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Oct 2024

Resilience and growth of Oman reinsurance

Source: Middle East Insurance Review | Oct 2024

Oman is often seen as the quiet achiever of the GCC states where reinsurance plays the role of the backbone of the insurance sector. We caught up with Oman Re’s Mr Romel Tabaja for in-depth insights about the performance of reinsurance in the sultanate in the past year, a preview of what lies ahead and the new Oman natural catastrophe pool.
By Paul McNamara
 
 
Oman makes fewer international headlines than its glitzy and glamorous GCC cousins, but the sultanate has generally been happy simply to make solid economic progress while remaining out of the limelight.
 
This is certainly true of the reinsurance sector over the past year, as Oman Reinsurance Company (Oman Re) CEO Romel Tabaja is keen to point out.
 
“Reinsurance business in Oman has experienced a period of resilience and growth over the past 12 months,” said Mr Tabaja. “Despite facing challenges such as natural disasters and regional geopolitical uncertainties, the sector has managed to perform well.”
 
Mr Tabaja offers some granular insights into the reasons behind the revenue growth that reinsurers have seen.
 
“The reinsurance market in Oman has seen an increase in revenue driven by higher demand for reinsurance coverage and strategic market expansions,” said Mr Tabaja.
 
This has had a direct impact on profitability. “Companies operating within the reinsurance sector have reported improved profitability, thanks to effective risk management and underwriting practices,” he said.
 
Market stability
Equally important has been a period free of any major shocks.
 
“The market has remained stable, with companies adapting to changing market conditions and regulatory environments,” said Mr Tabaja. “The consulting firm Alpen Capital is forecasting a five-year average annual increase of 5.3% with GCC countries’ insurance industry.
 
“The premium volume would jump from $34.3bn in 2023 to $44.4bn by 2028. Non-life premiums would show a 5.4% progression to $39.6bn in 2028. For their part, life premiums would reach $4.8bn, representing a 4% increase over five years. The Omani insurance market is poised to grow accordingly,” he said.
 
Reinsurers have also benefited from higher interest rates, as shown by their investment income.
 
“There has been a notable increase in investment income for most insurance companies, contributing to their overall financial stability,” said Mr Tabaja. “The collective returns from investments of insurance companies operating in Oman increased by 32.8% in 2023 to reach OMR46.5m ($120.8m).”
 
Mr Tabaja is also keen to acknowledge the part played by the resilient Omani economy.
 
“The insurance sector’s development in Oman would be underpinned by resilient economic growth, a growing population, higher demand for life and health products and ongoing infrastructure projects,” he said.
 
“Overall, reinsurance business in Oman has shown positive trends, benefiting from positive reinsurance market conditions. We are proud to share that Oman Re, the sole reinsurer in the sultanate, has performed notably well during this period,” said Mr Tabaja.
 
Oman Re performance
The reinsurer has delivered solid results. In terms of revenue growth, Oman Re reported a significant 17% increase in reinsurance revenue for the six months ending June 2024, reaching OMR24.5m compared to OMR21m for the same period in the previous year.
 
Its profitability is also still strong with net profit after tax as at 1H2024 of OMR1.1m compared to OMR1.2m for the corresponding period in 2023.
 
Mr Tabaja is sanguine about Oman Re’s underwriting performance.
 
“Heightened Nat CAT activity in our core markets impacted the net reinsurance results, which stood at OMR354,000 compared to OMR1.3m in 1H2023. The combined ratio reached 98.2% during 1H2024,” he said.
 
He is also proud of the reinsurer’s investment performance.
 
“Prudent investment strategies led to a 31% rise in net investment and other income, totalling OMR1.6m for 1H2024, up from OMR1.2m in the first half of 2023,” said Mr Tabaja.
 
As of 30 June 2024, Oman Re’s net equity increased to OMR33.5m, representing 4% growth since December 2023, underscoring the company’s financial stability.
 
“Overall, Oman Re has demonstrated strong financial stability and growth, positioning itself as a robust local and regional partner,” said Mr Tabaja. “Our effective management and strategic investments have helped us navigate the challenges and capitalise on opportunities in the industry.”
 
Future focus
Mr Tabaja is bullish on the prospects for reinsurance business in Oman in the year ahead and what this might mean for Oman Re.
 
“Reinsurance business in Oman is expected to experience growth and stability in the coming year,” said Mr Tabaja.
 
 He pointed to a range of factors to support this viewpoint. “The reinsurance sector in Oman faces challenges such as natural catastrophes like cyclones and floods which can cause significant property damage and financial losses,” said Mr Tabaja. “However, the establishment of a Nat CAT pool for Oman is being considered to mitigate these risks and provide financial stability.”
 
He is equally positive about the prospects for reinsurance sector growth.
 
“The overall reinsurance market is projected to grow at a compound annual growth rate of 5.7% for some years ahead, from 2024 to 2033,” said Mr Tabaja. “This growth is driven by factors such as increased demand for reinsurance coverage and favourable economic conditions.”
 
And once again, this is seen against a backdrop of economic growth.
 
“Oman’s economy is showing signs of recovery and growth, which positively impacts the insurance and reinsurance sectors,” said Mr Tabaja. “The country’s improved credit ratings and favourable economic outlook contribute to a more stable and attractive market for reinsurance.”
 
Regulatory support remains vital. “The Omani government is supportive of the insurance and reinsurance sectors, implementing policies that encourage market growth and stability. This includes efforts to diversify the economy and attract foreign investment,” said Mr Tabaja.
 
“Prudent investment strategies and favourable interest rates have boosted the financial stability of (re)insurance companies in Oman. This is expected to continue supporting the sector’s growth.
 
“Overall, the reinsurance market in Oman is expected to grow, driven by economic recovery, increased demand, regulatory support, and global reinsurance market trends. This creates a favourable environment for both Oman Re and international reinsurers to expand their operations and capture new opportunities in Oman,” said Mr Tabaja.
 
AI
Has Mr Tabaja seen any significant implementations of AI in reinsurance in Oman – and how is Oman Re currently using AI in its business?
 
“It is important to highlight that the insurance authority in Oman is actively promoting the use of AI in the insurance sector,” he said. “They are developing regulatory frameworks to ensure the responsible implementation of AI, focusing on data privacy and consumer protection.”
 
He also pointed to various start-ups in Oman working on AI solutions that can benefit the insurance sector. These include:
FIBRA.ai: This start-up focuses on enhancing consumer experiences through AI, which can be applied to streamline customer interactions and claims processing in insurance.
 
RASSD: Specialises in AI-driven maritime cyber security solutions, which can be adapted for fraud detection and risk management in the insurance industry.
 
Mamun: An embedded credit, payments and insurance platform that leverages AI to provide more efficient and personalised financial services.
 
Mr Tabaja said, “These start-ups are part of a growing ecosystem in Oman that is leveraging AI to innovate and improve various sectors, including insurance.
 
“Oman Re appreciates the important role AI will play in our industry and is closely monitoring AI solutions for reinsurance companies. As part of our 2025-2027 business plan elaboration, we will be finalising our digitalisation master plan taking into account available and expected AI solutions.”
 
Oman natural catastrophe pool
Does Mr Tabaja have any observations about Oman’s natural catastrophe pool?
 
“Oman’s Natural Catastrophe Insurance Pool is a significant initiative aimed at providing coverage for individuals and businesses against natural disasters,” he said. “This initiative has been spearheaded by Oman Re in collaboration with the Oman Insurance Association and the Financial Service Authority in Oman,” said Mr Tabaja.
 
The pool is designed to offer insurance coverage for disaster-related risks, such as cyclones, floods, and other adverse weather events.
 
“This is particularly important given the increasing frequency of natural catastrophes in Oman in recent years,” said Mr Tabaja. “The pool will have different sections, including motor and non-marine, to cover various types of risks. The motor section proposal has already been submitted to the regulator, while the non-motor section is being finalised by the steering committee.
 
“Alongside the Nat CAT pool, a National Fund for Emergencies has been established to address emergencies and natural disasters affecting government owned assets and will complement the Nat CAT pool initiative in narrowing the protection gap.
 
“These efforts reflect Oman’s proactive approach to managing natural disaster risks and ensuring financial resilience for its citizens and businesses,” said Mr Tabaja. M 
 
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