S&P Report Cites Potential in Abu Dhabi and Omani Markets

April 24, 2007

The Abu Dhabi and Omani insurance markets “offer significant development potential,” according to two reports -“Abu Dhabi’s Insurance Market: A Healthy Industry Facing Challenges?” and “Insurance In The Sultanate of Oman Benefits From Good Regulation And Steady Growth -” published by Standard & Poor’s Ratings Services.

“Abu Dhabi insurers have a long track record of sound earnings generated from their risk management skills,” S&P notes. “To some extent, however, this is due to their role as risk handlers for the international insurance market.”

“Because the risk values handled are so large, it is impossible for any one company, worldwide, to take such a large risk line, so reinsurance has been a key feature of the market,” indicated S&P credit analyst Kevin Willis.

In the first half of 2006 the investment market slumped, which caused “a strain in the Abu Dhabi market, and local insurers will need to invest in client relationships, seek to accept an increased level of risk, and move away from the historical “risk distribution model,” according to the report.

Concerning Oman, S&P explained that it “is now a thriving domestic retail and commercial market that increasingly contributes to total market premiums approaching Omani rial 140 million (US$363.6 million) in 2006. Insurable activity therefore goes well beyond oil, although more than one-half of the country’s premium income is still ceded to reinsurers abroad as Omani insurers are still far too small to retain much of the very large, often concentrated, energy-related risks.”

“Although the revenue and performance ratios and projections may look attractive, the underlying numbers remain modest by many international standards,” explained S&P credit analyst David Anthony. “The expectation, therefore, is that although international majors will continue to target ‘big-ticket’ Omani energy and infrastructure risks and more sophisticated specialty requirements, the local retail and small commercial sectors will remain largely the preserve of indigenous and regional insurers.”

S&P noted that the “outlook for the Gulf Cooperation Council (GCC) insurance markets and increasing involvement of international insurers in the region will be discussed in greater detail by Kevin Willis at Standard & Poor’s inaugural GCC conference, “Supporting The Development Of Middle East Financial Markets,” which will take place in Dubai on April 24, 2007.”

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