Al Busaidy Mansoor Jamal & Co.

Barristers and Legal Consultants


New rules for Oman’s insurance brokers

Filed under Capital Markets, Insurance

Oman insurance broker

In April, Oman’s Capital Market Authority (CMA) issued a new regulation for insurance and reinsurance brokers. The new rules contain more stringent capital and guarantee requirements, major changes to the insurance brokerage licensing regime and restrictions designed to prevent conflicts of interest.

Under the new rules the current single brokerage licence which covered both insurance and reinsurance brokerage will be replaced by three separate licences for (i) re-insurance brokerage, (ii) insurance brokerage, and (iii) dual brokerage. Applications for the new licences are likely to entail brokerage firms amending their commercial activities as registered with the Ministry of Commerce and Industry.

The most significant impact of the new rules for many brokerages will lie in the introduction of a minimum capital of OMR100,000. This represents a five-fold increase for many Omani brokerages currently registered with a capital of OMR20,000 under the Commercial Companies Law. Thresholds for the bank guarantees required to be deposited with the CMA as part of the licensing process have also been raised from OMR50,000 to OMR75,000 for insurance brokers, OMR150,000 for reinsurance brokers and OMR 200,000 for dual brokers.

The new rules also ban the ‘founders’ of brokerage companies from concurrently working for insurance companies, other brokers or agents in Oman. The percentage of shares a broker may hold in an insurance company has also been reduced from 10% to 5%. The combined effect of these restrictions is to lessen the risk of conflicts of interest arising between the insurance and insurance/reinsurance brokerage markets and to curtail the scope for interference by brokers in the conduct of insurance business. Another restriction is the ban on brokers from receiving or claiming any interest generated by the sums deposited in brokerage bank accounts (i.e. the accounts in which brokers keep client monies), from using these funds to obtain credit facilities or as security for bank loans.

The regulation is likely to have a significant impact on the brokerage industry in Oman. The robust approach taken signals the regulator’s determination to raise standards and adopt best international practice across all segments of the financial services sector in Oman.

For more on Oman’s insurance law, contact Mansoor Malik or Hussein Azmy

AMJ advises on Falcon and Arabia Insurance’s landmark deal

Filed under AMJ Deals, AMJ News, Insurance

Falcon insurance merger

AMJ recently acted as sole counsel at the request of both parties with regard to a complex share-purchase transaction in the insurance sector. The transaction, which completed at the end of March, involved the transfer of the Oman branch assets of Lebanese Arabia Insurance SAL, to Omani insurer, Falcon Insurance SAOC. Contemporaneous with Falcon’s acquisition of Arabia’s Oman branch insurance portfolio, Arabia Insurance acquired a majority share (54.29%) in Falcon.The deal involved a number of ‘firsts‘, namely the:-

 first ever transfer of a life insurance portfolio by court order in accordance with article 39 of Oman’s Insurance Law;
 first ever transfer of business (both life and general insurance) from a foreign insurer’s branch operation to an Omani closed joint stock insurance company requiring approval of the Ministry of Commerce and Industry (MOCI);
 first ever settlement of a business transfer consideration by the issue of shares to the seller’s wholly-owned subsidiary requiring approval by the MOCI of the business valuation;
 simultaneous acquisition of a majority stake and transfer of insurance portfolio requiring approvals from the MOCI, Capital Market Authority and the court.

AMJ’s team, led by Mansoor Malik, Managing Partner, advised on all aspects of the deal drafting the transaction documents and article 39 application to the court as well as assisting the client to obtain all the regulatory approvals necessary for successful completion.

The team also included corporate transactions partner, Ahmed Hashim, senior associates Nasar Ahmad, Majda Al Riyami and Abdullatif Al Rawahi, and associate Ahmed Al Busaidy.

Dentons Oman branch advised Falcon’s majority shareholder on the sale of its shares to Arabia.

No extension of listing deadline for Oman’s insurers

Filed under Capital Markets, Insurance

Oman CMA

Oman’s capital market and insurance regulator, the Capital Market Authority (CMA), has ruled out any extension to the three-year window given for Omani insurers to comply with regulations issued in August 2014. Royal Decree 39/2014 introduces an amendment to Oman’s Insurance Law which requires Omani insurers to double their capital to OMR10 million and list on the Muscat Securities Market by the end of July 2017.

Executive President of the CMA, H.E Abdullah al Salmi, speaking on the sidelines of the 11th Muscat Securities Market Forum in October, put an end to speculation that he might consider extending the mandatory listing deadline due to the dampening effect adverse market conditions have had on IPO plans in 2016. H.E al Salmi reiterated that the three-year grace period given for insurers to comply with the new rules was adequate and that it will always be difficult to predict the right time to go public as market conditions evolve continuously.

The new rules are expected to boost the insurance sector’s access to capital as well as to increase transparency via the financial reporting rules in place for publicly-listed companies. They are also aligned with the regulator’s aim to increase investment opportunities for individuals and small retail investors.

Oman’s insurance market set to benefit from new rules

Filed under Capital Markets, Insurance

Changes to Oman's insurance law

New regulations doubling the minimum capital requirement for Omani insurers to OMR10 million and mandating listing on the Muscat Securities Market (MSM) have been described as ‘credit positive’ by Moody’s ratings agency. Royal Decree 39/2014 issued in August 2014 amending Oman’s Insurance Law, provides a three-year grace period for existing providers to comply with the new rules. New market entrants must comply from the outset.

These measures, introduced by Oman’s insurance regulator, the Capital Market Authority (CMA), aim to boost the sector’s access to capital and increase transparency via the financial reporting rules in place for publicly-listed companies. Industry sources also forecast that the increased capital requirement may encourage Omani insurers to assume more underwriting risk with higher retention thereby reducing their traditional reliance on reinsurers. It may also trigger consolidation among the smaller players. Multiple insurance IPOs are likely to ensue as currently only 4 out of 22 Omani insurers (11 of which are branches of international insurance groups), are listed on the MSM.  The increase in capital market activity should boost investment opportunities for  individuals and small retail investors, a key focus area for the CMA.

Oman’s insurance sector has expanded at an average rate of 14% annually over the past 6 years and has doubled its share of GDP from 0.6% in 2007 to 1.2% in 2013 when total direct insurance premiums reached OMR360 million according to a recent report.  New segments such as engineering, construction, medical liability and property have experienced robust growth.  The introduction of mandatory insurance covers, such as health, unemployment, motor third party and liability, as well as the launch of two takaful (Islamic insurance) companies, have increased market awareness and the diversification of insurance products.

For more on Oman’s insurance law, contact Ravinder Singh