Oman’s Capital Market Authority (CMA) has published new rules for the marketing of insurance and takaful products in Oman (Decision E/69/2017). These replace the previous rules issued in 1983.

The new rules introduce a raft of additional requirements including:
– obliging insurers to complete CMA-issued application forms;
– expanding the documentation that an insurer needs to furnish in support of its application for product approval including: policy documents in Arabic, or Arabic translations (which are deemed to override their English counterparts); the insurer’s pricing policy for the product (which must be consistent with the insurer’s board approved underwriting and pricing policy); and marketing materials for the policy;
– recognition of fairness standards, which oblige insurers to ensure that policy documentation is balanced and fair;
– introduction of a time-bound application process (30 days in which to complete the application process from initial filing) and response process (30 days from filing of a complete application for the CMA to respond); and
– levying fees which insurance companies are required to pay the CMA for scrutiny of the product application (OMR 100) and for marketing it in Oman (OMR 500).

While overall the new rules bring structure to the previous practice-driven approach to obtaining CMA approval for marketing new products, insurers are likely to need further guidance on matters not specifically addressed by them. These include the procedure to be followed upon a refusal or deemed refusal of an application by the CMA, or the impact on insured parties and reinsurers of the cancellation by the CMA of consent for marketing a product.

For more on Oman’s insurance law, contact Ardeshir Patel.

AMJ recently advised leading insurance group, Howden Broking Group on the acquisition of a majority stake from the founder shareholders of New Generation Insurance Services in Oman. The new entity is renamed Howden Insurance Brokers LLC. The parties agreed not to disclose details of the transaction terms.

Howden is the retail broking arm of UK-based Hyperion Insurance Group, the world’s largest employee-owned insurance group which employs more than 3,800 people across 38 countries in Europe, the Middle East, Asia Pacific and the Americas.

This transaction represents a major step in the development of Howden’s business in Oman. David Howden, CEO of Howden and parent company Hyperion said in a statement to the press that “Oman has a rapidly growing insurance market and one to which we can bring a fresh approach for clients by leveraging our existing expertise in the region as well as the wider Group’s access to specialist products and markets in London and internationally.”

AMJ’s was led by senior partner, Mansoor Malik, and senior associate, Asad Qayyum working closely with in-house counsel at Howden and Hyperion.

AMJ advised Al Ahlia Insurance Company on its maiden IPO, conversion to a joint stock company and listing on Muscat Securities Market (MSM). The IPO raised OMR 7.5 million through the public offering of a 25% stake (25,000,000 shares at a price of 300 baisas per share) open to individual and institutional investors. It was subscribed by 2.43 times, indicating strong demand from both the investing public and institutional investors to the first share offer on the Muscat bourse in 2017.

This was also the first IPO by an insurance company ahead of the statutory deadline for insurers in Oman to increase their capital to OMR 10 million and list on the Muscat Securities Market.

AMJ’s corporate/capital markets team assisted Al Ahlia in securing key consents and approvals for the IPO from a range of regulatory bodies and with the drafting of the prospectus to ensure all stakeholders’ requirements were satisfied. In particular, AMJ assisted in obtaining CMA approval for the offer of 25% of Al Ahlia’s issued and paid-up share capital to public subscription by way of exemption from Article 61 of Oman’s Commercial Company’s Law (CCL) which provides for a minimum 40% share offer. The CMA also permitted Royal & Sun Alliance (Middle East) B.S.C as a strategic investor to hold a 52.50% majority stake in the new entity as an exception to the CCL which restricts to 20% the shares of a promoter in a public joint stock company.

The AMJ team comprised senior partner, Mansoor Malik, corporate/capital markets partner Ardeshir Patel, senior associate Nasar Ahmad and associate Armughan Ashfaq.

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.

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.

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.

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