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The Oman Insurance Industry: Developments and Prospects
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CORPORATE GOVERNANCE IN THE OMAN INSURANCE INDUSTRY
1
The Oman
Insurance Industry
Developments and Prospects
2
The Omani Insurance Industry: Developments and Prospects
1
The Oman Insurance Industry

Dr. Khalid Said Al-Amri

College of Economics and Political Science
Sultan Qaboos University
[email protected]
Dr.Serkan Akguc
Carnegie Mellon University Qatar
[email protected]
Dr. Muhammed Altuntas

University of Cologne, Germany
[email protected]
Mr. Qais Al-Suhai

Capital Market Authority Oman
2018
2
In the year 2004, Royal Decree No.

(90/2004) has been issued to provide
legal cover for the transfer of terms
of Supervision and Observation of
insurance section from the Minis-try
of Industry & Trade to Capital Market
Authority(CMA)
An unexpected rise of
fuel prices worldwide
2004 2005 2006

3
• Licensing of Oman
Reinsurance Company
• Continuation of World
Financial Crisis
• Capital Market authority • Implementation of
raise the minimum capital e-connection between
requirement for insurance Royal Omani Police and
companies to 5 Million OMR Omani Insurance com-
panies
• After effects of disastrous
Cyclone Gonu • Establishment of a Merger of
complete framework AL-Ahlia
• Issuance of information in
in order to curb illegal Insurance and
regards of assets relates to
financial practices (Mon- Royal Alliance
Insurance Companies
ey Laundering & Terror Insurance
Financing) Company.
2007 2008 2009 2010 2011
• World Financial Crisis • Merger of Al-Nisr

• Issuance of Consolidated Insurance and Saudi
Motor Insurance Policy Arabia Insurance
• Issuance of Orange Card • Take over Lebanese
• Rise in compensation amount Insurance company by
of road accidents Zurich Insurance
• Sale of Alico (American
Life Insurance company)
to Met Life Insurance
• In an extraordinary
step, regulators allowed
national banks to sell
insurance product
4
Contents
7
Introduction
7
Direct Premiums
7
Life and Non-
Written (DPW) Life DPW, Market
and Market Share, and
Share Growth Rate
11 Non-Life Insurance
Before and After
12 2007
16 Life Insurance Before
and After 2007
8 11 23 24
Top 10 Insurers Market Investments by Key Insurer
in Oman by Concentration Subcategories Statistic
DPW in the Omani Profitability
Insurance Financial Strength
Industry Investment Income

Expense Ratio
Retention Ratio
8 11 23 24
Key Statistics Insurance Comparison of GCC Suggestions
on Insurer Density and Countries: Insurance for the Oman
Governance Insurance Statistics and Insurance
Penetration Economic Indicators Market
in Oman Insurance Premium Composition of
Volume Investments
Insurance Density Digital Innovations
and Penetration
Reporting Standards
Macro-Economic and Insurance
Indicators Penetration
5
List of Figures
8 Fig. 1: Structure of the Insurance Industry in the Sultanate of Oman
14 Fig. 2: DPW (in millions 2015 OMR) and Market Share (%) in 2015
15 Fig. 3: DPW (in millions 2015 OMR) and Growth Rate (%) in 2015
19 Fig. 4: Life and Non-life DPW (in millions 2015 OMR) and Market Share (%) in 2015
20 Fig. 5: Non-Life Business Before and After 2007
22 Fig. 6: Life Business Before and After 2007
23 Fig. 7: Top 10 Insurer in Oman by DPW (in millions 2015 OMR) in 2015
24 Fig. 8: Market Concentration in the Oman Insurance Industry
31 Fig. 9: Development of the Profitability of Omani Insurers (N=12)
32 Fig. 10: Development of the Financial Strength of Omani Insurers (N=12)
34 Fig. 11: Development of the Investment Income of Omani Insurers (N=12 )
35 Fig. 12: Development of the Expense Ratio of Omani Insurers (N=12)
35 Fig. 13: Development of the Retention Ratio of Omani Insurers (N=12)
38 Fig. 14: Average Executive Compensation (constant 2014 OMR per month)
40 Fig. 15: Development of Insurance Density in Oman
41 Fig. 16: Development of Insurance Penetration in Oman
43 Fig. 17: Premium Volume in GCC Countries by Insurance Business
12 Tab. 1: Statistics of the Oman Insurance Industry in Numbers (2004-2015)

16 Tab. 2: DPW, Market Share and Growth Rate by Insurance Business
28 Tab. 3: Investments by Subcategories
30 Tab. 4: Key Insurer Statistics
38 Tab. 5: Key Statistics on Insurer Governance
45 Tab. 6: Insurance Density and Penetration in GCC Countries
46 Tab. 7: Macro-Economic Indicators in GCC Countries
47 Tab. 8: Average Asset Allocation
51 Tab. 9: Insurance Markets by Penetration
6
The Omani Insurance Industry

7
1. Introduction
The Omani insurance industry is one of the largest in the Gulf region and plays an
essential role in the economic strength of the country. It employs a large number
of individuals and plays an enormous role in the economic development of the
country. The economic progress in Oman is reflected in the performance of the
insurance sector. The sector grew by 11% in 2015 compared to 2014, where the
direct gross premiums were about OMR 442 million in 2015. The available statistics
from the Capital Market Authority show that the insurance business in Oman has
a lot of potential for growth. Additionally, in comparison to the non-oil sector with
regard to GDP, the insurance sector has a growth potential of up to 60% in the near
future.
Accordingly, the Sultanate of Oman
has different agencies for the fair and
transparent moni-toring of corporate
practices in the insurance industry. The
roles of these agencies are not limited
only to monitoring but also to providing
a guideline and keeping an eye on their
regu-latory affairs. In fact, Oman is the
first country in the Gulf region that has
presented its own code of governance
for the transparent and secure practices
in corporate insurance. This code of
practice provides a balanced, transparent
platform for companies to operate their
business-es in a fair environment.
The leading regulators of the Omani
insurers industry are the Capital Market
Authority, the Muscat Securities Market,
the Ministry of Commerce, and the
Central Bank of Oman.
8
Policy Holders
1,722,803
(2017) Oman
Fig. 1: Structure of Reinsurance
the Insurance Indus- Company
try in the Sultanate
of Oman
Omani Unified
Capital Market Bureau for The
Orange Card
Authority
(22)
Agents Insurance
(36) Companies
Insurance
Brokers
9
In the following section, we present some key efforts that have been taken by the
government of Oman in order to regularize the insurance industry:
Royal Decree No 97/12: Introduction of a new law of insurance and its amendment
for the advancement of industry.
Ministerial decision No. 80/5: formulation of new executive regulations along with
amendments.
Ministerial Decision No 90/56: provides regulation about the financial investments
of in-surance companies which was also supported by some amendments through
ministerial decision no 260/93.
Ministerial decision No 99/95: Provides amendments and a new law of insurance for
ve-hicle operating in sultanate of Oman.
• Ministerial Decision No 101/95: Provides new regulations and amendments in
common vehicle instrument insurance along with extended information in regards
of personal ac-cidents in sultanate of Oman.
• Royal Decree No 51/2002: Provide information about the executive decisions and
amendments in regards of emergency funds for insurance sector.
• Regulation of Year 2003: Provides information about the amended procedures of
role of brokers involved in insurance business.
• Regulation of Year 2007: Provides extended information and regulations in regards
of role of brokers in insurance business.
• Code No 2004: Provides information about the professional behavior of insurance
sector operating in sultanate of Oman.
• Establishment of Oman Reinsurance: “Oman reinsurance” was established as the
first Omani company engaged in reinsurance. The establishment of the company
was to pro-vide reinsurance services in the Sultanate beside to direct insurance
services on one hand, and with the aim of increasing the proportion of insurance
premiums retained in the local economy and reduce the leakage of these premiums
to the outside in the event of re-insurance companies have re- foreign on the other.
• Regulation 2010: Provides information about the marketing of insurance products
through banks.
• Regulation 2011: Provides information about the procedures for obtaining broker’s
li-cense in sultanate of Oman.
10
Some additional important steps have been taken in regard of road traffic accidents
in sultan-ate of Oman:
1. A new system has been 2. The new system has minimized

introduced in sultanate of Oman the burden of visiting insurance
to simplify the procedures and companies and police stations
regulation in regards of road relates to insurance claims of road
accidents and their claims. accidents in Oman.
3. The new system has also eased 4. The new system is also providing
the operational duty of Royal an opportunity to Royal Oman
Oman police while they are police and the insurance
investigating or evaluating the companies to corroborate all
road accidents in Oman. relevant information for the
avoidance of unnecessary delays
and for the prevention from frauds
and false claims.
11
5. A detailed new law of vehicle 6. Insurance companies of Oman are

insurance has also been introduced actively participating in orange
in the sultanate. The law provides insurance card scheme. The
all the necessary guidance in case of purpose of orange insurance card
any death or injuries occurred due is to provide ease of access to the
to road accidents. Additionally, the borders of gulf countries to the
new insurance law is also providing residents and citizen of sultanate
a comprehensive structure of of Oman. Orange insurance card is
payment to the family of deceased an acceptable document all over
person to compensate their financial the gulf countries, which protects
bur-dens. The law also revised the all civilian rights of in case of any
accidental claims rate and providing road accidents.
a handsome amount of 15,000
OMR (in case of death), to provide
a financial relief to deceased family.
The law was promulgated through
Royal decree no 118/2008.
7. The insurance companies working 8. A platform of Oman insurance

in Sultanate of Oman are bound association is actively
to provide a sample of insurance communicating between the
documents for the vehicles, which insur-ance companies and capital
provides consolidated information market authority. This window
about the relation between is not only bridging the gap
insurance companies, beneficiaries between Insurance industry and
and the other parties. Issuance of the regulatory authority but also
these documents are protected by providing an opportunity to all
ministerial decision 95/100 with an insurance companies to act as a
amendment no K/8/2008. binding force.
12
Tab. 1: Statistics of the Oman Insurance Industry in Numbers (2004-2015)
Statistics in 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
numbers
Local insurers 8 9 10 10 11 11 11 11 10 10 11 11
Foreign insurers 9 8 7 7 8 11 11 11 10 11 11 11
Insurers in Oman 17 17 17 --17 19 22 22 22 20 21 22 22
Takaful insurers 0 0 0 0 0 0 0 0 2 2 2 2
Reinsurers 0 0 0 0 1 1 1 1 1 1 1 1
Brokers n/a n/a n/a n/a 15 19 23 26 29 31 36 36
Employees in the 974 1,038 1,107 1,325 1,635 1,691 1,925 1,909 1,980 2,170 2,376 2,525
Omani
Source: Authors’ calculation with numbers from the Capital Market Authority in Oman, n/a is not applicable.
The purpose of this report is to provide an overview of the Omani insurance sector.
The data utilized in this report is from the executive report of the Omani insurance
industry and from insurance reports from the Capital Market Authority. The report
will provide a basic under-standing, with the help of statistics, about the current
condition and future growth of the Omani insurance industry. The analyses on
company-level data are based on 22 insurance companies operating in Oman,
from which 11 have foreign origin. The following sections of the report will discuss
the statistics of different market key indicators to evaluate the size and the stability
of the insurance industry in Oman. Table 1 presents the key numbers of the Omani
insurance industry.
Direct Premiums Written (DPW) and Market Share
This section analyzes the market shares of the life and non-life sectors in the
Omani insur-ance market. With respect to the property-liability (P&L) sector,
the data obtained from the years 2004 to 2012 shows steady growth with few
concerns after the year 2012. In reality, the share of P&L in the insurance industry
was above 70% of the total market share. This per-centage also stayed the same
in the following year. In 2006, however, as shown in Figure 2, there was a slight
decline in the direct premiums written (DPW) for the P&L sector in Oman in which
the market share was below 70%.
13
The data also shows a steady growth in the P&L sector from 2006 until 2009. After
2009, a sudden fall can be observed until 2011, where the market share of the P&L
sector fell again below 70%. 2012 brought good news when DPW for P&L achieved
70% market share. After that, a decline can also be observed from the available
data, where the market share of P&L reached the level of 60% in 2015. This was
due to measures taken by the government to overcome its financial deficit, which
also includes the shrinking of government spending on ongoing projects.
The life insurance business remained steady in 2004, above 10% of the market
until the year 2010. After that, the market share of life insurance reached closer
to 20%. In 2011, this rise did not stay for long, and a sharp decline can be seen in
Figure 2, in which nearly 10% of the market share in 2015 was due to the increase
of non-life classes. Normally, the life insurance business in Oman increases every
year by around 4–5%, whereas the non-life classes (P&L and Health) increase by
around 10–14%.
This study also aims to discuss the health insurance business of insurance
companies, and thereby evaluate the development of the market shares of the
health insurance industry. The health market share in the Omani insurance industry
showed steady progress and stayed above 10% of the total Omani insurance
market from 2004–2006. Afterwards, a downfall can be observed, as shown in
Table 2, where the health insurance premiums represented nearly 10% of the
insurance market and remained the same for five consecutive years (2007–2011).
In recent years, however, it has become one of the major insurance classes and is
expected to provide better results in the near future.
The data obtained for the health sector also reveals an abnormal growth from
2013 onwards and reached 20% of total market shares in 2015. Figure 2 illustrates
the DPW of the health insurance industry for the period 2004 to 2015. The health
market share shows a steady growth with a significant rise from the year 2011.
In 2004, the health business in Oman rep-resented over 10% of the total market
share within the insurance industry. The market share remained similar for 2005
and 2006, consecutively. Afterwards, a gradual drop can be seen from the available
data, where the market share keeps steady below 10% and remains the same
from 2008–2011. After this period, a significant rise can be witnessed from the
availa-ble data from 2012–2015, where at the end of the period, the market share
of the health busi-ness reached 20% of the Omani insurance industry.
14
Fig. 2: DPW (in millions 2015 OMR) and Market Share (%) in 2015
Market Share in % of Total Direct Premiums Written

Total Direct Premiums Written (DPW) by Category
350 80%
300 70%
250 60%
200 USD/OMR = 2.60 50%

40%
150
30%
100
20%
50 10%
0 0
Millions 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
OMR
dpw_pl dpw_life dpw_health
dpw_pl Market Share dpw_life Market Share dpw_health Market Share
Health insurance appeared as a most influential sellable product available in the

insurance market of Oman. The insurance products available in Omani insurance
market are providing comprehensive solution to the citizens and residents living in
the sultanate. Health insurance is also attaining interest of people from different
backgrounds. The reports available from the insurance markets are also providing
evidences in this regard. As per the reports, health in-surance achieved the growth
rate of 37% in the year 2013-2014, when the direct installments for insurance sector
reported only for 20%.
The report from the capital market authority is also providing the extensive in-formation
about the total direct installments of 58.2 million OMR and 78.3 million OMR for the
year 2013 and 2014 respectively. They also showed the exponential growth of 34
% for the year 2013 (As per the data available from 11th edition of CMA financial
report). The recent rise in the sale of health insurance products and commitments of
Omani Government in regards of mandatory health insurance for the entire private and
government sector employees. Private companies are bounded by the law to provide
mandatory health insurance from the year 2018. So, it is not hard to anticipate that the
health sector will be the dominating sector for the period of 2018-2020.
Figures 2 and 3 and Table 2 also illustrate the DPW for P&L, health, and the life
insurance business for the period 2004 to 2015. In 2004, the DPW for P&L was 72.6
million (OMR) with a market share of 70.6% of the total Omani insurance industry.
The available data also shows a 14.8% growth for DPW in 2005, whereas the DPW for
2005 was 83.3 million (OMR).
15
Fig. 3:DPW (in millions 2015 OMR) and Growth Rate (%) in 2015
Growth Rate in % of Total Direct Premiums Written

70%
350
60%
300 USD/OMR = 2.60 50%
40%
250
30%
200 20%
10%
150
0%
100 -10%
-20%
50
-30%
0 -40%
Millions 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
OMR
dpw_pl dpw_life dpw_health
dpw_pl Market Share dpw_life Market Share dpw_health Market Share
Additionally, Table 2 and Figures 2 and 3 also confirm a 16.4% growth of DPW
in the P&L sector of the Omani insurance industry. The available data from 2006
also shows the DPW at 97.0 million (OMR) and confirms the stable growth of
the P&L sector. The data acquired for 2007, also demonstrates growth in the P&L
sector of the Omani insurance industry, where the DPW was 115.5 million (OMR)
and the growth rate 19.1%. A significant rise in DPW for the P&L sector of the
Omani insurance market can also be seen from Figures 2 and 3 and Table 2, where
there was 146.6 million (OMR) in DPW, with a considerable growth rate of 26.9%
recorded in 2008 in the P&L sector of the Omani insurance market.
The following year, re-sults were not as good due to a substantial decline in the
growth of the P&L sector. In 2009, growth in DPW declined to 18.8% as compared
to a 26.9% growth in 2008. The trend of con-tinuous decline was also followed in
subsequent years, where the recorded growth in DPW reached 3.0% and 4.7% in
2010 and 2011, respectively. The year 2012 was a huge sigh of relief for the Omani
insurance market when a dramatic change occurred in the growth of DPW, with
the growth rate reaching 28.4% in the P&L sector of the Omani insurance market.
The period of 2013–2015 was yet again not as favorable for the Omani insurance
market, as the market witnessed a significant fall in the market shares of the P&L
sector. A notable col-lapse of growth rate of personal insurance occurred in the
period of 2011-2012 and in the year 2015.
16
Tab. 2: DPW, Market Share and Growth Rate by Insurance Business

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
P&L DPW millions 20.6 40.7 56.3 55.6 72.6 83.3 97.0 115.5 146.6 174.1 179.4 187.9 241.2
(2015 OMR)
Market Share (%) 74.9 79.9 80.2 73.2 70.6 71.0 67.2 70.1 70.4 73.2 72.4 67.2 73.8
Growth of DPW (%) - 97.6 38.3 -1.2 30.6 14.8 16.4 19.1 26.9 18.8 3.0 4.7 28.4
Life DPW millions 6.43 8.32 9.84 10.4 15.68 16.52 26.05 31.26 41.11 40.38 40.87 60.8 43.8
(2015 OMR)
Market Share (%) 23.4 16.3 14.0 13.7 15.3 14.1 18.1 19.0 19.7 17.0 16.5 21.7 13.4
Growth of DPW (%) - 29.5 18.2 5.7 50.8 5.3 57.7 20.0 31.5 -1.8 1.2 48.7 -27.9
Health DPW millions 0.48 1.94 4.05 9.93 14.55 17.44 21.21 18.07 20.6 23.31 27.55 31.0 41.83
(2015 OMR)
Market Share (%) 1.7 3.8 5.8 13.1 14.2 14.9 14.7 11.0 9.9 9.8 11.1 11.1 12.8
Growth of DPW (%) - 308.5 108.9 145.0 46.5 19.9 21.6 -14.8 14.0 13.1 18.2 12.6 34.9
Source: Authors’ calculation
The available data shows that growth in 2013, 2014, and 2015 was only 9.5%,
4.9%, and 3.5%, respectively, with DPW for those years recorded at 263.9, 276.8,
and 286.6 million (OMR), respectively. Apart from this, the acquired data also shows
that the P&L sector was still higher than other sectors as it had a market share of
over 60% in the Omani insurance industry.
Figure 3 illustrates DPW and the growth rate of the different sectors of the Omani
insurance industry. The line graphs in Figure 3 show the rise and fall of the growth
rate in the different sectors of the Omani insurance market during the period of
2004–2015. The available data shows that the growth of the health business in
2004 was above 100%, but after that a consid-erable fall (19.9%) occurred in
2005. The data available from 2007 also reveals a drop in the growth rate at
−14.8%. In contrast, a substantial growth can be seen during the following years,
where a sustained growth can also be witnessed in the health sector of the Omani
in-surance industry. The period of 2012–2015 was the ideal period for the health
sector of the Omani insurance industry, where the DPW increased consecutively
with a growth rate of 34.9%, 39.2%, 34.15%, and 31.3%, respectively.
Table 2 and Figures 2 and 3 show the number of total DPW by their categories. In
2004, the DPW for the P&L sector for the Omani insurance industry were 72.6 million
(OMR), where-as they were 15.68 million (OMR) and 14.55 million (OMR) for the
17
life and health sectors, respectively. While the figures from 2005 show that DPW
for the P&L sector were 83.3 mil-lion (OMR), they were 16.52 million (OMR) and
17.44 million (OMR) for the life and health sectors of the Omani insurance industry,
respectively. The data available from 2004 until 2006 shows substantial growth. In
2007, the health sector of the Omani insurance industry faced a decline of 14.8% in
comparison to the previous year. The data available for the year 2008 also shows an
incremental rise in the market share of 70.4% and 19.7% in the life insur-ance and
P&L sectors of the Omani insurance industry, respectively, but during the same year
(2008), the market share of the health business of the Omani insurance industry
declined to 9.9%, compared to 11.0% in 2007. The figures available from Table 2
also reveal that the DPW for 2009 were 174.1 million (OMR), 40.38 million (OMR),
and 23.31 million (OMR), respectively. The market share of the P&L business of
the Omani insurance industry was 67.2% in 2010, whereas during the same year,
the life insurance business shrank and only reached 16.5% of the Omani insurance
market. Whereas the health sector kept growing and imparted a share of 11.1%,
the growth in the P&L business was only 4.7% in 2011. During the same time, the
life insurance business of the Omani insurance industry observed a dra-matic rise
in its activities, with its market share reaching 21.7%.
Accordingly, the available data shows that the DPW of P&L increased in 2012,
2013, and 2014 with 241.2 million (OMR), 263.9 million (OMR), and 276.9 million
(OMR), respec-tively. The available statistics show a fall in the life insurance
business for the years 2012 and 2013 from 43.83 million (OMR) to 37.85 million
(OMR). Subsequently, the years 2014 and 2015 showed some improvement in
the life insurance business, with DPW at 41.65 million (OMR) and 52.96 million
(OMR), respectively. A dramatic rise can be observed from the data available from
2012 and onwards for the health insurance business, with substantial growth in
DPW reaching 34.9%, 39.2%, and 34.1% for the years 2012, 2013, and 2014, re-
spectively. This can also be witnessed in 2015 when DPW grew to 31.3%. Apart
from the above discussion, the total P&L was much higher than other sectors with a
market share of over 60%, whereas the market share of the life insurance business
kept declining from 20% in 2011 to 10% in 2015.
Additionally, the statistics reveal that the absolute premium from P&L has been
growing year to year, however its market share fell in 2011 and also after 2013 due
to the high growth rate seen in the medical and life insurance sectors. This trend
might have been exacerbated by the falling rates of insurance premiums in the
property, engineering, and energy segments. To stabilize the life insurance market,
18
Omani insurer might combine life insurance with a sav-ings plan that also include
hospital care coverage. A multinational insurance company has launched a similar
product in Indonesia (see Altuntas et al., 2017).
To sum up, Oman showed a remarkable growth in the insurance sector for the
period of 2007-2014. The figures available from Insurance markets gives an edge
to Omani insurance industry over other gulf insurance industry (Saudi Arabia is not
including in that as they had the growth rate of 18% for the said period). Omani
insurance industry witnessed the growth rate of 14 % in the year period of 2007-
2014. Whereas the growth rates for the year 2015 was 8% (as per the documents
available from insurance companies). However, other insurance products has
provided the productive results in the last four years, where the standalone growth
of engineering sector was around 12% for the year 2013.
Life and Non-Life DPW, Market Share, and Growth Rate
The data available for the period from 2000 to 2015 shows a steady growth in the
non-life sector of Omani insurance companies (see Figure 4). The DPW in 2004 for
non-life insurance were 72.6 million (OMR), while the market share of non-life
insurance in the same year was 70.6%. The data for 2005 shows a slight rise in
DPW in 2005, with the market share for non-life insurance being at 71.0% of the
total market share. Subsequently, the data in 2007 also shows the same scenario,
with DPW’s growth at 115.5 million (OMR) and a market share of 70.1% of the
total Omani insurance industry. In addition to that, the DPW for the years 2008,
2009, and 2010 were 146.6 million (OMR), 174.1 million (OMR), and 179.4 million
(OMR), respectively. The growth in the market share for the above-mentioned
years was also consid-erable, with life insurance maintaining respectively a 70.4%,
73.2%, and 72.4% share of the Omani insurance market during that period.
The data from 2011 shows a dramatic fall in the market share of the Omani non-life
insurance market to 67.2% of the total insurance market. DPW for the years 2012
and 2013 were noted as 241.2 million (OMR) and 263.9 million (OMR) with a market
share of 73.8% and 73.3%, respectively. The market share for non-life insurance
for the years 2014 and 2015 continued to decrease, though DPW substantially rose
from 276.8 million (OMR) to 286.6 million (OMR). This phenomenon was due to
the family insurance business being underwritten by the two Takaful insurance
companies, while at the same time, the other local insurance com-panies were
continuing to grow at a normal rate over the course of those years.
19
Fig. 4: Life and Non-life DPW (in millions 2015 OMR) and Market Share (%) in 2015
Market Share in % of Total Direct Premiums Written

350
80%
300
70%
250 USD/OMR = 2.60 60%
200 50%
150 40%
100 30%
50 20%
10%
0
0
Millions
OMR
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
dpw non-life dpw life

Market Share dpw non-life Market Share dpw life
Accordingly, the life insurance sector of the Omani insurance market also showed
a steady growth with rising and subsequent falls in a few instances. The market
share of the life sector of the Omani insurance industry in 2004 was 29.4% with
DPW at 34.0 million (OMR). In 2006, the market share of the Omani insurance
industry exceeded 32.8%, with DPW at 47.3 million (OMR). Afterwards, a steady
growth can be observed from the data for the period of 2007–2015, where the
DPW for the year 2008 reached 61.7 million (OMR) with a market share of 29.68%
of the Omani insurance industry. Subsequently, the DPW for 2010 were 68.4 million
(OMR) with a market share of 27.6% of the Omani insurance market. A signifi-
cant rise can also be observed in 2011, when the DPW for life insurance of the
Omani insur-ance industry reached 91.8 million (OMR) with an increase in the total
insurance market share to 32.8%. The trend of this abnormal growth can also be
seen from 2013 to 2015, where DPW for the Omani insurance market reached 96.0
million (OMR), 119.7 million (OMR), and 155.5 million (OMR) with market shares
of 26.7%, 30.2%, and 35.2%, respectively. It should also be noted that employee
benefit insurance (comprising of life and medical) be-came more commonplace
in 2010. Companies wanted to provide better benefits to retain their employees.
Foreign insurance company branches became more active in developing life in-
surance products. Banks became more active in selling insurance with life and
savings as key products. There was also increased activity in building the mortgage
20
sector, with the govern-ment requiring that all home-buying loans subsequently
be covered by life insurance policies.
As the portfolio of non-life insurance is larger than the life insurance, the total
direct premi-ums for non-life insurance are larger. Insurance products of non-life
sector in Oman wit-nessed a huge growth of 12% in the year 2013. As evident,
there is a big challenge for life insurance to penetrate, since there is some religious
binding which stops Omani society to buy life insurance products. However, the
sale of life insurance can be improved by altering life insurance products according
to basic Islamic principles (see Altuntas et al., 2011).
1. Non-Life Insurance Before and After 2007
Figure 5 shows the market share of non-life insurance before 2007, with the major
portion of non-life insurance being comprised of motor insurance at 56%, followed by
property insur-ance at 23%, marine insurance at 11%, and liability insurance at 4%.
Fig. 5: Non-Life Business Before and After 2007
PROPERTY
23%
MARINE
11%
6% OTHER
56% 4% LIABILITY
MOTOR
Before 2007
PROPERTY
22%
MARINE
7%
6%
OTHER
4% LIABILITY
61%
MOTOR
After 2007
21
Figure 5 also reveals the data about non-life insurance after 2007, where a
substantial growth can be seen in the motor insurance of the Omani insurance
industry. Motor insurance during that period remained the main driving force of
the non-life sector of the Omani insurance industry and increased in market share
holding since the period immediately preceding 2007. The figures show a significant
rise in the market share percentage of motor insurance after 2007, when it reached
61% in comparison to the period before 2007 when it was only 56% of the total
Omani insurance market. The data shows that motor insurance kept rising while
oth-er businesses declined (Marine) or stayed stable (Property). The rise in the
motor insurance business was one of the causes of abnormal growth in the non-
life insurance business after 2007. Liability insurance only covered 4% of non-life
insurance, whereas property insurance covered 22%, and marine insurance covered
only 7% of the non-life insurance business of the Omani insurance industry.
61%
after 2007
56%
before 2007
the market share percent-
age of motor insurance
22
2. Life Insurance Before and After 2007

The life insurance business of the Omani insurance industry is mainly comprised
of the life and health insurance sectors. The data available from Figure 6 shows
substantial growth in the health sector with simultaneous shrinking of the life
insurance sector. The life insurance of the Omani insurance sector was 52% before
2007, whereas it was 48% after that.
The data reflects the reality on the ground during that time, where life insurance
was declin-ing and health insurance was rising as medical coverage became an
increasingly major priori-ty for local businesses in the Sultanate. The government
encourages and tries to bring new laws making health insurance mandatory for
the employees of private businesses. Figure 6 also shows the substantial growth
in the health sector. This trend can also be observed from the data from the year
2007 and onwards. It should be noted that medical insurance before 2007 was not
very common. Medical insurance was mainly for expats and did not apply to most
Omanis, who were automatically covered by the government at no cost, unlike
the cur-rent situation where everyone tends to get coverage under a scheme for
availing the insurance policies for outbound medical tourism. Interestingly, the
financial crisis in 2008 had no sig-nificant effect on the insurance market in Oman.
The only change is the increase in DPW in the health market, which started in 2012
and achieved its peak in 2015.
Fig. 6: Non-Life Business Before and After 2007
LIFE 52% 48% HEALTH LIFE 52% 48% HEALTH
Before 2007 After 2007

23
Top 10 Insurers in Oman by DPW

Figure 7 shows the top 10 insurance companies in Oman by DPW in 2015. It can be
seen that the Omani insurance industry is dominated by local insurance companies.
The biggest player with respect to DPW is National Life Insurance and General with
90.6 million (OMR) DPW for the year 2015, while Dhofar Insurance stands next to
that with DPW totaling 65.4 million (OMR). Two foreign companies are also on the
top 10 list in terms of total direct premiums, namely New India Assurance and Axa
Insurance, with total direct premiums of 28 million (OMR) and 25.1 million (OMR),
respectively.
Fig. 7: Top 10 Insurer in Oman by DPW (in millions 2015 OMR) in 2015
National Life Insurance

and General 90.6
Dhofar Insurance 65.4
Oman United Insurance 38.7
AL Madinah Takaful 31.0
AL Ahlia Insurance 30.6
The New India Assurance 28.0
Axa Insurance 25.1
USD/OMR = 2.60
Oman & Qatar Insurance 19.1
Vision Insurance 18.4
Falcon Insurance 17.3
Local Insurer
Foreign Insurer
24
Market Concentration in the Omani Insurance Industry

Figure 8 shows the market concentration of the top 3 and top 5 insurance companies based on
DPW, indicating low competition in the Omani insurance market. The market concentration of
the top 3 insurance companies in 2004 was 54.9%, whereas it was 53.0%, 53.8%, and 53.7%,
respectively, for the years 2005, 2006, and 2007. Figure 8 also shows a slight fall in 2008 when
the market share of the top 3 companies decreased to a level of 49.9%. This trend also followed
in the subsequent years, when the market share of the top 3 companies contin-ued to decrease,
though total growth in the life and non-life sectors of the insurance business kept increasing.
For the period 2013 to 2015, the market share of the top 3 insurance compa-nies stayed stable
around 44.0%. Similar patterns can be observed for the top 5 insurers in the market. Common
is that the top insurers are local companies enjoying a big slice of the Oma-ni insurance market.
The share of the top 5 insurers in 2004 was 69.2%, whereas it was 70.5% the following year,
while the share declined a bit in 2006, 2007, and 2008, with from 68.9 to 66.3%, and 65.5%,
respectively. A huge fall can also be observed during the years 2009 and 2010, when the
market share achieved 59.7% and 57.8%, respectively, while in 2011, the market share of the
top 5 insurers increased a bit and reached 61.0% of the total share of the Omani insurance
industry. The period 2012 to 2015 reveals consistency in the competitiveness of the market,
with the top 5 insurers holding between 58.0% and 59.2% of the total market share.
Fig. 8: Market Concentration in the Oman Insurance Industry

Share of Top 3 Insurers
60.0%
40.0%
44.0%
44.0%
54.9%
53.8%
42.0%
53.0%
43.5%
53.7%
41.0%
49.9%
41.4%
45.1%
20.0%
0.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Share of Top 5 Insurers
80%
60.0%
40.0%
68.8%
58.0%
66.3%
65.5%
70.5%
59.2%
59.2%
69.2%
57.8%
61.0%
61.5%
59.7%
20.0%
0.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
25
that the local insurers are the market driving force; whereas the foreign insurance
companies have currently low effects on the market competition. A cross-country
study by Berry-Stölzle et al. (2013) shows that the average market share of five
largest insurers in developed insur-ance markets like Germany, France and Sweden
is about 41%. This implies that competition is stronger in saturated markets than
in growing markets like Oman.
Investments by Subcategories
A set of regulations named “insurance asset companies regulations” (KH/11/2007)
has also been formulated by regulators. These regulations contain all the procedural
information (limi-tation and boundaries) about the investment for the insurance
companies operating in the sul-tanate. The following are the glimpse of some
limitation and boundaries formulated by regu-lators for the ease of doing business
in Oman.
Insurance companies operating in Insurance companies can invest in

Oman are required to invest 75% of local commercial bond up to 30%
their total portfolio inside the Oman. of total invest-ments.
Whereas they can keep up to 25%
of their total investment abroad
(out-side the Oman). While they are
also allowed to keep less than 30%
in banks in form of deposits.
Insurance companies can invest Insurance companies can invest in

in shareholding companies where secured loans with life insurance
they can keep funds up to 40% of documents with up to 20% and no
total investments. more.
26
Table 3 shows the breakdown of the total investment of insurance companies in

Oman. The data covers the period of 2000 to 2015, which includes statistics of
insurance companies’ investments in cash deposits, bonds, and Foreign Investment
(FI) securities, stocks, and other variable instruments, mortgages and loans, and
investments in the real estate sector. While considering the total assets of Omani
insurance companies, cash was the major category fol-lowed by bonds, stocks,
mortgages, and real estate. In 2003, the cash deposits of Omani in-surance
companies were about 43.2 million (OMR), while for the years 2004, 2005, 2006,
and 2007 they were 88.4 million (OMR), 104.0 million (OMR), 122.0 million (OMR),
and 153.4 million (OMR), respectively. The period 2003 to 2007 can be considered
a volatile period with erratic changes, whereas after 2008, cash deposits stabilized
between 40% and 42%, with cash deposits increasing every year from 177.0
million (OMR) in 2009, to 207.9 million (OMR) in 2010, 223.7 million (OMR) in
2011, and 251.9 million (OMR) in 2012, respectively.
Similarly, the data shows a significant growth during the period of 2013 to 2015.
Cash depos-its in 2013 were 286.7 million (OMR) compared to 340.7 million (OMR)
in 2015. For the period of 2000 to 2003, the total percentage of investment in
terms of cash deposits was about 42–45%, whereas the investment in terms of
cash deposits was stable during the period of 2004 to 2015, with total investment
in cash between 67% and 68.5%.
In addition to that, Table 3 also shows the investment in cash deposits as a
percentage of total assets. For the period of 2000 to 2003, the percentage of the
total was between 28–31%. Thereafter, a significant rise can be seen in 2004 with
a substantial rise in total assets that was nearly 50%. Additionally, the percentage
of total assets was 36–50% for the period of 2005 to 2015.
Information about bonds and other FI securities are also presented in Table 3. For
the year 2004, bonds and other FI securities had a value of 14.7 million (OMR),
which corresponds to 11.3% of total investments and 8.2% of total assets. During
the period of 2005 to 2009, a substantial growth in the investment of bonds and FI
securities occurred, when investments increased from 17.4 million (OMR) to 29.4
million (OMR), with the total investment rate stably hovering at 11.3%.
Accordingly, the data from 2010 to 2015 reveals the same scenarios of substantial
growth in bonds and other FI investments, which increased from 34.6 million
(OMR) to 64.8 million (OMR). In addition, we can observe an incremental growth
in total assets from 7.0% to 8.3% for the period of 2010 to 2015. It is also worth
27
noting that Omani insurers began withdrawing from bonds and FI securities after
2004. During the period 2000 to 2003, those investments accounted for more than
23%, but after that, the share of bonds stayed around 8% of total assets. Omani
insurers seriously began pulling out of bond investments after 2004. This change
may be due to the fact that the share of bonds stayed at about 8% for the post-
2004 period, while it was more than 23% in the 2000 to 2003 period due to the
strategic decisions made by the insurance companies. Additionally, it may also
stem from the fact that other in-vestment instruments were giving a higher rate of
return than the corporate and governmental bonds during this period.
Table 3 also reveals the investment of Omani insurers in stocks and other variable
interest instruments. In 2004, the investment of Omani insurers was about 18.3
million (OMR), which increased to 21.8 million (OMR) in 2015 with corresponding
percentages of total as-sets of 10.2% and 10.4%, respectively. The following
years show stable patterns in terms of total investments for the period of 2004 to
2014 with 14.1%. Interestingly, a significant rise can be observed in 2014 when
investment reached 15.3%, with a slight fall (2.4%) in 2015, which was about
12.9%.
21.8
million
18.3 2015
million
2004
the investment of Omani insurers in stocks and other

variable interest instruments.
Subsequently, mortgages were relatively low for the period of 2004 to 2015. For
the period 2004 to 2012 the investment for mortgages was between 1.0 million
(OMR) and 2.4 million (OMR). Then, investments reached 3.2 million (OMR) in
2013. The situation remains the same for the following years (2014 and 2015),
where investment lies between 3.2 million (OMR) and 3.5 million (OMR).
28
Apart from this, the real estate investments become more important, especially after
2004. They maintain a share of 3.4% relative to the total assets. The total investment
in 2004 was 7.4 million (OMR) in real estate by Omani insurers, which gradually rose in
the following years. This can be seen from the trend of investments by Omani insurers
in the real estate sector from Table 3. The data shows stability in total investments at
5.7% throughout the whole period, reaching 29.6 million (OMR) in 2015.
Remarkable is that the cash category was volatile from 2003 to 2007, which was due
to the global financial crisis. The insurance companies became more conservative in
their invest-ment strategies and increased their investments in cash and bank deposits
Tab. 3: Investments by Subcategories
2000 2001 2002
Cash Deposits with credit institutions (in millions 2015 OMR) 32.3 37.7 40.9
% of Total Investments 44.8 47.4 44.7
% of Total Assets 31.4 31.4 30.3
Bonds & Other FI Securities (in millions 2015 OMR) 25.5 28.0 32.0
Stocks and Other Variable Instruments (in millions 2015 OMR) 11.7 10.9 13.6
Mortgage & Loans (in millions 2015 OMR) 2.0 1.9 1.9
Real Estate (in millions 2015 OMR) 0.7 1.1 2.9

Total Investments (in millions 2015 OMR) 72.1 79.5 91.4

Total Assets (in millions 2015 OMR) 103.0 120.0 135.0
Source: Authors’ calculation.
29
to limit their losses from equity markets and to preserve their capital. Also, since the
value of other investments went down, the percentage and amount of cash deposits
automatically went up in the overall investment portfolio. However, a strong cash
category means that Omani insurers do not par-ticipate well in financial markets to
achieve high yields. This might be the reason why the investment incomes decrease
especially during the years 2013 to 2015 (see section 7.3). While investment in stocks
is relatively stable for the entire period at 8–12%, stocks form a very small part of the
insurance companies’ portfolio. In many companies, these investments are blocked in
private equity and private companies, which are not very easy to liquidate.
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
43.2 88.4 105.0 122.0 153.4 171.3 177.0 207.9 223.7 251.9 286.7 320.2 340.7
42.8 68.1 68.1 68.1 68.1 68.1 68.1 68.1 68.1 68.1 68.1 68.5 67.7
28.6 49.5 50.3 47.1 36.6 42.2 41.0 42.2 41.6 42.7 40.1 42.0 43.8
33.4 14.7 17.4 20.3 25.5 28.5 29.4 34.6 37.2 41.9 47.6 45.6 64.8
33.1 11.3 11.3 11.3 11.3 11.3 11.3 11.3 11.3 11.3 11.3 9.8 12.9
22.1 8.2 8.4 7.8 6.1 7.0 6.8 7.0 6.9 7.1 6.7 6.0 8.3
18.6 18.3 21.8 25.3 31.8 35.5 36.7 43.1 46.4 52.2 59.4 71.7 64.8
18.4 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 14.1 15.3 12.9
12.3 10.2 10.4 9.8 7.6 8.7 8.5 8.7 8.6 8.8 8.3 9.4 8.3
2.0 1.0 1.2 1.4 1.7 1.9 2.0 2.3 2.5 2.8 3.2 3.9 3.5
2.0 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.7
1.3 0.6 0.6 0.5 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.4
3.6 7.4 8.8 10.3 12.9 14.4 14.9 17.5 18.8 21.2 24.1 26.1 29.6
3.6 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.6 5.9
2.4 4.2 4.2 4.0 3.1 3.5 3.5 3.6 3.5 3.6 3.4 3.4 3.8
101.0 129.8 154.2 179.3 225.3 251.7 259.9 305.4 328.5 370.0 421.1 467.6 503.3
151.0 178.7 208.8 259.3 419.0 406.3 431.6 492.6 537.2 590.1 714.2 761.4 778.0
30
Key Insurer Statistics

Table 4 provides key aggregate information about the profitability, financial strength,
in-vestment income, and expense ratio of all insurance companies and differentiates
between local and foreign insurers operating in the Sultanate of Oman. In the
following subsections, we discuss these key statistics in detail.
Tab. 4: Key Insurer Statistics

Key Statistics All Insurers Local Insurers Foreign Insurers
(N=12) (N=12) (N=12)
Mean Median SD Mean Median SD Mean Median SD
Profitability 0.028 0.029 0.032 0.046 0.043 0.039 0.018 0.001 0.087
Financial Strength 3.236 2.685 1.159 4.851 4.338 1.260 1.717 1.412 1.927
Investment Income 0.033 0.024 0.017 0.035 0.029 0.029 0.031 0.025 0.021
Expense Ratio 0.235 0.242 0.054 0.224 0.234 0.039 0.254 0.270 0.083
Notes: “Profitability” is calculated as profit/loss before tax divided by total assets. “Financial Strength” is
capital plus surplus divided by net premiums written. “Investment Income” is the net investment income
di-vided by total assets. “Expense Ratio” is the net operating expenses divided by net premiums written. SD
denotes the Standard Deviation, N denotes the number of insurers.
1. Profitability
The profitability of any company depends on the yielding gain and is measured as
profit/loss before tax divided by total assets. The Omani insurance companies have a
mean profitability of 0.028 for the period of 2004 to 2015; the median for the same
period of time is 0.029 with a standard deviation of 0.032. While the local Omani
insurers have a mean profitability of 0.046 for the entire period, foreign companies
have relatively low profitability rates of 0.018. This might be due to the fact that
local companies enjoy information advantages over foreign competitors e.g. in local
assets and consumer needs (e.g., DeYoung and Nolle, 1996; Maha-jan et al., 1996).
Figure 9 shows the profitability of the Omani insurance industry for the period of
2004 to 2015. The profitability of foreign insurance companies in Oman showed
a decline from 2005 to 2007, culminating in a total profitability of foreign insurers
close to -11% in 2007. It is worth noting that this was during the time when Oman
was hit by a natural disaster (GONU), whose impact greatly affected the Omani
economy and cost around 3 to 4 billion (OMR) in economic losses, of which only
245 million (OMR) (approximately USD 600 million) were insured. Apart from this,
there was a significant rise in 2008 that was due to the implementa-tion of a new
motor insurance law, which makes every Omani vehicle holder obtain an insur-ance
31
policy for his or her vehicle. In 2009, 2010, and 2011, the profitability of foreign
Omani insurers fell 3.7%, 6.3%, and 0.4%, respectively. That was due to the global
financial crisis of 2008 compelling many foreign firms to consolidate their operations
worldwide, which, in turn, greatly impacted their growth rate.
In 2012, the profitability of Omani foreign insurers gradually gained with 0.9%, and
this trend also followed in 2013 and 2014 at the rate of 1.7% for each, respectively.
Fig. 9: Development of the Profitability of Omani Insurers (N=12)

25%
20%
15%
10%
5%
0
-5%
-10%
-15%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
ALL Firms Local Foreign
Notes: “Profitability” is calculated as profit/loss before tax divided by total assets. N denotes the number of years.
Figure 9 also shows the profitability of local Omani insurers, where the profitability
was above 10% in 2004, but after that, the profitability decreased and reached
around 5% in 2006. Interestingly, local Omani insurers were able to make a profit in
2007 despite natural disas-ters in that year, while in 2008 Omani local insurers fell
in profitability to around -4%. In 2009 and later, the trend shows a steady growth in
the profitability of Omani insurers, where-as starting in 2012, profitability of Omani
insurance companies began to decline from 6.4% in 2012 to 5.8% in 2013, and from
3.7% in 2014 to 3.1% in 2015.
2. Financial Strength
The Royal Decree No. 39/2004 ensures that all insurance companies (foreign or
local) operat-ing in Oman must be a shareholder company. Another law relates to
the commercial compa-nies who are performing insurance activities in Oman must
require keeping the minimum capital position of 10,000 OMR for their operation in
the sultanate. The law also provided a 3-year grace period to all insurance companies
for the fulfillment of necessary arrangements provided in the insurance companies
law (ended in 17/08/2017).
32
One way to operationalize the financial strength of insurers is to divide capital plus
surplus by the net premium written. The mean of the financial strength for all insurers
is 3.236 for the period of 2004 to 2015, whereas the median for the same period
is 2.685, with a standard deviation of 1.159. The mean for the financial strength of
all local companies is 4.851, whereas the median score is 4.338, with a standard
deviation of 1.260. While the mean for all foreign insurers in Oman is 1.717, with
a median score of 1.412 and a standard deviation of 1.927. It is evident that the
financial strength of local insurers is almost three times greater than the average of
foreign insurers.
As presented in Figure 10, the financial strength of local Omani insurers was around
5 in 2005. Then a substantial fall can be seen in 2006, when the financial strength
decreased near-ly to 4.4. This was due to the arrangements of reinsurers and the
retention ratios, which was very low at that time. In fact, the paid-up capital to some
companies was very low also. After that, the paid-up capital increased, which was
due to regulations. More premiums translated to more reserves, and the business
ceded to the reinsurers meant the retention ratio was at a minimum.
Fig. 10: Development of the Financial Strength of Omani Insurers (N=12)
8
7
6
5
4
3
2
1
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Notes: “Financial Strength” is calculated as capital plus surplus divided by net premiums written. N denotes
the number of years.
The financial strength of all Omani insurers for the period of 2000 to 2015 is also
shown in Figure 10. The reported statistics show that the financial strength of locals
becomes relatively weak after 2014, while for foreigners it is stable. This is due to a
decrease in underwriting results and the return on investment from the stock market
achieved by local companies. Moreover, the foreign companies were only investing
in the bank deposits that guarantee a fixed rate of return. As foreign firms are guided
by their global policies, they are often re-stricted in how much they can grow beyond
33
a certain limit. Hence, the financial strength of these companies shows a stable value.
These companies tend to have strict underwriting dis-ciplines, are able to leverage a
higher level of technical expertise from their parent compa-nies, and thus operate at
lower costs, which is significant for their financial stability. Having said that, it must be
pointed out that many of these foreign companies faced a high degree of instability
in their home countries – of which, AIG, RSA, and Zurich are some recent exam-ples.
3. Investment Income
The investment income is defined as the net investment income divided by the total
assets. The mean investment income of all insurers is 0.033, whereas the median
is 0.024, with a standard deviation of 0.017 for the period of 2004-2015. The mean
investment income of local insurers is 0.035, whereas the median is 0.029, with a
standard deviation of 0.029 for the same period. Subsequently, the mean investment
income of all foreign insurers is 0.031, whereas the median is 0.025, with a standard
deviation of 0.021 for the period of 2004-2015. Similar to the financial strength, local
insurers possess higher investment income than for-eigners.
Figure 11 shows the investment income of local and foreign insurers operating in the
Sultan-ate of Oman. The investment income of foreign insurers in 2004 was below
4%, whereas the investment income for the year 2005 was slightly above 3%, while
substantial growth can be seen for the year 2006, where it reached a value closer
to 6%. In 2008, the investment income of foreign insurers grew disproportionately
to almost 8%. Then a decline can be seen, where a gradual decrease was evident
in the years 2011, 2012, and 2013. A slight improvement can, however, be seen in
2014, where investment income reached a value closer to 2%. Apart from this, the
investment income for the year 2015 was reported below 2%.
Figure 11 also reveals the investment income of local Omani insurers. The investment
in-come of local insurers was 6.2% and 7.1% for the years 2004 and 2005, respectively.
Then after a drastic fall occurred in 2006, investments reached 2.6%. A dramatic rise
can be seen for the year 2007 when investment incomes reached 9.0%, whereas the
investment income for local insurers lied between 2% to 4% for the period 2009 to
2014. Apart from this, the investment income of Omani insurers reached the level of
1.4% in 2015. The data shows so many transitions in the investment income of local
Omani insurers during the period of 2004 to 2014, which can be explained by the
many fluctuations of the investment rate of return. The reported investment income
for all Omani insurers for the years 2013, 2014, and 2015 were 2.4%, 2.0%, and
1.4%, respectively.
34
Fig. 11: Development of the Investment Income of Omani Insurers (N=12)

10%
8%
6%
4%
2%
0%
-2%
-4%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Notes: “Investment Income” is calculated as investment income divided by total assets. N denotes the
number of insurers.
4. Expense Ratio
The expense ratio is defined as the net operating expenses divided by the net
premium writ-ten. The mean expense ratio of all insurers is 0.235 for the period of
2004–2015. The mean expense ratio of local insurers is 0.224, whereas the median
is 0.234, with a standard devia-tion of 0.039. Apart from this, the mean expense
ratio of foreign insurers is 0.254, whereas the median is 0.270, with a standard
deviation of 0.083 for the period 2004 to 2015. Interest-ingly, foreign insurers have
on average high expense ratios than local insurers.
Figure 12 shows the expense ratio of Omani insurers, including both local and foreign
inves-tors. In 2004, the expense ratio of foreign investors was 7.7%, whereas it
was 10.9% in 2005. This trend of growth was also followed in the following years,
with the expense ratio of for-eign insurers increasing each subsequent year as
presented in Figure 12. Apart from this, the expense ratio of foreign insurers in
2013, 2014, and 2015 was 24.7%, 26.9%, and 31.9%, respectively.
The data also shows the statistics of the expense ratio of local Omani insurers. The
available data shows that the expense ratio of local Omani insurers was a bit lower
in comparison to foreign Omani insurers, due to the large business proportion of
Omani local insurers. The reported expenses of all insurers for the years 2013,
2014, and 2015 were 24.3% 22.7%, and 21.7%, respectively. The statistics of the
expense ratios of local Omani insurers for the years 2013, 2014, and 2015 were
35
ig. 12: Development of the Expense Ratio of Omani Insurers (N=12)

40%
35%
30%
25%
20%
15%
10%
5%
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Notes: “Expense Ratio” is calculated as net operating expenses divided by total assets. N denotes the
number of years.
revealed as 23.9%, 18.6%, and 16.7%, respectively

5. Retention Ratio
The retention ratio refers to the measurement of quantity of risk carried out by the
insurers, ra-ther than passing it to re-insurers. Figure 13 shows the stability in the
retention ratio in Omani insurers for the period of 2004 to 2015. The retention ratio
of Omani insurers stays above 50% for the entire period. In 2004, the retention
ratio was 52.2%, whereas it was 56.5% in 2008. From 2010 to 2013, one can
observe a similar trend, in which the retention ratio stays stable at above 50%.
The data shows that the retention ratio for the year 2010 was 56.9% and 56.1% in
2011. A dramatic change occurred in 2014, when the retention ratio of all Omani
insurers reached 61.7% and followed with 60.2% in 2015.
Fig. 13: Development of the Retention Ratio of Omani Insurers (N=12)
52.2%
54.3%
53.6%
65.5%
51.2%
57.0%
2004 2005 2006 2007 2008 2009

60.2%
56.9%
57.0%
57.0%
61.7%
56.1%
2010 2011 2012 2013 2014 2015

36
In order to provide enhanced retention rate in the local insurance market, few
suggestion are given below.
• Companies are required to find a financial stable
reinsurance company to maintain the re-tention rates
as per the rates available in foreign markets
• There is need to encourage companies to establish
some sort of secure funding or combine funds in order
to combat financial risks
• There is a need to create secured structures with
secured financial capability, that would help to
maintain the retention rates, and provides opportunity
to insurance companies to share some facilities along
with others
• Arrangement between insurance companies through
insurance association in Oman to par-ticipate in
insurance procedures for some real risks or assign
to the optional government insurances according to
agreed rates to avoid installments sneak abroad.
• Companies can provide a better solution in cooperation
with the companies operating in GCC countries. e.g. a
better strategy in regards of exchanging risk insurance
with low damages can help companies to deal with
others efficiently.
• There are no instructions for inducing insurance
companies to rise retention rates but the instruction is
applied in specific rates, those are commercial decisions
and depends on in-surance companies experience to
deal such risks in some insurance documents with
high rates when they return to another document with
more high risks
• Determining minimum retention rates may acquit the
company administration from any re-sponsibility when
risk accrue where the responsibility transfer back to
organized sector.
37
Key Statistics on Insurer Governance

The board of any corporation is responsible for managing all of its administrative
work effec-tively (Baysinger and Hoskisson, 1990). The independence and the size
of the board are recog-nized as important for the corporate value creation in a
company (Zahra et al., 2000, Toumi et al., 2016). According to agency theory, the
smaller the board size, the more the CEO can domi-nate the board (Johnson et al.,
1996). Interestingly, the mean and median numbers (6.0) of board sizes in Oman
appear very low in comparison to board sizes of other countries (UK, Germany,
Belgium, France, Italy, South Africa). Only Finland and Norway have board sizes (7.9
and 8.2) similar to Oman (Authors Data). Although there is no specific requirement
for board sizes from Omani capital market law or the code of governance, it is still
advisable to have a larger board with an optimal number of outside directors for
the maintenance of trans-parency in organization operations.
Our results (see Table 5) imply that local insurers have more outside directors in
comparison to foreign companies (1.4 vs 3.9). The employment of outside directors
allows Omani companies to perform their operations transparently, and it helps to
build the confidence of shareholders. Apart from this, we also discuss the number
of inside/outside directors in the corporations.
As highlighted in Table 4, the total board size seems stable across all years, and
the number of inside directors increased constantly and doubled from 2004 to
2005. This showed a highly appreciable trend, as it was recommended in literature
that there should be an optimal number of insiders, as they are more aware
of a company’s operational performance and can provide posi-tive feedback to
the board of directors, which can simplify the decision-making (Baysinger and
Hoskisson, 1990, Johnson et al., 1996, Gottesman and Morey, 2010). In addition to
that, one can observe the trend that the number of outside directors is declining.
While the number of outside directors was six in 2000, it dropped to four in 2014.
There was a need to address this issue on an immediate basis, as the neutrality
and transparency of the board is also dependent on its composition. Interestingly,
education plays a significant role in the se-lection of CEO replacement.
38
Fig. 14: Average Executive Compensation (constant 2014 OMR per month)
350,0000
300,0000 USD/OMR = 2.60

250,0000
200,0000
150,0000
100,0000
50,0000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
CEO Salary CEO Bonus
CEO Total Compensation Top 5 Executive Compensation
Tab. 5: Key Statistics on Insurer Governance

Key Facts on Insurer Governance All Insurers
N Mean Median SD
Board and CEO Characteristics

Number of directors on the board 225 6.0 6.0 3.1
Number of inside directors (stakeholder in the company) 224 2.6 1.0 2.9
Number of outside directors (not stakeholder in the company) 225 3.4 3.0 3.3
Number of Omanis in executive positions 225 1.8 1.0 2.6
CEO tenure (years) 225 4.9 3.0 6.1
CEO age (years) 225 46.7 48.0 14.6
CEO's education level (years after graduation) 225 2.1 2.0 1.9
CEO duality (also Chair of Board of Directors), (No=0, Yes=1) 225 0.07 0.00 0.25
Change of the CEO (Appointment of a new CEO), (No=0, Yes=1) 225 0.16 0.00 0.37
CEO ownership (in percent) 225 0.03 0.00 0.18
Executive Compensation (in 2014 (OMR) per year)
CEO compensation - Salary 224 60,041 55,296 40,402
CEO compensation - Bonus 218 47,975 4,307 152,100
CEO compensation - TOTAL 217 108,605 61,942 179,979
Top 5 executive (including CEO) compensation 217 234,403 138,603 293,853
Notes: Statistics on Insurer Governance are aggregated for the period 2004 to 2014. SD denotes the Standard
Deviation, N denotes insurer-year observations.
39
Table 5 reveals that the average local Omani CEO has a higher education level than a
CEO from a foreign insurance company (mean 2.7 vs 1.4). Therefore, it can be assumed
that board gover-nors have given education considerable importance when considering
someone for the position. Working experience was also a significant criterion considered
in the CEO selection process.
CEO compensation plays also an important role for the company governance. The
compensa-tion of the CEO must be related to the performance and profitability of
the organization (Tosi and Gomez-Mejia, 1989). Therefore, this study evaluates the
compensation received by CEOs of Omani insurers. Table 5 reveals that the total CEO
compensation is on average 108,605 (OMR) per year, with a median of 61,942 (OMR)
per year. However, CEOs of local firms receive relatively high compensation with
171,934 (84,129) (OMR) per year at a mean (medi-an) versus foreign company CEOs
with only 43,502 (44,896) at mean (median). The overall average (median) salary for
the top 5 executives was 234,403 (OMR) (138,603) per year. Ad-ditionally, the local top
5 executives earned much more on average (at the median) with 331,840 (247,802)
compared to the top 5 foreign company executives at 118,265 (86,417) (OMR) per year.
Local Insurers Foreign Insurers

N Mean Median SD N Mean Median SD
118 6.7 7.0 2.9 107 5.3 5.0 3.1

117 1.4 1.0 1.6 107 3.9 3.0 3.4
118 5.2 5.0 3.1 107 1.4 0.0 2.1
118 2.0 1.0 2.5 107 1.6 1.0 2.7
118 5.7 3.0 6.3 107 4.0 2.0 5.7
118 51.4 51 8.6 107 41.6 45 17.8
118 2.7 2.0 2.2 107 1.4 2.0 1.3
118 0.13 0.00 0.33 107 0.00 0.00 0.00
118 0.16 0.00 0.37 107 0.17 0.00 0.38
118 0.05 0.00 0.25 107 0.00 0.00 0.00
117 79,537 69,687 40,627 107 38,723 41,658 27,375

111 89,615 7,700 204,976 107 4,779 0 7,755
110 171,934 84,129 234,393 107 43,502 44,896 32,735
118 331,840 247,802 348,729 99 118,265 86,417 141,688
40
Insurance Density and Insurance Penetration in Oman

Insurance density gives an indication of how much each person in a country spends
on insur-ance in terms of premiums. In other words, it is the per capita premium for
the country, calcu-lated by dividing the total insurance premium by the population.
Figure 14 shows the statistics of insurance density in the Sultanate of Oman for the
period 2000 to 2014. One can observe a gradual growth in the insurance density
for all periods. Insurance density in 2000 was 20.2 (OMR), with an increase to 32.2
(OMR) in the following year, and 48.7 (OMR) in 2003. However, a notable fall can
be observed for 2004, when insurance density was 46.2 (OMR). For the years 2012,
2013, and 2014, the insurance density was stable at 102.8 (OMR), 109.7 (OMR),
and 120.2 (OMR), respectively. In sum, one can see that the insurance density rose
from 20 OMR to 120 OMR from 2000 to 2014, which is an increase of nearly six-fold
(or average annual increase of 13.65%) and confirms the increasing importance of
insurance for the Omani society. It is expected that the insurance density will keep
rising as medical insurance and motor insurance businesses continue to grow.
Fig. 15: Development of Insurance Density in Oman
2000 20.2
2001 32.2 USD/OMR = 2.60
2002 45.1
2003 48.7
2004 46.2
2005 48.5
2006 58.5
Notes: “Insurance Density” 2007 62.4

is gross premiums written 2008 74.0
in constant 2015 OMR. 2009 76.4
2010 90.7
2011 86.0
2012 102.8
2013 109.7
2014 120.2
41
Insurance penetration indicates the level of development of the insurance sector in

a country. It is measured as the ratio of premiums written in a country divided by the
GDP. Figure 16 shows the insurance penetration in Oman in comparison with the oil
sector and non-oil sector. It should be noted that insurance companies face some
hurdles in Oman just because of some conservative views in the society. There are
people who considers insurance as a financial bur-den or a burden superimposed by
the government in terms of rendering services of insurance companies in different
regards. Where community has also great reservation against the life insurance, as
the services of some of these products still needs proper justifications in regards
of Islamic values. Also, there is need to provide comprehensive background and
knowledge of the insurance, as the insurers are still need to provide sufficient
knowledge about their products. In-fact, some people are hesitant to buy insurance
when they see documents in regards of the uncovered items. Insurance companies
are required to work on the issues address above to get the better response and
results, which may help them to attract residents and citizens to avail the insurance
for their families and businesses.
Fig. 16: Development of Insurance Penetration in Oman

4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Penetration Penetration Oil Sector Penetration non- Oil Sector

Notes: “Insurance Penetration” is gross premiums written per capita GDP in constant 2015 OMR.
42
It reveals that the insurance penetration (non-oil) was above 1% in 2000 and
increased to 2.5% in 2002. The statistics for the period 2000 to 2011 reveal a
steady growth with rising and fall-ing in few instances. A substantial growth can be
seen from the year 2011 to 2014, when the ratio rose from 2.0% to 2.5%. While
comparing the insurance sector with the oil sector, it can easily be assumed that the
insurance sector has the potential for greater growth. In comparing the insurance
sector with the non-oil sector in regard to GDP, one can expect a growth of 60% in
the near future in the former sector, as medical coverage will be compulsory for all
private employees working in the private sector in Oman after 2018.
Comparison of GCC Countries: Insurance Statistics and Economic Indicators
This section of the report contains a discussion of key insurance statistics of different
GCC countries, namely premium volume, insurance density, insurance penetration,
and macro-economic indicators. Data for the discussion is acquired from the Capital
Market Authority, the Swiss Re’s Sigma publications and the World Bank database.
Additionally, some data is also gathered from the periodicals of insurance companies
to provide a holistic overview of the in-surance industry in Oman.
1. Insurance Premium Volume
The premium volume of life and non-life insurance in different GCC countries is
presented in Figure 17. The total premium volume of the Oman insurance industry
for the year 2013 was 947 million (USD) and increased to 1,035 million (USD) in
2014. In contrast, the premium volume of the Bahrain insurance industry was 720
million (USD) for the year 2014; 1,007 mil-lion (USD) for Kuwait; and 2,183 million
(USD) for Qatar, which corresponds to a 9.5% in-crease relative to the previous
year.
43
Fig. 17: Premium Volume in GCC Countries by Insurance Business
Life Business Non-Life Business
88 859
95 940
Oman
173 515
151 569
Bahrain
181 766
191 816
Kuwait
62 1831
65 2118
Qatar
225 6505
241 7887
Saudi Arabia
1914 6119
2200 6905
Unaited Arab Emirates 2013

2014
Source: Swiss Re Sigma publications.
44
2. Insurance Density and Penetration

Table 6 shows the breakdown of insurance density of GCC countries for the years
2013 and 2014. Subsequently, the insurance density of the Omani insurance industry
in life and non-life businesses was about 266 million (USD) in 2014, whereas the
insurance density of Bahrain for the same year was 583 million (USD). In addition,
the 2013 statistics of insurance density for Bahrain and Oman were also available,
at 557 million (USD) and 321 million (USD), respec-tively. For Kuwait and Qatar,
the insurance densities in 2014 were 291 million (USD) and 979 million (USD),
respectively, compared to 277 million (USD) and 974 million in Saudi Arabia and
the UAE, respectively.
The insurance penetration of life and non-life insurance in different GCC countries
is also pre-sented in Table 6. The obtained data reveals that insurance penetration
of Oman for the year 2013 was at 1.1, whereas it was at 1.3 for the year 2014,
which is far better from Qatar and Kuwait with insurance penetration of 1.0 and
0.6 in 2014. The insurance penetration of Saudi Arabia was 1.1, whereas it was
2.2 for the UAE in 2014. In sum, it can be seen that the Oman insurance market is
quite competitive with other insurance market having the same size of economy in
GCC. Bahrain and Kuwait also progressed well but the trend shows that insurance
penetration in Oman was impressive in 2013. The expectation is that insurance
penetration will increase by 3% to 4% in 2020 for the most GCC countries.
45
Tab. 6: Insurance Density and Penetration in GCC Countries
InsuranceDensity Life & Non-life Life Non-life

(N=12) (N=12) (N=12)
2014 2013 Change 2014 2013 Change 2014 2013 Change
Oman 266 321 -17.1% 24 30 -20.0% 242 291 -16.8%
Bahrain 583 557 4.7% 122 140 -12.7% 461 417 10.5%
Kuwait 291 323 -9.9% 55 62 -11.3% 235 261 -10.0%
Qatar 979 697 40.5% 29 30 -3.3% 950 667 42.4%
Saudi Arabia 277 221 25.3% 8 9 -11.1% 269 212 26.9%
UAE 974 872 11.7% 235 212 10.8% 739 661 11.8%
GCC (average) 562 499 12.7% 79 81 -2.0% 483 418 15.4%
InsuranceDensity Life & Non-life Life Non-life
1.3 1.1 0.2 0.1 0.1 0.0 1.2 1.0 0.2

Oman 2.1 2.1 0.0 0.4 0.5 -0.1 1.7 1.6 0.1
Bahrain 0.6 0.5 0.1 0.1 0.1 0.0 0.5 0.4 0.1
Kuwait 1.0 0.7 0.3 0.0 0.0 0.0 1.0 0.7 0.3
Qatar 1.1 0.9 0.2 0.1 0.1 0.0 1.0 0.8 0.2
Saudi Arabia 2.2 2.0 0.2 0.5 0.5 0.0 1.7 1.5 0.2
UAE 1.4 1.2 0.2 0.2 0.2 0.0 1.2 1.0 0.2
GCC (average) 562 499 12.7% 79 81 -2.0% 483 418 15.4%
Notes: Numbers from 2013 and 2014 are in million USD and are based on Swiss Re Sigma publications.
10.3 Macro-Economic Indicators

Statistics for GDP growth and inflation are taken from the World Bank database and
are pre-sented in Table 7. The GDP growth of Oman was 3.2% in 2014 and 3.9%
in 2013. The GDP growth of Bahrain for the year 2014 was 4.5%, whereas it was
4.6% in 2013. In 2014, the GDP growth of Kuwait was 1.5%, while for Qatar, the
GDP growth was 5.8 for the year 2014.
46
Tab. 7: Macro-Economic Indicators in GCC Countries
Macro-Economic Indicators Real GDP growth Inflation (%)

(%)
2014 2013 2014 2013
Oman 3.2 3.9 1.0 1.2
Bahrain 4.5 4.6 2.7 3.2
Kuwait 1.5 1.5 2.9 2.7
Qatar 5.8 6.3 3.0 3.2
Saudi Arabia 3.6 2.7 2.7 3.5
UAE 2.6 5.2 2.3 1.1
Source: World Bank database.
In 2014, the inflation rate in Oman was as low as 1% compared to 2013 when it
was 1.2%. The statistics show that inflation in 2014 was 4.5% in Bahrain, 3% in
Qatar, 2.7% in Saudi Arabia (3.5% in 2013), and 2.3% in the UAE (1.1% in 2013).
The available statistics show that infla-tion as a whole in the GCC countries are
at their lowest level and can be compared with any western country, where the
average value of inflation is also under 2%.
47
Suggestions for the Oman Insurance Market

Insurance companies are financial organizations whose business
depends mainly on the uncer-tainties faced by individuals in their
daily lives. The business of insurance relies only on the customers’
premiums, as they must provide compensation in case of any risks.
Since insurance companies are the viable assets of any economy,
they require maintaining their operational business in a way
that help them to minimize the business risks. In the following
are some sug-gestions that may help insurance companies to
improve their business viability in a suitable manner.
1. Composition of Investments
• Nearly 70% of total investments of Omani

insurers are in the form cash or near cash
whereas bond and equity investment are
around 8% each as of 2015.
• Cash provides instant liquidity but at the

same is an unproductive asset and negatively
af-fects net income of the insurance industry.
• As seen in the following table (Table 8)

from EY 2017 European Insurance Industry
Out-look, bonds constitute about 74% total
investments and equity is 7%. Bank deposits
(i.e. cash) is only about 7% as of 2015. There is
an active international Eurobond market with
high rated bonds available in Euros and other
major currencies. Conventional Omani insur-
ance companies can tap onto that market
and significantly improve their profitability
while ensuring the safety of liquidity.
48
Tab. 8: Average Asset Allocation
Asset Allocation 2010 2011 2012 2013 2014 2015E

Bonds 73.8% 74.8% 74.1% 73.9% 74.1% 73.6%
Equities 5.9% 5% 5.1% 6.0% 5.8% 5.9%
Private Equity 0.6% 0.6% 0.6% 0.6% 0.7% 0.6%
Hedge Fund Property 0.4% 0.3% 0.3% 0.3% 0.3% 0.2%
Mortgage Loans 5.8% 5.8% 5.9% 5.9% 5.5% 5.7%
Other Loans 0.6% 0.5% 0.6% 0.8% 1.2% 1.3%
Bank Deposits 7.2% 7.5% 7.8% 6.8% 6.7% 6.8%
Other Assets** 2.9% 2.8% 2.9% 2.5% 2.7% 2.6%
Source: EY 2017 European Insurance Outlook Report, p2,
E=Estimate Source: Standard & Poor’s (S&P)
**Ceding company Deposits and hedging assets.
49
2. Digital Innovations
Insurance Technology:
• Consumer expectations for digital access and transparency, specifically for car
and house-hold insurance has been on the rise. The focus should be more on
the younger generation due to their rising wealth and potential influence on
next generations. According to EY Eu-ropean Insurance Outlook Report 2017,
European insurers are heavily investing in social, mobile, analytics and cloud
(SMAC) technologies. In addition, competition is expected to rely heavily on
investments in artificial intelligence, blockchain, and the internet of things.
Insurers across Europe invested increasingly on InsurTech through Venture
Capitalists and strategic partnerships. Consumers are in this age are attracted
more by technology than tra-ditional tools. In addition, Insurance Technology
companies are developing products that will allow more precisely to assess
the risk category that an individual belongs to so that in-surance products can
be priced more competitively. The current system causes some people to pay
more than others and hence discoursing people to sign up for insurance, hence
re-stricting growth in per capita premiums written (i.e. insurance penetration).
• To prepare for the global shift towards higher technology, Omani insurers should
start market transformation early and do not fall behind digital transformation.
One example is that new generation young people will not be attracted in
traditional way of selling insur-ance through agents. They require everything to
be digital and on their fingertips.
• Skillset required is also changing significantly due to digitalization. This requires
new talent equipped with latest high tech skillset.
50
Blockchain:
• Blockchain technology is already turned from test to actual use. According to EY
report on Global Insurance Trends 2017 , India’s second largest private general
insurer launched a blockchain based product for overseas travel policies, which
allows customers to receive their claims instantly without actually filing for an
overseas flight delay.
• EY reports that at a recent insurance blockchain hackathon organized by Travelers
(via Simply Business), several new blockchain based insurance solutions were
introduced.
• Marine insurance sector is already moving forward with blockchain.
• EY has launched Tesseract, an integrated blockchain based mobility platform
which facili-tates fractional vehicle ownership, shared use and seamless
multimodal transport. It will help lay the groundwork for managing autonomous
vehicle fleets and can also have huge implications in the future motor insurance
landscape.
• EY is leading a consortium of 13 Indian insurers to use blockchain based tech
to create a central policyholder repository and streamline policy admin and
registration.
• Blockchain enabled smart contracts can considerably cut down cycle times and
improve the reliability of processes and transactions.
• Oman insurers should seriously look closely at these developments and keep
with recent global trends in technology.
51
3. Reporting Standards and Insurance Penetration

Reporting Standards:
New reporting standards (IFRS17 and IFRS9) aim to improve the comparability an
trans-parency of accounting practices, while promoting better alignment between
finance, risk and actuarial functions through enhanced disclosure of valuation,
performance and risk infor-mation, and the adoption of principles-based accounting
frameworks.
Insurance Penetration:
• One of the reasons why insurance penetration is low is due to people now
being knowl-edgeable about the insurance products. In Oman, nationwide
education should take place to encourage people to learn more about various
insurance products offered and how these can significantly reduce risk.
• Averaging below 2%, insurance penetration in Oman is much lower than global
figures as seen in the EY report on Global Insurance Trends in 2016 (see Table
9). World average dropped from 7.5% in 2006 to 6.2% in 2015, however, still
much higher than Oman aver-age. The surge in Taiwan is noteworthy from
14.5% in 2006 to 19% in 2015, while U.K. experienced a large drop from
16.5% to 10% during the same time. According to the EY re-port, the surge in
Taiwan is due to strong demand for individual whole life insurance prod-ucts.
This is an area where Oman can make significant leeway through educating
public about life insurance, which is not a well-known concept in the region
unlike in the U.S. and Europe. The key is in increasing insurance awareness.
52
Tab. 9: Insurance Markets by Penetration
Top 10 Insurance Global Rank (Basis total GDP) Penetration (GWP as % of Density (GWP per Capita)
GDP)
Markets by Premium 2016 2015 2016 2015 2016 2015
World - - 7.5% 6.2% 565 621
USA 1 1 8.8% 7.3% 3,924 4,096
Japan 2 2 10.5% 10.8% 3,590 3,554
China 10 3 2.7% 3.6% 54 281
UK 3 4 13.5% 10.0% 6,467 4,359
France 4 5 11.0% 9.3% 4,075 3,392
Germany 5 6 6.7% 6.2% 2,437 2,563
Italy 6 7 7.2% 8.7% 2,303 2,581
South Korea 7 8 11.1% 11.4% 2,071 3,034

Canada 9 9 7.0% 7.4% 2,708 3,209
Taiwan 13 10 14.5% 19.0% 2,250 4,094
Source SwissRe, Sigma no 03/2016 Re, Sigma No. 04/2007.

53
54
References
• Altuntas, M., Berry-Stölzle, TR, and Erlbeck, A. (2011), Takaful – Charity or Business?
Field Study Evidence from Microinsurance Providers, Journal of Insurance Regulation,
30: 339-358.
• Altuntas, M., Erlbeck, A., and Huber, F. (2017), The Effect of ROSCA Participation on
Microin-surance Purchase: Evidence from Indonesia, Working Paper, University of
Cologne.
• Baysinger, B.D., and Hoskisson R.E. (1990), The composition of boards of directors
and strate-gic control, Academy of Management Review, 15(1): 72-87.
• Berry-Stölzle, T.R., Hoyt, R.E., and Wende, S. (2013), Capital Market Development,
Competi-tion, Property Rights, and the Value of Insurer Product-Line Diversification:
A Cross-Country Analysis, Journal of Risk and Insurance, 80(2): 423-459.
• DeYoung, R., and Nolle, D.E. (1996), Foreign-owned banks in the U.S.: Earning
market share or buying it?, Journal of Money Credit and Banking, 28(4): 622-636.
• Gottesman, A.A., and Morey, M.R. (2010), CEO educational background and firm
financial per-formance, Journal of Applied Finance, 2: 70-82.
• Johnson, J.L., Ellstrand, A.E., and Daily, C.M. (1996), Boards of directors: A review
and re-search agenda, Journal of Management, 22(3): 409-438.
• Mahajan, A., Rangan, N., and Zardkoohi, A. (1996), Cost structures in multinational
and domes-tic banking, Journal of Banking and Finance, 20 (2): 238-306.
• Tosi, H., and Gomez-Mejia, L. (1989), The decoupling of CEO pay and performance:
an agency theory perspective, Administrative Science Quarterly, 34(2): 169-189.
• Toumi, N., Benkraiem, R., and Hamrouni, A. (2016), Board director disciplinary
and cognitive influence on corporate value creation, Corporate Governance, 16(3):
564-578.
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medium-size companies: Exploring the effects of ownership and governance
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3
This report discusses the future prospects and progress of insurance
industry of Oman. The report utilized different aspects including direct
premium written (DPW), market share and growth rate to determine
the progression and prospects of insurance industry of Oman. The
statistics of profitability, financial strength, investment income, expense
ratio and retention ratio were also used to determine the financial
stability of Omani insurance industry. In order to provide the complete
picture, the report also discusses in depth with key facts about the
penetration of insurance and density of insurance in Omani society.
In addition, the report also compares key statistics of insurance
companies of Oman with other countries of Gulf Cooperation Council
(GCC) and provides suggestions to improve the business viability of
insurance companies in Oman.
@DrkhalidAlAmri
[email protected]
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The Oman Insurance Industry: Developments and Prospects

Book · January 2018

Khalid Al-Amri Muhammed Altuntas

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The Oman Insurance Industry

Dr. Khalid Said Al-Amri

Dr. Muhammed Altuntas

Mr. Qais Al-Suhai

In the year 2004, Royal Decree No.

2004 2005 2006

2007 2008 2009 2010 2011

• World Financial Crisis • Merger of Al-Nisr

Industry Investment Income

12 Tab. 1: Statistics of the Oman Insurance Industry in Numbers (2004-2015)

The Omani Insurance Industry

1. A new system has been 2. The new system has minimized

5. A detailed new law of vehicle 6. Insurance companies of Oman are

7. The insurance companies working 8. A platform of Oman insurance

Tab. 1: Statistics of the Oman Insurance Industry in Numbers (2004-2015)

Insurers in Oman 17 17 17 --17 19 22 22 22 20 21 22 22

Brokers n/a n/a n/a n/a 15 19 23 26 29 31 36 36

Market Share in % of Total Direct Premiums Written

200 USD/OMR = 2.60 50%

Health insurance appeared as a most influential sellable product available in the

Growth Rate in % of Total Direct Premiums Written

Tab. 2: DPW, Market Share and Growth Rate by Insurance Business

Market Share in % of Total Direct Premiums Written

dpw non-life dpw life

Fig. 5: Non-Life Business Before and After 2007

2. Life Insurance Before and After 2007

Fig. 6: Non-Life Business Before and After 2007

LIFE 52% 48% HEALTH LIFE 52% 48% HEALTH

Before 2007 After 2007

Top 10 Insurers in Oman by DPW

National Life Insurance

Market Concentration in the Omani Insurance Industry

Fig. 8: Market Concentration in the Oman Insurance Industry

Insurance companies operating in Insurance companies can invest in

Insurance companies can invest Insurance companies can invest in

Table 3 shows the breakdown of the total investment of insurance companies in

the investment of Omani insurers in stocks and other

Real Estate (in millions 2015 OMR) 0.7 1.1 2.9

Total Investments (in millions 2015 OMR) 72.1 79.5 91.4

Key Insurer Statistics

Tab. 4: Key Insurer Statistics

Fig. 9: Development of the Profitability of Omani Insurers (N=12)

Fig. 11: Development of the Investment Income of Omani Insurers (N=12)

ig. 12: Development of the Expense Ratio of Omani Insurers (N=12)

revealed as 23.9%, 18.6%, and 16.7%, respectively

2004 2005 2006 2007 2008 2009

2010 2011 2012 2013 2014 2015

Key Statistics on Insurer Governance

300,0000 USD/OMR = 2.60

CEO Salary CEO Bonus

CEO Total Compensation Top 5 Executive Compensation

Tab. 5: Key Statistics on Insurer Governance

Board and CEO Characteristics