Minimum capital of insurance firms to be raised to OMR10m, says CMA

03/03/2014 16:44 AST

Insurance companies in Oman will have to raise their minimum capital to OMR10 million and list shares on the Muscat Securities Market (MSM) once the insurance law is amended by the Capital Market Authority (CMA).

Presently, only new companies are required to have a minimum capital of OMR10 million and need to go public for listing shares on the local bourse. And for existing companies, the current minimum capital requirement is OMR5 million.

"But in the amendment of the law, we have a clause for existing companies to raise capital to OMR10 million and go public within a certain period of time. We will announce it soon," Sheikh Abdullah bin Salem Al Salmi, Executive President of CMA, told Times of Oman in an exclusive interview.

Although the Sultanate has 21 insurance companies (11 locally incorporated companies and 10 branch operations of foreign firms), merely four or five companies are listed, which include two Islamic insurance or takaful firms. All these companies have achieved a 10.44 per cent growth in their gross direct premiums to OMR364 million in 2013, from OMR329.6 million posted for the previous year.

Sheikh Al Salmi said the proposal is aimed at strengthening capital base of insurance firms for making these institutions big enough to underwrite more risks and retain the premium within the country. "We need to strengthen our insurance companies for retaining some of the risks within their own books."

However, the CMA chief said that several national companies have exceeded the OMR10 million capital base.

Sheikh Al Salmi also noted that the regulatory authority might consider separating different lines of insurance businesses like life, motor and healthcare in the future. "We need to have specialisation in these categories. Life is completely different from health and motor is completely different from health and other lines of insurance. We may look into that (in future)," he explained.

However, majority of companies are small in size, and therefore are in a disadvantageous position to underwrite major risks and compete with their foreign counterparts in an effective manner.

The CMA chief also said that Oman Reinsurance Company (OmanRe), which was formed to retain reinsurance business within the country, has plans to raise its capital to OMR30 million within a stipulated period. As per the earlier plan, the company will have to go public for further raising the capital. "However, the company had some issues last year that may delay this plan."

Times of Oman