Tuesday 11 / February / 2025
Muscat: The Capital Market Authority (CMA) has issued a new organisational regulation to organise the investment of the insurance companies’ assets and Takaful insurance. This came to meet the Omani insurance market development which adds sufficient flexibility for the companies to be able to diversify investment opportunities and face the market volatility.
This contributes to strengthen the insurance companies’ investments both the traditional and Takaful and enhance the financial centres that qualify it to be able to compete and absorb more risks, thus maximising the amount of the invested funds in the local economy.
The decision issued by Abdullah bin Salim Al Salmi, executive director of the Capital Market Authority, directed all the companies to work on conciliating its conditions according to the regulation’s requirements during one year.
For the importance of this regulation, Al Salmi clarified that adopting this regulation comes by the continuous revision for the regulations and procedures that the authority approved to ensure the alignment and consistency for the developments and absorb the needs that the special conditions required in this critical period of economic growth that the Sultanate is experiencing in neo-renaissance process. This comes in the frame of creating suitable conditions to start executing Oman vision 2040.
The insurance and Takaful companies are considered in addition to their principal activity to provide the insurance coverage for individuals, properties, and economic activities, they are also important investment institutions that invest the premiums collected from different economic activities to protect the policyholders’ rights and maximising returns on investments that are considered an important component in developing and expanding these companies.
For these reasons, the authority redrafted in coordination with the companies and the effective institutions working in the sector the regulation to give more flexibility for the companies to direct its investments to achieve the desired objectives by the companies by achieving the development, expansion and provide the reserves and sufficient liquidity to face the possible claims by the insurance policyholders, ensure the insurance companies’ efficiency and power and achieve the financial sustainability.
Al Salmi clarified that the regulation in its new drafting came after identifying the insurance companies’ investments facts existing in the Sultanate and evaluate the companies’ abilities to face the investment opportunities volatility in addition to convoying the sector’s variations and development.
Therefore, when drafting the regulation clauses, it focused on the positive dealing with the international market variations and respond to the investment opportunities facts and current stage requirements. Thus, the regulation was marked with sufficient flexibility to help the insurance companies in enhancing its investment performance and achieve the greatest economic value for the local market to preserve the insurance companies’ role level in revitalising the economy as one of the important saving and investing schemes in the national economic system.
Al Salmi referred to the insurance sector’s investment volume since it exceeded OMR709.2 million at the end of the third quarter of the year 2020 and an average growth which reached 6 per cent during the last five years. In addition to its major role in revitalising the governmental and private bond market where the insurance companies are considered the principal authorities that lead its investments in the government bond market with the banking sector and the pension funds in addition to its investments in the other indirect investment instruments.
On the other hand, Al Salmi mentioned that the Omani insurance market today has diversity in providing its services for the public especially after entering the Takaful insurance products, where the Takaful insurance companies possess a good share that reaches 12 per cent of a total insurance portfolio. Therefore, the investment regulation related to the sector shall be adopted to include this aspect.
This regulation provided the Takaful insurance companies with the investment in new investment instruments that comply with the legal provisions like deeds and Islamic investment funds according to the specified percentages and terms whether inside or outside the Sultanate. This regulation also provided the companies with the necessity to organise the investments professionally through investments policies and plans annually certified in addition to the existence of committees that follow these policies and plans conditions. This organisational step will contribute to directing the investments toward safety and limit the impact of investment risks.
This regulation referred to the needed borders to invest in the investment schemes as deposit, commercial and governmental bonds and the public joint-stock companies’ shares, investment funds and the companies not included in the stock exchange and real estates. The regulation specified the investment schemes that prohibit the insurance company to invest outside the Sultanate which ensures the diversity and distribution of assets adequately where it allows the companies to respond effectively with the capital markets, local and international real estate markets variations. This enhances its ability to satisfy the commitments toward its clients.
The regulation indicates that the insurance companies’ investments shall not be in the bank deposits and investment agencies at the authorised banks and financial enterprises from the Central Bank of Oman, bonds, and governmental deeds less than 30 per cent from the total investments but shall not exceed 50 per cent of the total company’s bank deposits.
The company’s investments in the deeds and commercial bonds inside the Sultanate shall not exceed 35 per cent according to the specified terms. This regulation allowed the company to invest in the joint-stock companies, investment funds and the companies not included in the market shares by not exceeding 40 per cent of the total investments and also according to the specified terms.
The regulation will also allow investing in the loans secured by insurance policies on life and properties and shall not exceed the investment percentage 20 per cent from the total insurance companies’ investments and the investment shall not be in the real estate speculatively.
The investment percentage in real estate may increase according to the specified conditions that do not exceed 30 per cent after the authority’s agreement.
By achieving the authority’s oversight role, the regulation stated that the investment committee which is formed by the company’s executive administration or investment management company, is obliged to prepare the investment policy for the company which shall include measuring the investment portfolio, evaluate it, analyse the company’s performance results during the previous five financial years, the predictions for the coming five financial years, also the assets specialised for the investment and manage the risks related to the investment activities.
These decisions presented the new regulation’s characteristics clarifying that it will include a separate chapter for the organisational articles related to annual investment plan preparation requirements which the insurance companies prepare and present it to the Capital Market Authority which includes the objectives, strategies and mechanisms for investing the insurance company’s assets.
The companies under this regulation shall be assigned to put an investment policy certified by its board of directors. It is about a policy that the company prepares indicating risk management and risk tolerance system and level. This ensures that the company’s power will not be affected to contingent liability, its capital sufficiency, analyse and evaluate the possible results for each risk and the relation between the internal risks and the external factors.
It is mentioned that the audited financial statements for the insurance sector in the Sultanate clarify that the sector has developed remarkably during the past years and is approaching half a billion Omani rials.
Regarding the insurance companies’ investments development, we notice that it developed during the year 2015 which reached OMR503.3 million to OMR709.2 million at the end of the third quarter of the year 2020 and a development percentage of 41 per cent during that period.
