(MENAFN - Muscat Daily) With continued growth forecast for Oman's insurance market, A M Best Co believes the new takaful licensing regulation will generate additional competition in an already crowded market.
Over the long term, A M Best, a credit-rating organisation dedicated to the insurance industry, expects that underwriting profitability challenges in Oman could lead some insurers to exit the market, while larger insurers will maintain their leading positions.
In a report entitled 'Oman's Market Offers Opportunities; Fierce Competition Remains,' A M Best says the pending introduction of takaful licensing regulation by the Capital Market Authority is likely to create further interest from new entrants.
"While this is seen as a positive regulatory development, we expect an influx of fresh capital trying to service a small market, will only result in a more saturated one, unless takaful offerings can open up a previously untapped market and increase overall insurance penetration," A M Best said in the report.
The report said that takaful operators are likely to compete directly with their conventional counterparts as observed in other GCC markets.
Despite the low total premium volume, Omani insurance market is fragmented with 22 active insurers, half of which are local companies.
"Pricing pressures occur when companies aim to generate volume to capture market share in the absence of brand recognition or should demand for insurance fail to increase. While the introduction of takaful operators and windows is anticipated, it is unlikely that the market will sustain this number of companies in the long run," the report said.
A M Best expects increased competition to place pressure on the profitability of some smaller players, which may cause them to withdraw from the market altogether.
"Despite good market opportunities and continued growth over the short-to-medium term, an anticipated increase in new entrants after the introduction of new takaful licensing regulation is expected to further crowd the market and create a more challenging operating environment"
Mahesh Mistry, director of analytics at A M Best, said, "In addition to the insurance market benefiting from infrastructure development, medical health care is expanding and is likely to grow further over the short-to-medium term."