Having risen through the ranks over the past ten years, Oman Insurance Company stands head and shoulders above its peers. Karen Attwood speaks to Abdul Muttalib Mustafa Al Jaidi, chief executive officer of the UAE’s top insurer.

Nobody has remained unscathed in the global slowdown. Construction projects have been delayed and businesses have had to cut their expansion plans. However, Oman Insurance Company, the UAE’s largest insurer, is continuing to grow.

Chief executive Abdul Muttalib Mustafa Al Jaidi explains that while the company has not been immune it has been able to mitigate losses.

“Since we currently underwrite on a wider regional area and since not all of the region is experiencing the same level of downturn, we are managing to mitigate losses of business from one sector or class with business from other sectors or classes,” he says.

He adds that although the decrease in construction activity in the UAE will mean this part of the business will register a decline, “overall we are still budgeting for growth”.

Oman Insurance, a publicly-listed company based in Dubai, benefits from having a broad portfolio. Non-life insurance accounted for 78 per cent of gross written premium in 2007 with life and health – a growing segment due to the UAE’s high number of expatriates who need compulsory insurance – accounted for the remaining 22%. “No economy has escaped the toxic fallout,” Al Jaidi says.

However, he believes that whereas countries such as Russia, Venezuela and Iran that previously benefited from hefty increases in the price of oil will experience a sharp decline in foreign assets in the current climate, this is not true of the UAE and Qatar.

“The foreign assets of GCC countries are

expected to continue to rise,” he says. “Similarly, because of their sovereign wealth funds, GCC countries are able to plough back more financial resources into the region in order to withstand the economic storm.”

He adds: “We have already identified areas of growth even in these trying times. The company is still registering growth, albeit on a smaller scale than in the recent past, while several insurance companies in more developed markets are contracting.”

He says the “current adverse scenario may give rise to some underwriting considerations, such as heightened moral hazard, a greater possibility of cessation of work...which we need to address with the appropriate underwriting measures”.

Overseas expansion

Those unfamiliar with the vagaries of the Middle East insurance market may assume that the company has its origins in the neighbouring Sultanate of Oman.

However, Oman Insurance is a home-grown UAE product. It was established as the insurance arm of the Bank of Oman in 1975 and was therefore named after the parent company.

Although the Bank of Oman later changed its name to Mashreq Bank, its insurance subsidiary continued with its old name partly because it had become a well known brand.

The domestic market currently makes up 95% of business - the company has ten branches throughout the emirates but it recently expanded into the international market with the opening of offices in Oman and Qatar.

Al Jaidi says the company is looking even further afield. “From an economic perspective, given the increased need for capacity, this is arguably a good time to seek out growth opportunities beyond organic growth,” he says. “Oman Insurance Company is committed to continue growing its underwriting footprint... However, one has to do so cautiously with eyes firmly on the road, hands loosely on the wheel and a foot close to the brakes.”

Risk management

Oman Insurance has been one of the pioneers of risk management in the Gulf. “We are one of the few, if not the only regional insurer with an in-house team of engineers engaged solely in risk management surveys as a service to our

construction and property clients,” Al Jaidi says. “We consider their engagement to be part and parcel of the service that we offer since prevention, even more so for the insured, is better than cure.”

The Gulf insurance market is often criticized for relatively high reinsurance cessions. But Al Jaidi says the company’s “enterprise risk management policy limits both the extent of our reinsurance cessions, as these would increase our credit and, or default risks, as well as the potential dependence on any single reinsurer”.

“There is a healthy balance between our net retentions and reinsurance cessions as this also has a direct impact on the underwriting and commercial controls that we would be able to leverage both with the client as well as with reinsurers,” he says.

The company is not reliant on regional reinsurers. “Our preference is not dictated by region but by how well rated is the security we are purchasing,” Al Jaidi says. “Of course, all things being equal, one would endeavour to support regional reinsurance companies however this also needs to be done within the framework of the widest reinsurance spread possible within the realms of practicality and economic feasibility. Therefore, our two main considerations in this respect are reinsurance rating and maintaining the spread.” He adds the company does not have current plans to move into Sharia complaint products.

“The laws in the UAE are such that a conventional company cannot underwrite takaful products and the inverse also applies,” he says. “Therefore, if one had to go down the takaful route, it would need to be done via a separate subsidiary and/or associated company.”

Oman Insurance Company - key facts

• Oman Insurance CEO Abdul Muttalib Al Jaidi says the company’s key qualities are investment in people, premises, processes and quality, as well as vision and “a passion to succeed at what we do”. “The essence of success lies in learning about both one’s strengths and limitations,” he says.
• Top 3 Arab insurer? Al Jaidi says that according to the latest available pan-Arab figures, which are those from 2007, Oman Insurance Company placed first by net profit in the Arab insurance world. “Our estimate is that by the end of 2008, we would also be with the top three insurers in the entire Arab world by gross written premium,”he adds.
• The company’s strategy was based on identifying where the market was and where the company wanted to be in a few years, as Al Jaidi explains: “Our core product is not to grow premiums but to pay claims,” he says. Finally, the company assessed how the clients expected to be served which meant “putting in place the necessary processes to exceed market expectations”.
• Established in 1975, the company has enjoyed rapid growth. In 2007, it achieved a premium turnover of Dh1.51bn ($411m). It has a technical reserve of Dh517m ($141m), shareholder equity of Dh2.36bn ($643m) and assets in excess of Dh4.69bn ($1.28bn).
• It reported pre-tax profits of Dh631m ($172m) in 2007, compared to Dh202m ($55m) in 2006.
• It is supported by leading reinsurers such as Swiss Re, Munich Re, Allianz and Bahrain-based Arig.
• In July 2008, AM Best assigned A ratings, but stated that an offsetting factor was its “volatile investment performance” due to its considerable exposure to the UAE stock market in 2006 which led to losses of Dh50m.
• In March 2009, Standard & Poor’s placed the rating on credit watch “with negative implications”. This was largely due to the challenging economic climate that its parent company Mashreq Bank is operating in.