(MENAFN- Muscat Daily) Muscat- The implementation of a compulsory healthcare insurance system in Oman will boost the growth in the country's insurance market, S & P Global Ratings said in a new report.
In September 2017, the sultanate's Ministry of Health gave its approval to implement a compulsory healthcare insurance, with effect from January 2018.
The plan will be rolled out in a number of phases, starting with expatriates working in large companies, S & P said in a report titled 'Compulsory health insurance in Oman will boost the sector but could exacerbate declining profits'.
The ratings agency said health insurance currently contributes approximately 26 per cent of total premiums in the Omani market. 'Once it becomes compulsory, we believe health premium alone could see a growth rate in excess of 25 per cent, similar to what we have seen in neighbouring states that introduced compulsory health insurance, especially Dubai over 2014-2017'.
S & P said this surge in health premium would also support the overall Omani insurance market and expects total premiums to grow by around ten per cent over the next two years.
'Our growth estimate on market premiums is well ahead of our real GDP growth estimate of around two per cent over 2017-2018, which also indicates that insurance penetration will continue to rise in Oman', it said.
Insurance penetration in Oman is around 1.5 per cent, which S & P said is much lower than peers like the UAE (2.3 per cent) and other developed markets (generally above six per cent), and also indicates that there is strong growth potential.
S & P said Oman's insurance market remained profitable in the past three years but net income has declined, falling from RO26mn in 2014 to RO15.6mn in 2015 and then to RO8.7mn in 2016.
'This signals increased competition in the market, primarily from new players vying for market share. Technical profitability of the Omani insurance market has also fallen in the past three years, and loss ratios for health sector – which are already inferior to the overall market – rose to 91 per cent in 2016 from 77 per cent in 2014', the ratings agency said.
It added that the position of each insurer will differ, but they will need to strictly follow technical pricing if they are to benefit from the upcoming growth from the introduction of compulsory health insurance. 'We believe making health insurance compulsory in Oman is a step in the right direction in terms of expanding the underpenetrated insurance market and improving the country's healthcare provision'.
National Life and General Insurance Co (NLGIC) is a market leader in health insurance with approximately 50 per cent market share in Oman as of 2016. NLGIC's initial public offering (IPO) is the fourth and biggest IPO this year in Oman. The company is offering 66.25mn shares (25 per cent of share capital) at an offer price of 320bz.
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