Oman’s decision last month to implement a compulsory health insurance scheme for private sector employees is a positive move aimed at boosting the non-life insurance sector, which has a relatively low penetration rate in the Gulf Cooperation Council (GCC) region, according to a Dubai-based financial analyst.

Oman’s Capital Market Authority (CMA), the state’s financial regulator, announced in July a decision to introduce a mandatory health insurance system for private sector employees. The government already offers health insurance for the public sector employees.

“It is extremely clear where real growth can be achieved (in the insurance sector); it is most certainly in the life insurance segment, which has low penetration rates in the GCC when compared to the non-life insurance segment (which includes health insurance and motor insurance) that formed 87.6 percent of total GCC Insurance in 2016,” Issam Kassabieh, senior financial analyst in the Dubai-based Menacorp financial services company, told Zawya in an email interview late last month.

The CMA said the final decision on compulsory health insurance for all is currently under legal review. It said the implementation will be gradual and did not specify a timeframe for when the decision will be enforced, despite announcing plans last year to introduce the scheme in 2018. Kassabieh said he expects the decision to be implemented by January next year. The CMA could not be immediately reached for comment.

UAE and Saudi Arabia
The United Arab Emirates (UAE) is the biggest insurance market in the GCC region, with gross written premiums (GWPs) of 44.8 billion dirhams ($12.20 billion) in 2017, up from 40 billion dirhams in 2016, according to the UAE’s Insurance Authority website. GWPs refers to the total payments issued by an insurance company during a certain period of time.

The UAE and Saudi Arabia together control around 70 percent of the insurance market in the GCC, Krishna Dhanak, the executive director of consultancy firm Alpen Capital, told Zawya in an interview last year.

According to an Alpen Capital report on the insurance sector in the GCC region issued in December, the UAE occupied 39.1 percent of the GCC insurance market in 2016, followed by Saudi Arabia, (38 percent), Qatar (11.2 percent), while Oman came fourth (4.6 percent). Kuwait and Bahrain held the two last positions, with market shares of 4.3 percent and 2.8 percent respectively.

According Alpen Capital, Oman is set to be a fast growing insurance market in the coming years, once the new health insurance system has been rolled out.

“The insurance sector in Oman grew at an average annualised rate of 10.3 percent between 2011 and 2016… the third fastest growth in the GCC. The expanding market is mainly attributed to the rapid rise in the health insurance segment,” the report said.

“The share of health insurance in non-life GWP grew from 18.1 percent in 2013 to 30.3 percent in 2016 on the back of increasing use of healthcare facilities and growing awareness about the benefits of insurance among the people. Moreover, the subscriptions have increased ahead of the forthcoming mandatory health insurance in the country,” the Alpen Capital report added.

Oman’s motor insurance is considered the biggest insurance sector, said the report, mainly due to a previous adoption of a compulsory insurance scheme targeted at the motor vehicles sector and introduced by the CMA in 2015.

“The biggest insurance segment in the sultanate is motor insurance, with 41.3 percent of the non-life market share in 2016,” Kassabieh said. “Health comes in second and is expected to grow further following the implementation of the mandate,” he added.

According to the CMA’s statement last month, the decision to implement mandatory health insurance in the private sector is aimed at “meeting the needs of the employees of the private sector relating to coverage of basic health to limit the high cost the employers of the private sector will incur in view of the current economic situation.”

Oman was badly affected by the oil price crash in 2014, but the sultanate has recovered this year as prices started to stabilise. The Omani oil price hit a three-year high last April. The International Monetary Fund (IMF) forecast Oman to score the highest growth rates among the six GCC states next year.

Asked about the main challenges facing the insurance sector in Oman, Kassabieh said: “There have been reports highlighting the hits insurance companies have taken in Oman as a result of high accident rates which have cost companies quite a lot and this could impact profitability and destabilise the sector in a way if companies seek to boost premiums especially since the motor insurance segment is the main insurance segment in the country,” he said.

“Also, low oil prices add pressure on incomes which leads to the purchase of fuel-efficient vehicles which are cheaper than the larger engine cars and thus have lower premiums. The relatively low population also limits the growth of these local companies if they don’t have any operations in nearby markets such as Saudi and UAE,” he added.

Kassabieh said the next challenge will be for Omani insurance companies to further penetrate the life insurance segment and to enter other neighbouring countries. Kassabieh said there are 11 listed Omani insurance companies, with ten listed on Muscat’s stock market and one, Oman Insurance Company, listed on the Dubai stock exchange.

Further reading:
Zawya's Special Coverage on the GCC Insurance Sector
Oman's workforce to get health insurance
Oman plans mandatory health insurance from next year
Oman to lead GCC in 2019 GDP growth
Alpen Capital's latest report on the GCC Insurance sector highlights its growth potential
Economic slowdown: UAE fires weigh down GCC's insurance industry

(Reporting by Yasmine Saleh; Editing by Imogen Lillywhite and Shane McGinley)

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