The insurance industry in Oman has been growing steadily over the past decades, from just a few national companies in the early 1980s to a very competitive market with 23 foreign and locally incorporated companies today. But the insurance penetration is still very low and the market is barely reaching 1% of GDP. Can you please discuss the evolution of the insurance sector in Oman and the latest developments?
In terms of insurance penetration, we are still talking about a developing market. If you look at a developed market economy like the U.K., insurance would account for 4% of GDP and in Oman it is currently around 1.2%, so clearly the market has the potential to grow.
Prior to 2007, Oman was quite a profitable market for insurers. There were fewer players and the industry delivered consistent profits year on year between 2002 and 2007. Since then, the market has seen two changes – one is the regular catastrophe events. Despite those events, market prices actually went down after those events rather than increase, which I guess, was driven by an increase in competition. In addition, the number of brokers has grown from 15-16 to 23, and the number of insurers has grown by one to two per annum.
At the end of 2011 there were 11 domestic players and 11 foreign players competing for a small total market premium, hence many feel Oman is highly saturated. Nevertheless, there is the potential and scope for future growth. The CMA has sought to manage that growth and seek to play a judicious hand in helping the industry to grow. But the current position is certainly challenging for many insurers, both domestic and foreign.
In your opinion, what needs to be done for the market to grow stronger? Do you foresee further consolidation in the near future?
RSA is, as you know a global insurer, now approaching our 302nd birthday! We underwrite business in around 140 countries and employ 23,000 people. RSA has been present in Oman since the early 1970’s and in 2002 we entered into a local joint venture. More recently, in 2010 we acquired Al Ahlia Insurance Co. and have integrated the two companies to become the number two player in Oman.
There has been one other acquisition, but I think in the short-term, most industry commentators do not foresee a significant amount of consolidation. The CMA has put increased capital guidelines in place for new insurers. However, until the new solvency requirements, which are being rolled out in Europe (along risk based capital lines) are introduced in Oman, I think the potential and pressure for significant consolidation resulting from significant injections of capital that will be required, will probably not be there for the next two to three years.
Currently vehicle insurance accounts for almost 60% of the portfolio of most general insurance companies in Oman. How can other segments of the market be promoted? Where do you foresee major growth?
If you look at the five-year plan that has been announced recently, then the budget carries with it a 10% increase in investment in infrastructure. Therefore we can expect to see project insurance, construction, roads, transport and further opportunities on the back of the investments across Oman. We should see an increase in commercial lines insurance as a result of these projects.
There is also a significant investment being made in job creation, therefore I would expect to see an increase in domestic consumption, which will lead to consumables, marine insurance, and potentially growth in vehicle purchase.
The third area is of course the recent announcement of the openness of the CMA to considering Takaful. It will be interesting to see if that spurns growth in the insurance sector overall, or whether that will have simply a substitution effect where conventional insurers might see some attrition in their books from people looking for a Takaful alternative. That is still to be seen but is an interesting development.
From your past experience, what impact do you expect the Sharia compliant insurance to have on the market?
Having been part of the team that set up Western Europe’s first Takaful company, I do have some experience in this sector, but I think every market is unique. People often look at Malaysia as being the model to replicate, but in my experience, every market is different.
At Al Ahlia Insurance, we do not plan to launch Takaful yet, but we will review developments closely in the market. We would certainly support choice – I think it is a good thing for consumers, but I do not think there is any firm evidence as to whether this will be a growth opportunity for the market or whether it is predominantly substitution. There is no conclusive research to indicate this. We are going to remain focused on great service, great pricing and delivering a great proposition and we will obviously seek to compete against the new Takaful players that will come along in due course.
In January 2012, Al Ahlia received the award for the “Oman Insurer of the Year” at the MENA Insurance Awards for the second year running. How would you comment your first year of operation in Oman?
It is an absolute pleasure to be living and working in Oman. The country enjoys a stable political environment and the country is young and bears a population very hungry to learn new skills. In terms of the progress for the business, we are very pleased with the acquisition of Al Ahlia. We have retained the Al Ahlia name and we set an original plan to integrate the two businesses within two years, but we achieved it within one year.
We have successfully integrated two groups of people from two different organizations and we have rebuilt momentum. That has really been delivered through restructuring and refocusing our business around customers.
Thirdly we have delivered brilliant service, which is a global theme within RSA Group. Through our strategy of building on the distribution that we acquired through Al Ahlia, applying the technical capabilities and knowledge of RSA as a global player, and ensuring that we cut through in the local market in terms of propositions to customers and great service, we feel that we have made great progress.
Our efforts were recognized externally when, for the second year running, despite the integration, we won the Oman Insurer of the Year from the MENA Insurance Awards. It was great that the body recognized that we were able to maintain those levels of service despite the fact that we were undergoing a major integration to put two of the top seven players in the market together.
Why did you decide to keep the Al Ahlia brand?
Al Ahlia is a well-established brand with a national network of branches, and it is the second most well-known insurance brand in Oman. RSA’s brand strategy is to deploy the most powerful brand in each of our chosen markets. We operate as RSA in some markets, but in many markets we have a global portfolio of brands. We have no plans to change the brand name.
How important is the Omani market for the RSA Group?
Both symbolically and practically, very important. We plan to grow both organically and inorganically across the Asia and the Middle East region. In all our markets, particularly the emerging markets, we are looking to build scale. In Oman we had the opportunity to consolidate and become a top three player. Therefore the Al Ahlia integration was highly consistent with our RSA Group’s strategy of building scale and presence in each of our existing markets.
Being able to acquire, integrate and consolidate our position and then grow the business in the subsequent year, means this is a classic example of the kind of way RSA wants to grow the organization. We are seen as a good model for the way we would like to continue to grow the business and the footprint of RSA globally in our existing markets.
What is your growth strategy? Are you going to remain focused on traditional lines of business or look for more into niche areas?
We aim for sustainable and profitable growth. For the past four years, the insurance market has made losses year-on-year, so we do not aim to track or emulate the performance of the sector as a whole. But we will look to remain a top three player.
We have about 15% market share in most lines of business, but we will also segment and target. Therefore we will look to ensure that we only participate in lines of business where we see long-term value. That will be based on a targeted approach where we look to work with the best clients and schemes, and also use our branch network. We have a very broad base of distribution that allows us to work with partners where we can see genuine long-term value.
What are the main strengths of Al Ahlia’s human capital? How do you train and retain highly qualified staff?
That is a critical question, particularly for this market. The Omanization ratio target will increase up to 65% in our sector by the end of 2012. We currently employ 200 people and I am pleased to say that we are currently in the upper quartile, at 62%. We are extremely confident that we will comfortably exceed that target by the end of the year.
There is a huge ambition to learn in Oman, and undoubtedly a need to upscale capability in the local market. Therefore we think we have an inherent advantage, being able to draw upon the resources and the capability of 23,000 people worldwide.
We do three things. First of all, we have very structured learning programs. We have a graduate program and an 18-month fast-track program for junior managers; we have a senior management program; and an executive program. We have people on these programs who are currently going through an accelerated in-depth skill development process.
Secondly we have to reach out to different parts of Oman and not everybody can participate in these programs. So we have an online learning zone portal where you can access hundreds of different training courses. These are a combination of e-learning, visuals and a variety of different training elements.
We also have a partnership with CMA, so a number of our people are going through CMA endorsed qualifications. I think we have more people than any insurer going through these programs at the moment. We see training and development as a crucial means of recruiting and retaining people. We see the capability that RSA can bring in terms of training and development as one of the core competences we have in terms of retaining people.
As a foreign executive, how would you evaluate the current business environment in Oman?
I would say Oman has a relatively stable political environment. His Majesty and the Government has charted a sure-footed path over a period of time and Oman continues to be an attractive place to work.
There is a clear Five-Year Plan in terms of investment in tourism, education and diversifying the economy. I think there is a highly mobile and available pool of employment talent, and a young population eager to learn and get involved in new and growing opportunities.
RSA sees Oman as one of our core emerging markets and we clearly embraced the opportunity to invest more heavily in the country and take our presence from being number six to the number two player in the market. We see this as a really attractive and long-term place to do business and we will therefore continue to invest in people, capability and infrastructure to ensure that this is a market that we will have a long-term presence in.