The insurance industry in Oman is grappling with increasing challenges due to the amplified impact of Expected Credit Losses (ECL), as insurers adopt IFRS 17 and as credit risks increase, according to Badri Management Consultancy, an international company offering actuarial, risk management, and consulting services.
Shifting insurers from reporting Gross Written Premium (GWP) to focusing solely on Insurance Revenue under the IFRS 17 has brought significant changes, encompassing Gross Earned Premium along with ECL.
For conventional companies, insurance revenue saw a 10% increase, reaching OMR274m ($712m) in 1H2024, compared to OMR250m during the corresponding period last year. Meanwhile, for takaful companies, gross contribution remains the primary topline measure, with a 25% increase from OMR37m in 1H2023 to OMR46m in 1H2024.
Net results
Insurance service results for conventional companies saw a plunge to a negative OMR16.6m in 1H2024 from a positive OMR0.4m in the corresponding period in 2023.
The recorded profit (after tax) for the analysed group of eight listed companies experienced a decrease in a profit of OMR2.2m in 1H2023 to a loss of OMR10m in 1H2024. The major loss is incurred by market leader LIVA due to challenging weather events in the UAE. If LIVA was excluded from this analysis, the 1H2024 profits would have been 84% higher than those for the corresponding period of 2023. (Takaful companies’ net profit is calculated by consolidating the policyholder and shareholder accounts in this analysis.)
Financial reporting
Conventional companies have transitioned to disclosing their financials under IFRS-17, though not without challenges. Meanwhile, takaful companies are still in the process of adopting these standards. Despite noticeable progress, many firms have encountered obstacles.
Badri expects the quality of financial reporting to improve as insurance companies continue to refine their data and operations. However, reconciling accounts receivable/payable and managing related credit risk have been challenging for some companies, potentially leading to increased provisions for write-offs.
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