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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

17pc growth in health insurance from Jan to Sept 2017

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Unaudited financial data issued by the Department of Audit and Financial Analysis at Capital Market Authority (CMA) indicates the insurance sector in the Sultanate has achieved continued growth in gross written premiums during the three quarters of 2017 compared to the same period in 2016 with varying ratios.


Direct gross insurance premiums during the three quarters of 2017 have increased by 0.3 per cent compared to the first three quarters of 2016 by RO 931,000 to RO 358.16 million compared to RO 357.23 million during the same period in 2016.


Although the written premiums have generally increased during the period, most insurance segments have witnessed varying declines with the exception of health insurance and group life insurance which recorded an increase at 17 per cent and 25 per cent consecutively. The decline of most insurance branches is attributed to the cost of rationing policies as was evident in engineering insurance which witnessed a reduction at 3 per cent compared to the same term in the past year. This branch has witnessed in 2016 a decrease according to the audited insurance indices at 25 per cent as well as transport, property, motor, individual life and liability at 19 per cent, 7 per cent, 8 per cent, 21 per cent and 3 per cent consecutively while other branches have decreased by 6 per cent.


The indices show that direct premiums of motor insurance products accounts for 33 per cent of the gross insurance premiums compared to health insurance which represents 31 per cent. Motor insurance products still maintain the leading position with regard to the volume of representation in the total insurance market. However, health insurance has contributed to enhanced representation approaching the level of motor insurance.


The audited data in 2016 suggest the average growth of health insurance in the Sultanate in the past five years was 34 per cent and is expected to witness further growth due to the Government’s policy to implement compulsory health insurance for all the employees of the private sector.


Written Premiums


The slight increase achieved by the sector in gross direct written premiums in the three quarters of 2017 has reflected positively on the gross net direct premiums after reinsurance processes. Gross net direct premiums have increased during the three quarters of 2017 by 1 per cent compared to the same period in the previous year.


Properties and engineering insurance have achieved the highest ratio in premiums at 19 per cent and 18 per cent consecutively compared to the same period in 2016 while the individual life insurance and other insurance recorded the highest ratio of decrease in the insurance companies’ retention to 19 per cent and 13 per cent consecutively.


As for the distribution of the insurance products’ share in the gross direct written premiums, the motor insurance, both comprehensive and third party, led the field from the standpoint of the volume of direct written premiums after reinsurance with a 50 per cent share, followed by health insurance with 30 per cent. This reflects the ability of insurance companies to accommodate the risks of such branches while the net share of insurance products of transport, properties, engineering and liability are still low compared to the gross direct premiums on the bases that the retention ratio of each branch doesn’t exceed 2 per cent of the gross premiums due to the cost of indemnities paid by the insurers for such branches which are very high and exceed the capital of the insurers sometimes. Hence, insurance companies turn to reinsurance companies to cover such risks which is a sound practice in the global insurance market.


CMA endeavours to enhance the financial positions of the insurance companies operating in the Sultanate to be able to reach better retention ratios and to expand their abilities to cover greater risks through increasing the minimum capital to RO 10 million and transforming the national companies into public joint stock companies.


Retention Ratio


The retention ratio for properties, transport and engineering insurances are the lowest compared to other branches of insurance at 14 per cent, 21 per cent and 21 per cent consecutively due to reinsurance of greater part of the risk with reinsurance companies.


Retention ratio of motor insurance (comprehensive and third party) is the highest among various insurance branches at 88 per cent for third party insurance and 85 per cent for comprehensive insurance. It is noted that retention ratio of individual life insurance has recorded 68 per cent.


The amount of written premiums in the three quarters of 2017 increased by 10 per cent compared to the same period in 2016. Gross written premiums were RO 196.9 million during the three quarters of 2017 compared to RO 178.4 during the same period in 2016. Net indemnities were RO 131.12 million during the three quarters of 2017 compared to RO 124.2 million in the same period in 2016. Total commissions insurance companies have received from reinsurers for reinsurance have increased to RO 20.92 million during the three quarters of 2017 compared to RO 19.51 million during the same period in 2016. Production costs have increased by 5 per cent during the three quarters of 2017 to RO 42.12 million compared to RO 39.94 million during the same period in 2016.


Largest players


National Life and General Insurance is the largest player with a contribution to direct premiums in the three quarters of 2017 of RO 90 million (25 per cent) followed by Dhofar Insurance at 10 per cent and Oman United Insurance at 9 per cent, Axa Insurance at 8 per cent, and Al Madina Insurance at 6 per cent.


There were 20 insurance companies at the end of the third quarter of 2017 after the merger of Arabian and Falcon Insurance and Muscat Insurance with Muscat Life Insurance. There were 10 national insurance companies and 10 foreign companies in addition to one reinsurance company namely Oman Reinsurance. The number of brokers was 38 and the agents were 112 at the end of the third quarter of 2017.


The number of employees of the insurance sector was 2987 including 1988 Omani employees (accounting for 67 per cent of the total). The Omanisation ratio was 71 per cent and 58 per cent in insurance companies and brokers respectively, and 52 per cent for insurance agents. Insurance companies recorded 76 per cent Omanisation ratio followed by brokers at 17 per cent.


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