Roll-out of Omani Nat-Cat Insurance Pool likely this year

MUSCAT: A long-awaited Natural Catastrophe (Nat-Cat) Insurance Pool, designed to provide insurance coverage to individuals and businesses exposed to disaster-related risks, is likely to be rolled out this year, according to Oman Reinsurance Company (Oman Re), the nation’s first and only reinsurer.

The publicly traded reinsurer said in its 2023 Annual Report that multi-year efforts to secure broad agreement on the contours of a first-ever Nat-Cat Insurance Pool for the Sultanate of Oman have reached a key phase. Those efforts, spearheaded by Oman Re, have involved Oman Insurance Association (OIA), the Capital Market Authority (as the insurance sector regulator), and other stakeholders.

“The deployment of the Omani Nat-Cat Pool is expected during 2024 and this a decision to be taken by the CMA,” said Dr Juma bin Ali al Juma, Chairman – Oman Re, in the Directors’ Report for the financial year ended December 31, 2023.

According to the Chairman, the rising frequency of natural catastrophes witnessed in Oman since 2018 had spurred the company to initiate a “national dialogue” with the regulator and Oman Insurance Association on the need for a framework to mitigate and manage the impacts for individuals and businesses.

An initial meeting to discuss the initiative was held in November 2021 in the wake of the devastation unleashed by Cyclone Shaheen. In attendance were members of Oman Insurance Association and all decision-makers representing local insurance companies. There was broad consensus on the need to establish a Nat-Cat Insurance Pool for the Omani market.

A Steering Committee helmed by Oman Re has since been working on the technical aspects of the reinsurance pool formation. While a proposal on the Motor section of the Nat-Cat Pool has been submitted to the regulator for its consideration and approval, the Non-Marine Section is currently being finalized, the Chairman stated, adding that the Nat-Cat Pool is expected to be a reality this year.

Underscoring the need for contingency funding to help the nation bounce back from natural disasters, a National Fund for Emergencies (NFE) was instituted by Royal Decree earlier this year. Set up under the auspices of the Ministry of Finance, its primary aim is to address “emergencies and natural disasters, like climatic conditions, floods, earthquakes and other risks that might impact the country or cause damage to public utilities and public infrastructure”.

The prestigious General Arab Insurance Federation (GAIF) has also called upon insurers and reinsurers of the MENA region to create a regional Nat-Cat insurance pool to help strengthen underwriting capacities at the regional level. Arab countries, it warned, are becoming increasingly vulnerable to climate risks including floods, earthquakes, tropical storms, droughts and forest fires.

According to the latest annual Natural Catastrophe and Climate Report by Gallagher Re, one of the world’s biggest reinsurance brokers, global insured losses from natural catastrophes reached an estimated $123 billion in 2023, marking the fourth consecutive year where such losses exceeded $100 billion. The report estimates the global economic cost of all natural perils at $357 billion in 2023.