(MENAFN- Muscat Daily) Moody's Investors Service said that the recent Royal Decree which requires national insurers to be listed on the Muscat Securities Market (MSM) is credit positive for companies because it will improve companies' capital market access to funds strengthen their capital make them more transparent and enhance the financial strength of the Omani insurance market.
The Royal Decree promulgated amendments to certain provisions of the insurance companies laws. The decree as implemented by the Capital Market Authority (CMA) requires insurers to be listed on MSM and at the same time raised the minimum capital for insurers to RO10mn. The established insurers have three years to comply with the new capital standards while new market entrants must comply from the outset.
'The new requirements are credit positive for Omani insurers. It will improve the companies' capital market access to funds strengthen their capital make them more transparent and enhance the financial strength of insurance market' Moody's said in a sector report.
The ratings agency said that Oman's insurance market which consists of 22 insurers (11 of which are the Omani branches of international insurance groups) had a compound annual growth rate between 2006 and 2013 of 14.1 per cent with 2013 direct premiums of RO364mn.
Previously the minimum capital base for insurers was set at RO5mn with only new market entrants required to be listed and hold a minimum capital of RO10mn. As a result only four insurance and takaful firms were listed on the MSM namely Al Madina Takaful Dhofar Insurance Oman United Insurance and Takaful Oman.
'Going forward we expect the insurance market as a whole to benefit from the listing as it will require periodic financial disclosures enhancing transparency (a general deficiency in the market now) and improving companies' access to capital markets' Moody's analyst Mohammed Ali Riyazuddin Londe said.
Although some of the 22 insurers already maintain or exceed the new minimum capital requirement of RO10mn we expect the market as a whole to over time comply with and benefit from the enhanced capitalisation levels implied by the increased minimum capital requirement he said.
Londe added that given the increase in capitalisation insurers will likely take on more risk be it underwriting risk through increased business/higher retentions and/or investment risk.
'For example insurers may seek to raise business volumes or weaken pricing and/or deploy excess capital into investment in high risk asset classes potentially increasing volatility in the market's performance. However these risks will likely be offset over time as the increased capital requirements encourage consolidation among some of the smaller players as well as pose a barrier to new entrants aiding market stability in the medium- term' Londe said.
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