The sultanate’s sole local reinsurer continues to invest in the local market through participating in important initiatives such as the Nat CAT pool and introducing new services to meet market needs and serve all segments. Oman Reinsurance Company’s Mr Khaled Nouiri offers updates on some of the market and his company’s recent developments.
Oman’s Nat CAT pool
There has been an ongoing discussion in the Oman insurance market regarding the establishment of a Nat CAT pool to enhance insurance protection against weather-related risks. Major steps have been taken by the government in that direction.
We caught up with Oman Re chief operating officer Khalid Nouiri for a first-hand view of market developments in the reinsurance sector.
Insurance players in Oman and the regulatory authority are aware of the importance of setting up a Nat CAT pool, said Mr Nouiri. “The steering committee focused on two separate portfolios: Oman motor Nat CAT (OMCAT) scheme and non-motor Nat CAT scheme,” he said.
One recent positive development is that the insurance authority took the decision to implement the OMCAT scheme and asked the local players to take the necessary steps for the distribution of insurance products.
OMCAT cover will be soon compulsory for all vehicles subject to compulsory motor third-party insurance. The estimated number of vehicles for 2025 will exceed 1.5m. Oman Re is appointed as the sole reinsurer for this new product.
Mr Nouiri said that the implementation of OMCAT is expected to reduce the protection gap and could generate circa OMR7m ($18.2m) new insurance premium for the local insurance market.
The steering committee also progressed on the non-motor Nat CAT scheme. “But opted to focus on the successful implementation of the motor scheme before proceeding with the larger non-compulsory non-motor scheme,” he said.
Setting up a regional Nat CAT pool
The establishment of Nat CAT pools in a single piece of legislation is challenging, based on various markets’ experiences and Oman’s own experience, said Mr Nouiri.
“We believe that the establishment of pan-Arab or any multi-legislative Nat CAT pool will be quite challenging for various reasons.”
He identified some of the challenges as being:
- Variance in insurance penetration between markets
- Markets’ exposures to different perils such as earthquake, floods, cyclones, drought and volcanic eruptions
- Nat CAT pricing variances between markets
- Non-harmonised legal insurance frameworks
- Non-availability of modelling tools for certain perils in certain countries
- Sanction imposed on certain countries
Mr Nouiri said that the priority is for Arab countries to consider the establishment of their national Nat CAT pools individually based on their market needs and challenges.
“Once successful, bigger dreams can be achieved subject to strategic alignment of pan-Arab countries’ vision,” he said.
Challenges encountered
The insurance market in Oman faces several significant challenges, said Mr Nouiri. One major challenge is that the insurance market is highly competitive, he said.
“Intense competition among insurers leading to pricing pressures and reduced profitability. In addition, there is high dependence on reinsurance, especially for large industrial power, oil and gas policies which leads to substantial business outflow,” he said.
The retention ratio of Omani insurance companies increased in recent years to reach 57% in 2023. Mr Nouiri recommended that further increase of the retention ratio without taking unmeasured risk requires further investment of local insurance companies in enterprise risk management.
“It all comes down to efficient deployment of capital, appropriate pricing of exposures and protection against catastrophic events. Oman Re is quite active locally with knowledge sharing initiatives and we are playing an important role in promoting market solutions for the management of Nat CAT exposures,” he said.
He also referred to other challenges including the talent shortage. “Despite all the efforts and investment made in training qualified local talents, the industry struggles with a shortage of skilled professionals,” he said.
Low insurance penetration is another challenge, which he attributed to lack of awareness about the benefits of insurance among the general population. He also considered technological gap as a difficulty facing the industry.
“There is a lag in adopting new technologies, which affects efficiency and customer service,” he said.
Lastly, Mr Nouiri believes that volatility of results due to increased frequency and severity of Nat CAT events in Oman is a major strain facing the (re)insurance industry.
He said, “In general, these challenges require strategic responses from insurers to ensure sustainable growth and improved service delivery. It is fair to say that these challenges are also common in other Arab countries.”
A challenging 2024
The year 2024 started on a positive note for Oman Re with the first quarter results exceeding top and bottom lines targets. However, the second quarter of the year witnessed the occurrence of a major flood event in the UAE, while the third quarter of the same year suffered a couple of large losses. All this has put pressure on Oman Re’s profitability in the second and third quarter of 2024.
As 2024 concluded with a quieter fourth quarter, in terms of loss activities, Oman Re managed to exceed top line target with reinsurance revenue reaching $129.8m, a 18.5% increase compared to 2023, along with a profit after tax of $7.9m in 2024, 19.2% higher than the prior year. Both underwriting and investments contributed to profits in 2024.
Retakaful window
Referring to recent developments and plans for this year, Mr Nouiri revealed that starting in January 2025, Oman Re launched its retakaful window operation.
“This move is being taken to serve our partners better,” he said. “In addition, we will be investing in Oman’s motor Nat CAT scheme this year.”
During the 1/1 renewal season, Oman Re managed to achieve its budget for both treaty and facultative portfolios, said Mr Nouiri.
“Our underwriting team welcomed the treaty terms corrections in markets affected by large Nat CAT events and at the same time noted the excess capacity available for large facultative placement not affected by large losses,” he said.
For the rest of 2025, Oman Re will continue the implementation of its risk selection policy focusing on underwriting profitability.
“Our core portfolio demonstrated its resilience and showed profitability in recent years despite above average loss activities in our region, earthquakes in Turkey and Morrocco, floods in UAE and cyclones in Oman.” M