Oman’s insurance sector will see steady single-digit growth in the next several years to 2019, significantly below the highs of recent years, said BMI Research, a unit of the Fitch group.
Strong macroeconomic performance as well as a growing expatriate community will help fuel demand, particularly for compulsory lines such as motor and health. Oman’s population, including expatriates, exceeded 4.22 million at the end of August 2015, reported the Times of Oman citing demographic data for August. The number of expats was more than 1.86 million, while the Omani population crossed 2.35 million. The population stood at 4.155 million at the end of March.
Structural issues such as a fragmented market and low retention ratios will, however, continue to undermine the sector’s upside potential, said BMI Research in its “Oman Insurance Report”.
“Looking ahead, the market will continue to operate at sub-optimal levels due to ingrained structural impediments. These barriers are largely caused by intense price competition in basic lines,” said the report.
One of the main barriers to optimal growth is the fact that the sector’s market landscape is dominated by sub-scale operators. They lack scale and are forced to forgo a large portion of gross premiums in outward reinsurance, said the report.
“We do not anticipate any significant re-structuring of the overall sector in terms of each insurer’s market share, at least over the short-to-medium term. As a result, retention ratios are, and will remain, low for the foreseeable future. Given that many insurers across the sector will continue to rely heavily on outwards reinsurance, net premiums will grow broadly in line with gross premiums in both the life and the non-life segments. Therefore, the driving force behind net premiums will be expansion in the overall economy,” said the report.
Another barrier to higher growth rates has been the fact that claims have historically been relatively high as a proportion of gross premiums. This poses a significant barrier to local insurance players and further curtails profitability levels.