A new insurance law amendment to keep have-a-go firms from crowding the market, as well as developments in takaful, are defining 2014.

On the back of a recent insurance law amendment, the sector is on the cusp of major growth. The 22 firms that comprise the insurance market are a mix of Omani and international, with property and health emerging as the most profitable segments.

A new insurance law amendment in mid 2014 means insurance companies will need a minimum of OMR10 million in paid-in capital, a move that has been greeted with delight by some sector participants, while Al Madina Takaful's entrance into the sharia-compliant insurance segment is a boon for the Islamic economy and offers up a new way to expand penetration rates.

According to 1H2014 figures released by the Capital Market Authority (CMA), total premiums stand at OMR226.792 million, while the sector grew by 8.8% over the half with OMR18.3 million in premiums compared to the same period of 2013. Health insurance is leading the charge, growing 30% over the half, followed by engineering insurance on 16%. Losers included property insurance, which dropped 5% and life insurance, which also dropped 5%. Diving into the details of the data, net earned premiums after reinsurance came in at OMR122 million over 1H2014 compared to OMR106 million in 1H2013.

There are 22 insurance companies in Oman, which are a mix of local and foreign firms. Of the five largest players, four are public firms and represent 54% of total direct insurance sector premiums. Number one is Dhofar Insurance Company, which boasts OMR39.3 million in gross premiums, or 17.3% of the total. It is closely followed by National Life and General Insurance Company, on 16.98%, and Oman United Insurance Company, on 10.7%. Big winners for insurers over the year included property and health insurance, which posted net earned premium increases of 124% and 61%, respectively, over the half. In retention terms, the sector saw 3% growth in 1H2014, totaling 54%. Health insurance also won in these stakes, upping its retention rate by 50%, up from 41% in 1H2013. The worst performers in terms of retention include property, transport, and engineering insurance, on 17%, 19%, and 21%, respectively.

One major development over the year has been an amendment to the insurance law, whereby insurance companies must have minimum paid-in capital of OMR10 million and should be a public joint stock company. The minimum paid-in capital level had stood at OMR5 million, and together with the measure instructing firms to list on the stock market is set to ensure that only serious companies get involved in the sector. The new stipulations could lead to mergers and acquisitions, according to some industry insiders, as not all firms will be able to afford to put up the necessary capital. And for firms from the GCC or other companies, it could mean restructuring to in order to comply with the new laws.

Elsewhere, Oman got its first takaful firm in early 2014, as Al Madina Takaful, previously without the “Takaful" addition, took a bold step into Islamic insurance. The firm now follows sharia-compliant principles, avoiding interest and speculation and instead operating a system whereby risk is pooled among policyholders, rather than borne entirely by the company. The company has a 5% market share, and hopes that its conversion will encourage new customers, who may have shied away due to a lack of Islamic products, into the industry. According to a Reuters report, another two takaful firms may be on the way, including Takaful Oman Insurance, which is backed up by Kuwait's T'azur Takaful Insurance, and Oman United Insurance, which has board approval to set up a takaful operation of its own. Going forward, it is hard to know what the reaction in Oman to takaful will be, but Al Madina Takaful's CEO, Gautam Datta, appears hopeful; “Al Madina is one of few companies in the world that planned to convert its existing conventional portfolio into takaful," he said, adding that the company has a “loyal customer base." There do remain some skeptics, however, as to the impact takaful will have on the penetration rate, with the CEO of Falcon Insurance, A.R. Srinivasan, commenting that, “people simply move from conventional to takaful. And usually, they move because they find it cheaper," adding that, “how much of an impact it is going to have remains to be seen, but like any other new insurance company, it is going to eat into the existing market."

Moving into 2015, we could be in for an active period of merger and acquisitions and firms look to band together to meet the new requirements on paid-in capital. The emergence of Takaful, too, could have an impact on the sector, yet it remains to be seen to what extent.