurance accounts for a third of the nonlife

sector, which will continue to grow following the

introduction of mandatory cover.

Annual net loss ratios have reduced in 2020, driven

by national insurers due to reduced economic and

claims activity.

Oman insurance market update 2020-2021 13


Regulation

The Capital Markets Authority (CMA) supervises

and regulates insurance companies, agents and

brokers in Oman. The CMA works to facilitate

efficiency and transparency in insurance

transactions by enforcing rules, regulation and

sanction breaches.

Transformation

The Oman insurance sector is slowly adopting

the use of technology to offer insurance products

and services. Most players are leveraging

communication platforms and social media to

connect with clients for marketing and/or claims

settlements 6 . The Oman vision 2040 steps are

positioned towards digital transformation towards

a tech-smart government.

6. Glasgow Consulting Group.

14 Oman insurance market update 2020-2021


Figure 4. Gross written premium and average

premium per policy for general insurance

Source: Capital Markets Authority

National insurance companies

Foreign insurance companies

960

680

158

1500

940

920

900

5%

670

660

650

640

630

156

154

152

150

54%

1000

500

880

2019 2020

620

148

2019

2020

0

GWP (USD) Millions

Premium per policy (USD)

GWP (USD) Millions

Premium per policy (USD)

Total gross written premiums have

decreased by 4% for national insurance

companies to USD 914m, while premiums

for foreign insurance companies increased

by 3% from USD 152m to USD 157m.

The average premium per policy has increased from

USD 704m to USD 1,081m (Figure 4). Premiums written

for national insurance companies have decreased

by 4% since 2019, although average premium per

policy has increased to USD 670m from USD 640m

in 2019. Considering the premium change and the

average premium per policy together, rates appear

to have increased for both national and foreign

insurance companies during the last year.

Oman insurance market update 2020-2021 15


Figure 5. Line of business split of gross

written premium in 2019 and 2020

Source: Capital Markets Authority

USD

1.10bn

2019

35% Health

27% Motor

13% Life

12% Property

5% Engineering

4% Other

3% Transport

2% Liability

USD

1.07bn

2020

33% Health

24% Motor

15% Property

12% Life

5% Engineering

5% Other

3% Transport

3% Liability

16 Oman insurance market update 2020-2021


Motor and Health insurance dominate the

Oman insurance market with a combined

share with 58% of premiums in 2020. This

percentage has lowered since 2019 as

insurers increase property premiums due

to increased natural catastrophe activity

(Figure 5).

The non-life insurance segment accounted for over

88% of total insurance premiums written in 2020 7 .

The growth of GWP in recent years has been largely

driven by an increase in Health insurance from an

18% market share in 2013 to a share of 33% in 2020 8 .

This can be attributed to the introduction of the

Unified Health Insurance Policy (UHIP) which made

Health insurance mandatory for all private sector

employees in March 2019. The Health insurance

sector is expected to grow as the government

continues to roll out UHIP for all expatriate and local

workers employed in the private sector.

Property insurance represents the largest growth

with a 3ppts increase, now making up 15% of the

general insurance market. This is due to an increase

in the frequency and severity of natural catastrophic

events in Oman. This includes the Mekunu Cyclone

which caused devastation in 2018 resulted in

insurance companies receiving claims amounting to

USD 390 million 9 . The reinforced public awareness

following similar catastrophes has led to an active

movement towards investing in Property insurance

protection.

Due to the fragmented nature of the Oman

insurance sector, it is highly competitive with 20

players contending for market share. It is dominated

by the non-life segment with over 88% of GPW in

2020 8 . This is expected to be driven by economic

and population growth, in addition to the rising

trend of ‘Omanization’. Omanization aims to create

employment opportunities for its citizens in the

private sector to reinforce its local economy, which

has been hit by the pandemic and low oil prices.

Oman’s 2040 Vision is striving to see 40% of the

jobs available in the private sector to be occupied

by Omanis 10 . Within the insurance sector, 79% of

the workforce were Omani nationals in 2020, with

the ratio set to increase in the coming years 8 .

7. Alpen.

8. Capital Markets Authority (CMA).

9. Oman Times.

10. Implementation Support and Follow-up Unit (ISFU).

Oman insurance market update 2020-2021 17


Figure 6. Net loss ratio for national and

foreign insurance companies in 2019 and 2020

Source: Capital Markets Authority

64%

60%

53%

52%

National insurance companies

Foreign insurance companies

2019 2020

The loss ratio of national and foreign

insurance companies decreased by

4ppts and 1ppt respectively (Figure 6).

The overall decrease in loss ratios across

all companies can be attributed to the

effects of the pandemic which suppressed

movement and therefore reduced the

claims incurred by companies.

Despite the weaker economic conditions as a

result of the pandemic which led to a decline in

GWP by 4%-5% in 2020, the market has reported

an improvement in profitability in 2020, compared

to 2019. The suppression of business activity and

imposed lockdowns has led to fewer claims which

has supported profitability in the industry.

18 Oman insurance market update 2020-2021


Figure 7. The percentage share of total gross written premium

of the top 5 local listed insurance companies in 2020

Source: Company Annual Reports 2020

USD

0.7bn

34% National Life and General Insurance Company

10% Dhofar Insurance Company

9% Al Madina Insurance Company

6% Oman Qatar Insurance Company

6% Oman United Insurance Company

The top 5 insurers account for 65% of the

total non-life insurance market, of which

34% represents National Life & General

Insurance Company (Figure 7).

Despite the competition among the large

number of insurance suppliers incentivising

towards consolidation, there has been a lack of

M&A activity in the Omani insurance market 11 .

Foreign ownership of Omani joint listed insurance

companies is permitted up to a maximum of 70% of

the total shareholding.

11. Oxford Business Group.

Oman insurance market update 2020-2021 19



Pricing trends

and drivers

Rates have remained relatively stable

during the last year across most

accounts, with exceptions for Financial

Lines and Property insurance which

have experienced more pronounced

rate hardening during the last year.

Note: Reported pricing changes are calculated using averages from a wide range of clients in

terms of size, industry, location, claims history and other parameters. Many clients experienced

pricing changes that deviated above and below the average.

Oman insurance market update 2020-2021 21


Figure 8. 2020-2021 average rate change by line of business

Source: Howden, Howden Analytics, Nova

80%

60%

40%

20%

0%

-20%

-40%

For free of loss accounts

For accounts with loss experience

Marine

Employee Benefits

Motor Fleet

Casualty

Engineering

Property

Financial Lines

22 Oman insurance market update 2020-2021



Casualty

Personal Accident | Professional Indemnity | Public Liability | Comprehensive General Liability

7.5% av. rate increase

across all Casualty

accounts

0-5% average increase for free of loss accounts

5-10% average increase for accounts with loss

experience

Key drivers of rate change

∙∙

Changes to market capacity

∙∙

Loss experience

∙∙

Competition

∙∙

Cost of reinsurance

Insurer overall appetite

Comprehensive General Liability – Cautious

Professional Indemnity – Cautious

Public Liability – Stable

Personal Accident – Stable

Overall coverage terms

Have become stable favourable for Liability

insurance. Coverage terms have not majorly

changed for all other Casualty lines.

Casualty rates remained relatively stable during 2020

due to the lack of significant losses, and therefore

there was no requirement to increase pricing.

Furthermore, local listed insurers have substantial

capacity for Casualty insurance and are able to offer

lower rates to retain renewals in the competitive

market, which has also stabilised rates. Rates are

expected to remain consistent into next year.

24 Oman insurance market update 2020-2021


Employee Benefits

Group Medical | Group Life | Workmen’s Compensation

7.5% average rate increase

across all Employee

Benefits accounts

Key drivers of rate change

∙∙

Loss experience

∙∙

Competition

5-10% average decrease for free of loss accounts

5-10% average increase for accounts with

loss experience

Insurer overall appetite

Group Medical – Stable

Group Life – Stable

Workmen’s Compensation – Stable

Overall coverage terms

Terms have become more favourable

towards clients for Group Medical insurance

and Group Life insurance. There has been

no change in coverage terms for Workmen’s

compensation insurance.

The moderate 5-10% average increase in rate is

consistent across all sub-lines of Employee Benefits

(EB) insurance. In particular, the premium rates for

Workmen’s Compensation insurance have decreased

over the last few years due to severe competition

and minimal loss experience. Insurers have also

started offering several additional extensions

without charging more premium. Renewal rates for

EB insurance typically reflect the loss experience

on the accounts.

There is a lack of international capacity for EB in

Oman, however due to the large number of local

carriers, there is sufficient capacity to place EB

insurance in the local market.

The introduction of mandatory health insurance

coverage for the private sector offers a

considerable boost to Oman’s EB insurance, in

addition to standardising the health benefits

available in Oman.

Oman insurance market update 2020-2021 25


Engineering

Contractors All Risks (CAR) | Contractors Plant & Machinery | Erection All Risks (EAR)

12% average rate increase

across all Engineering

accounts

10% average increase for free of loss accounts

10-15% average increase for accounts with

loss experience

Key drivers

of rate change

∙∙

Changes to market appetite/capacity

∙∙

Loss experience

∙∙

Cost of reinsurance

Insurer

overall appetite

CAR – Cautious

Contractors Plant and Machinery – Stable

EAR – Cautious

Overall coverage

terms

Terms have become less favourable towards

clients for CAR and EAR, while there has

been no change in terms for Contractors

Plant and Machinery.

Changes to capacity and appetite, unfavourable

loss experience and cost of reinsurance have

inflated rates for Engineering lines to a 12% average

increase across all accounts. The individual nature

of the risk insured is reflected in the rate change for

accounts with loss experience. Insurance pricing for

the Engineering industry is also influenced by high

interest rates and inflation.

Overall client retention has remained stable

while limits placed have increased for all lines

of Engineering insurance. Coverage terms have

changed due to restrictive covers and clauses, sublimited

extensions and an increase in deductibles.

26 Oman insurance market update 2020-2021


Financial Lines

Banker Blanket Bond (BBB) | Cyber | Cyber Security & Privacy Protection Insurance | D&O Liability

50% average rate increase

across all Financial Lines

accounts

25% average increase for free of loss accounts

50-100% average increase for accounts with

loss

Key drivers

of rate change

∙∙

Changes to market appetite/capacity

∙∙

Loss experience

∙∙

Macro factors

∙∙

Shifting views of risk

Insurer

overall appetite

D&O Liability – Cautious

Professional Indemnity – Cautious

Cyber – Cautious

BBB - Cautious

Overall coverage

terms

Terms have become less favourable to

clients across all lines of business.

All sub-lines of Financial Lines have experienced

hardened rates across all accounts, with rates

increasing by 100% for some lines depending on

loss experience and several macro factors.

Cyber is a relatively new product in Oman, therefore

high rates represent the lack of experience and low

level of risk mitigation strategies in place. Pricing

pressure is reinforced by several significantly

large losses in the Middle East which is cautioning

insurers and increasing prices.

There is a lack of capacity for Financial Lines

insurance in Oman, specifically there is no local

market capacity, therefore the market is heavily

dependent on the (re)insurers in the London and

international markets. The increase in pricing was

further reinforced by the effects of the pandemic

on the tourism and service industries.

Oman insurance market update 2020-2021 27


Marine

Marine | Marine Stock Throughput | Open Marine Shipments

25% average rate

reduction across all

Marine accounts

25% average decrease for free of loss

accounts

Key drivers

of rate change

∙∙

Changes to market capacity

Insurer

overall appetite

Marine – Cautious - Stable

Marine Stock Throughput – Stable

Expansive- Stable

Open marine shipments insurance – Stable

Overall coverage

terms

Terms have become more favourable

to clients across all sub-lines of Marine

insurance.

The Marine market in Oman is largely in line

with that of the UAE. The lower level of Marine

losses was underpinned by the suppression of

movement and trade as a result of the pandemic.

Furthermore, despite the reduction in capacity

from Lloyd’s of London syndicates for Marine,

there is high competition and capacity amongst

insurance companies for Marine insurance. The

lower loss ratios, coupled with the changes in

market capacity has placed downward pressure

on rates for Marine insurance.

28 Oman insurance market update 2020-2021


Motor Fleet

Motor Commercial Comprehensive | Motor Commercial Third Party

Zero average rate change

across all Motor Fleet

accounts

5-10% average reduction for free of loss

accounts

10% average increase for accounts with loss

experience

Key drivers

of rate change

∙∙

Competition

∙∙

Loss ratio

Insurer

overall appetite

Motor Commercial Comprehensive – Stable

Motor Commercial Third Party – Stable

Overall coverage

terms

Terms have become more favourable to

clients for Motor Commercial Comprehensive

Insurance and favourable to clients for Motor

Commercial Third Party insurance.

On average, Motor Fleet insurance experienced no

change in rates across all accounts during the last

year. Again, following the reduction of movement

as a result of government-enforced lockdowns in

response to the pandemic, there were far fewer

losses than in prior years. Therefore rates reflect the

favourable loss experience and the high competition

and capacity for Motor insurance in Oman.

Oman insurance market update 2020-2021 29


Property

Property All Risks (PAR) | Business Secure | Machinery Breakdown | Electronic Equipment

30% average rate increase

across all Property

accounts

20% average increase for free of loss accounts

40% average increase for accounts with loss

experience

Key drivers

of rate change

∙∙

Changes to market appetite/capacity

∙∙

Loss experience

∙∙

Geopolitical situations in the region

∙∙

Climatic changes and trends

Insurer

overall appetite

PAR – Cautious

Business Secure – Cautious

Machinery Breakdown – Cautious

Electronic Equipment – Cautious

Overall coverage

terms

Terms have become less favourable to

clients across all lines of business.

All Property lines of business have experienced

the same rate hardening. Pricing reflects the

hardening of reinsurance markets both locally and

internationally. Local insurers continued to struggle

to gain support from reinsurers who are abstaining

from Oman due to the frequency and severity of

natural catastrophe losses. For example, Cyclone

Shaheen caused widespread devastation and

significant losses during October 2020. Events

such as Cyclone Shaheen have further aggravated

the situation and restricted the capacity further for

Property insurance.

30 Oman insurance market update 2020-2021


Contacts

Atinc Yilmaz

Regional CEO Turkey, The Middle East and Africa

Atinc.Yilmaz@howdengroup.com

Rajiv Arora

CEO Howden Oman

Rajiv.Arora@howdenoman.com

Guru Arunachalam

Key Account Manager

A.Guruprasad@howdenoman.com

Michelle To

Head of Business Intelligence, Howden Analytics

M.To@howdengroup.com

Lauren Powell

Business Intelligence, Howden Analytics

Lauren.Powell@howdengroup.com

Oman insurance market update 2020-2021 31


One Creechurch Place, London, EC3A 5AF

T +44 (0)20 7623 3806

E info@howdengroup.com

www.howdengroup.co.uk

Howden is a trading name of Howden Insurance Brokers Limited, part of Howden Group

Holdings. Howden Insurance Brokers Limited is authorised and regulated by the Financial

Conduct Authority in respect of general insurance business. Registered in England and

Wales under company registration number 725875. Registered Office: One Creechurch

Place, London, EC3A 5AF. Calls may be monitored and recorded for quality assurance

purposes. 12/21 Ref: 6755

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