AMJ has advised the Oman Government and Sovereign Sukuk Company on the sale of US$1.5billion 5.92% sukuk certificates due 2025 and the update of its unlimited sukuk-al-ijara trust certificate issuance programme (Programme). The issue at the end of October 2018, received orders in excess of US$3.9bn according to Oman’s Ministry of Finance, and was rated BBB and Baa3, respectively by Moody’s and Fitch credit rating agencies.

The AMJ team was led by senior partner, Mansoor Malik supported by senior associate Asad Qayyum and associate Khalid Al Abri.  Clifford Chance acted as international counsel to the Government and issuer.

This is the second issuance under the Programme set up in 2017. AMJ also advised on the Oman law aspects of establishing the Programme and the subsequent drawdown of US$2 billion trust certificates which settled on 1 June 2017 and which marked the largest-ever sukuk issuance by the Sultanate.

This sukuk issue is Oman’s second foray into the international debt capital markets in 2018 following a jumbo US$6.5 billion conventional bond issue in January 2018, the country’s largest ever debt sale. Listed on Euronext Dublin (formerly the Irish Stock Exchange, the bond was sold in tranches of $1 billion 3.875% notes due 2022, $2 billion 5.375% notes due 2027, and $2 billion 6.5% notes due 2047. AMJ acted as Oman counsel for the Government on the establishment of a Global Medium Term Note Programme for Oman and the jumbo bond issuance thereunder.

AMJ’s team comprised senior partner, Mansoor Malik supported by senior associate Asad Qayyum. Clifford Chance acted as international counsel to the Government and issuer.

Rising crude oil prices and increased government investment in non-oil sectors will boost growth in Oman’s construction sector in 2018 by 10.4% and in 2019 by 11.5% outstripping the MENA construction sector average according to a recent report by BMI Research, a unit of Fitch Ratings.

An earlier report by intelligence provider BNC in April 2018, identified a total of 2,410 active construction projects in Oman with a combined value in excess of US$190bn. Ongoing projects comprise 1,840 projects worth US$61bn urban construction projects, 70 projects worth US$39bn in the oil and gas sector and 150 projects worth US$32bn in transportation.

BMI predicts continued strong growth for the sector over the course of the next five years. The upward trajectory is underpinned by Oman’s favourable foreign investment regulations and incentives, as well as an ambitious economic diversification agenda and robust government support for infrastructure sectors like power and water, tourism, and transport and logistics and the establishment of special economic zones to serve as an investment focus for companies seeking infrastructure opportunities.

Against this substantial project pipeline, AMJ’s construction specialists, managing partner, Mansoor Malik, and senior associate, Henry Mitchell, have contributed an overview of Oman’s construction law regime to the latest Legal 500 Construction Comparative Guide. For guidance on the procurement, financing, permitting and licensing of construction activity in Oman as well as standard contract terms relating to the obligations of parties, taking of security, termination and dispute resolution,

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Developing a robust debt capital market to sustain long-term economic growth has been high on Oman’s policy agenda for some years. This policy is beginning to pay dividends with the value of the bonds and sukuk segment of the Muscat Securities Market (MSM) growing by 32% to OMR2.63 billion during the period 2016 to 2017. This represents about 15% of the MSM’s total market capitalisation and an average annual increase of 46% over the last five years.

In a keynote address to the Oman Debt Capital Market Conference held in Muscat on April 18, the head of Oman’s Capital Market Authority (CMA), Sheikh Abdullah Al Salmi, attributed the strong growth to CMA measures to promote debt capital market instruments as an alternative funding mechanism for both government and private sector in addition to stimulating FDI. CMA measures include focusing on key areas of market infrastructure, regulation and product innovation in both the conventional and Islamic segments.

The day-long conference organised by the Gulf Bond and Sukuk Association (GBSA) in partnership with Al Busaidy Mansoor Jamal & Co (AMJ), and Maisarah, Bank Dhofar’s Islamic banking window, assembled industry players, legal experts and stakeholders to discuss the development of both conventional and Islamic debt markets. A panel moderated by AMJ’s Islamic finance specialist, Asad Qayyum, identified the introduction of more diverse and complex instruments and structured products as a key factor to driving development and promoting financial stability.

As at June 2018, the value of bonds and sukuks on the MSM has risen to OMR2.85 billion.

AMJ’s Islamic Finance team advised on two of the winning deals in the IFN Awards Deals of the Year 2017 ceremony held at the Ritz Carlton in Dubai on March 11.

The annual IFN Awards, now in the 12th edition, recognise excellence and innovation in the global Islamic Finance industry.

The Oman Deal of the Year was awarded to Oman Government for its US$2 billion 144A Sovereign Sukuk and the Ijarah Deal of the Year was awarded to Mazoon Electricity Company for its US$500 million 144A/Reg S Sukuk.

The winning deals were selected from a total of 425 nominations from across the world.

AMJ advised the Government of Oman and the issuer, Oman Sovereign Sukuk Company, on the Omani law aspects of the Oman Deal of the Year, the Sultanate’s maiden international public sukuk issuance in June 2017. The issuance was the debut issuance under the Sultanate’s first-ever trust certificates issuance program on which AMJ also advised. The deal is further noteworthy for being the second-largest US dollar Sukuk issued out of the GCC since July 2012.

On the Ijarah Deal of the Year awarded to Mazoon Electricity Company, AMJ acted as Oman Counsel for the joint lead managers and issuers. The US$500 million Reg S/144A Sukuk was the first international corporate sukuk issue out of Oman, and the first Reg S/144A corporate sukuk out of the MENA region since May 2016. The deal is also the first-ever Sukuk from the regulated electricity distribution sector which required detailed discussions with the regulator on structuring the transaction in order to comply with the restrictions of the Oman’s Sector Law.

The corporate deal also demonstrated the efficacy of Oman’s Sukuk law, which uses an SPV in lieu of a trust. The concept and structure were not deterrents to global and US investors who respectively took up 30% and 13% of the deal.The fact that both the award-winning deals were well-received by investors which should instil confidence in Omani institutions and corporates for the success of future transactions in the global market.

The IFN Deal of the Year 2017 awards, which were for the first time hosted as a part of IFN’s World Leaders Summit, assembled CEOs and decision-makers from Islamic financial institutions, top business leaders, policymakers, legal experts, economists and thought leaders from key Shariah finance markets around the world.

Mansoor Malik led AMJ’s team supported by senior Islamic Finance associate Asad Qayyum. AMJ was previously awarded the IFN’s global Sovereign Deal of the Year award for its advisory role on Oman’s OMR250million inaugural sovereign sukuk issuance in 2015.

Oman’s Capital Market Authority (CMA) issued the regulatory framework (Regulation) for the introduction and trading of real estate investment trusts (REITs) in early January 2018.

Oman joins the UAE, Saudi Arabia and Bahrain as GCC countries which have established REIT regulations. REITs have gained popularity in GCC countries in recent years as a mechanism for smaller investors to invest in real estate while offering real estate companies access to a larger pool of investors to fund acquisitions and development projects via capital markets.

The keenly-awaited Regulation contains detailed guidelines for setting-up, managing and operating REITs. It expands existing rules on investment funds in the CMA’s Executive Regulations (Decision 1/2009). The Regulation governs both conventional and shariah-compliant REITs and allows for different structures such as closed-end REITs, public REITs and special REITs. Under the Regulation, a REIT must have a minimum paid-up capital of OMR10 million, offer at least 40% of units to the public in the case of a public REIT, and pay a minimum of 90% of the net annual profits as a dividend to unit holders. In contrast to other jurisdictions which limit foreign ownership to 49%, international investors can own up to 100% of a REIT set up in the Sultanate.

REITs may invest only in real estate properties, special purpose vehicles, assets (whether or not they relate to real estate), monetary amounts, deposits and financial instruments. The Regulation contains a number of specific restrictions on permitted investment activities. For example, a REIT may not offer credit facilities, purchase vacant land, nor invest more than a certain percentage of its asset value outside Oman. In all cases, a minimum 50% of the total value of the REIT’s assets has to be invested in income-generating real estate and/or special purpose vehicles.

The stricter regulatory framework for REITs in comparison to direct investment in a real estate asset or investment via a fund should increase transparency in the real estate market where visibility around asset performance, ownership and legislation are key to attracting capital. The significance and potential of REITS in Oman as a vehicle for driving investment and liquidity in the real estate industry, as well as boosting capital market activity, was identified by Tanfeedh — Oman’s National Programme for Enhancing Economic Diversification — as one of nearly 100 economic initiatives for implementation over the short term.

For more information, contact Ardeshir Patel or Asad Qayyum.

AMJ partnered the Islamic Finance News in staging a successful third Oman Forum at the Grand Millennium, Muscat on March 13. The day-long annual event attracted a record number of industry players, regulators and legal experts gathered to deliberate the future of Islamic retail banking, capital markets and takaful in Oman. In his keynote address to an audience of more than 200 bankers, issuers and other key stakeholders from across the Middle East, Europe and Asia, new Central Bank of Oman chief, Tahir Salim Al Amri, noted that while Islamic banking in Oman accounted for OMR 3.03bn (12.9 per cent) of total banking assets at the end of 2017, the impressive growth trajectory of the segment shows signs of tapering. He urged Islamic banks and windows to focus on innovation and the introduction of new sharia-compliant financial products and services that are not clones of conventional banking offerings. This recurrent theme had been highlighted by AMJ’s managing partner, Mansoor Jamal Malik  in the 2017 Forum when he called for alternative investment products to maintain growth and create a vibrant and sustainable market.

During the course of the day, a high-level line-up of speakers participated in a series of panel discussions, case studies and presentations, on the opportunities and challenges in the Islamic market for both capital-raising and investment. Senior associate, Asad Qayyum , participated in a panel session of experts discussing the sharia-compliant project finance structures and future of Oman’s Islamic capital markets.

AMJ acted as Oman counsel to the issue manager and joint lead manager on the debut sukuk offering by Mazoon Electricity Company S.A.O.C. The landmark transaction marks the first international corporate sukuk issue out of Oman, and the first Reg S/144A corporate sukuk out of the MENA region since May 2016.

The ten-year Reg-S/144A sukuk certificates were successfully priced on 1 November 2017 and the profit rate for the certificates was set at 5.2 per cent.

The sukuk offering was based on the Shariah-compliant ijarah structure and the certificates were rated Baa2 (negative) by Moody’s Investor Services and BBB(negative) by Fitch Ratings.

Robust investor demand translated into a final order-book of approximately US$5bn from 300 orders, representing more than ten times oversubscription. The sukuk certificates were listed on the Irish Stock Exchange. The issuance was managed by Mazoon Electricity Company and Nama Holding along with JP Morgan Securities plc, Bank Muscat, KFH Capital Investment and First Abu Dhabi Bank acting as joint lead managers and Noor Bank and Warba Bank acting as co-managers.

The fundraising programme is expected to support the Mazoon Electricity group’s electricity transmission and distribution networks investments in Oman.

Mansoor Malik led AMJ’s team which included senior Islamic Finance associate Asad Qayyum. AMJ’s dedicated Islamic Finance team, the only one of its kind in Oman, has acted on a number of sukuk issuances in Oman in recent years including the Oman government’s US$2 billion international sukuk in 2017, US$500 million international sukuk in 2016 and the global award-winning US$650 million maiden sovereign sukuk in 2015.

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 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 has advised the Government of Oman and the issuer, Oman Sovereign Sukuk Company, on the Omani law aspects of establishing an unlimited sukuk alijarah trust certificate issuance programme, and the debut US$2bn international sukuk issuance under the Programme. The Programme was listed on the Irish Stock Exchange in mid-May and followed by the US$2bn sovereign issuance which settled on June 1.

The sukuk facility, which has a seven-year tenor and profit rate of 4.397 percent, was effected under Rule 144A and Regulation S and listed on the Irish Stock Exchange.

The final order book was reportedly in excess of US$6.9 billion, more than three times the issue size, which demonstrates strong international demand for Oman’s high-yielding debt despite the country’s recent credit downgrade by Standard and Poor.

The transaction marks a number of firsts; the Programme is the first of its kind established by the Government; the sukuk issuance is Oman’s largest-ever; and the Sovereign’s first public offer of sukuk in the international market. The issuance marks Oman’s second foray into the international debt capital markets this year following a US$5 billion multi-tranche conventional bond sale in March upon which AMJ also advised. The funds raised by the two issuances are expected to meet a significant portion of the Sultanate’s requirements for 2017.

Mansoor Malik, managing partner, supported by senior Islamic Finance associate Asad Qayyum acted as Oman counsel to the Government and the issuer. Clifford Chance acted as international counsel. Alizz Islamic Bank, Citi, Dubai Islamic Bank, Gulf International Bank, HSBC, JP Morgan and Standard Chartered Bank were the sukuk book-runners.

In mid-2016, AMJ acted as sole counsel to the government on the Sultanate’s first international US$500 million sukuk issuance, which was privately placed. In two earlier ‘first of a kind’ transactions, AMJ advised the issue manager and joint lead managers on Oman’s debut US$648 million sovereign sukuk in 2015 and on Oman’s first-ever corporate issuance in 2013.

AMJ has advised the government on Omani law aspects of the country’s largest debt capital markets issue to date. The US$5 billion offering in tranches of five, 10 and 30 years was settled on 8 March 2017. The five-year tranche totalled US$1 billion, while the 10- and 30-year tranches raised US$2 billion each. The bonds were offered and sold in reliance on Rule 144A and Regulation S and were admitted to trading on the Irish Stock Exchange.

Order books for the issue which marks the Sultanate’s return to the international debt capital markets after an absence of two decades, reportedly totalled $20 billion, demonstrating strong international demand for Oman’s high-yielding debt.Most long term bonds were taken up by US investors in the United States thereby reducing the impact of Oman’s bond on liquidity within the region while the five year tranche was more in demand with Gulf based investors. The proceeds from the bond sale represent almost the entirety of Oman’s foreign borrowing requirement for 2017 which the government intends to use to cover around two thirds of the country’s expected budget deficit of US$ 7.8 million. The remainder will be covered from state reserves and domestic borrowing.

Mansoor Malik, managing partner, led AMJ’s team supported by senior associate Asad Qayyum. Clifford Chance acted as International Counsel to the government. Bank Muscat, Citi, Deutsche Bank, HSBC, ICBC Standard, JP Morgan, Société Générale, and Standard Chartered Bank were joint-lead managers for the bond.

In mid-2016, AMJ acted as sole counsel to the government on the Sultanate’s first international US$500 million sukuk issuance, which was privately placed. In two earlier ‘first of a kind’ transactions, AMJ advised the issue manager and joint lead managers on Oman’s debut US$648 million sovereign sukuk in 2015 and on Oman’s first-ever corporate issuance in 2013.

AMJ partnered the Islamic Finance News in staging a successful second Oman Forum and Dialogue at the Grand Millennium, Muscat on March 7. The day-long event gathered over 150 industry players, legal experts and stakeholders from across the Middle East, Europe and Asia in an audience with the regulators to discuss trends in Oman’s fast-growing Islamic finance industry.

In the opening keynote address H.E Abdullah Salim Al-Salmi, executive president of the Capital Market Authority (CMA) announced that two private sector sukuk programmes totalling OMR 300million (US$ 780million), have received initial approval from the CMA. These sukuk programmes are the ‘first of a kind’ under Oman’s new sukuk regulation and come as the government is contemplating a second international sovereign issuance.

In a second keynote, H.E Hamoud Sangour Al Zadjali, the executive president of the Central Bank of Oman (CBO) expressed satisfaction with the pace of development in the Islamic finance segment. In the short span of four years, the combined assets of Oman’s Islamic banks and windows had reached OMR 3billion, representing a 10% market share, by the end of December 2016.

AMJ’s managing partner, Mansoor Malik, shared his insights on Islamic finance regulatory frameworks in two expert panel sessions. He stressed the need for the industry and regulators to embrace alternative investment products in order to maintain the positive growth trajectory of the Shariah compliant segment and create a vibrant and sustainable market. Malik recently advised on the Sultanate’s international US$500 million sukuk, which was privately placed and settled on 14 July 2016, as well as the sovereign’s debut sukuk and preceding corporate sukuk, the first of its kind in Oman.

AMJ’s banking partner, Marcus Pery, participated in the Forum’s closed-door dialogue on developing Oman’s Islamic financial markets, between industry experts and CMA and CBO representatives. Senior associate, Asad Qayyum delivered a workshop to students on legal and regulatory issues in Islamic finance.

For more information, contact Bernadette Bhacker-Millard

AMJ is partnering with the IFN for this major event in the Islamic finance sector calendar in Muscat on March 7, 2017.

With keynote addresses by H.E Abdullah Al-Salmi, Executive President of the Capital Market Authority and H.E Hamood bin Sangour Al Zadjali, Executive President of the Central Bank of Oman, the Forum will provide an opportunity for industry players to gain insight into Oman’s Shariah-compliant capital raising and investment space as well as to network with other executives and leaders from government, industry and institutions.

This 2017 Forum builds on the success of the inaugural seminar last year which brought together more than 120 senior industry players from across the GCC with 26 domestic and international speakers. It will include an audience with the regulators and expert panel discussions on legislative and regulatory developments in the Islamic finance space as well as the outlook and prospects for Oman’s fast fund management industry, more sukuk issuances and cross border deals

For more information, contact Bernadette Bhacker-Millard

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.

AMJ acted as sole Omani Counsel to all the parties on the Oman government’s recent US$500mn sukuk issuance. The sovereign sukuk issuance, Oman’s first US dollar-denominated sukuk issuance, was privately placed by Oman Sovereign Sukuk S.A.O.C, a special purpose vehicle incorporated in Oman and wholly owned by the Government of Oman.

The certificates were priced with a profit rate of 3.5% per annum, payable semi-annually. As in the case of Oman’s debut sovereign sukuk, the certificates are based on an al-Ijarah structure. The tenor is 6 years with maturity date of July 14, 2022.

Standard Chartered Bank acted as lead manager and placement agent for the issuance and Deutsche Bank as the certificate-holders’ agent and principal paying agent.

The purpose of this sophomore issuance is to finance ongoing development projects as well as to raise Oman’s profile in international debt markets. The issuance met with strong demand from investors despite a Baa1 rating by Moody’s compared to its A1 rating for the previous sovereign issuance.

Commenting on the deal, AMJ managing partner, Mansoor Malik, said, “It is a testament to investor confidence in Oman’s stable outlook and the government’s risk profile that, despite the rating downgrade, this international issuance achieved the same pricing as the previous sovereign issuance. We are pleased to have played our part in another landmark transaction in Oman’s Islamic finance space and to assist efforts to maintain forward momentum in the economy during challenging times.”

Mansoor Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior Islamic Finance associate Asad Qayyum. The same team acted as Oman Counsel to the issue manager and joint lead managers on Oman’s debut sovereign transaction in 2015.

Allen and Overy acted as International Counsel for Standard Chartered Bank and Clifford Chance as International Counsel for Oman Sovereign Sukuk S.A.O.C and the Government.

On July 21, 2016, Oman’s Code of Corporate Governance for Publicly Listed Companies came into force in Oman. The New Code (issued by CMA Circular E/4/2015) replaced the previous code issued in 2002 and is legally binding on companies with shares listed for public trading on the Muscat Securities Market in accordance with Article 50(8) of the Capital Market Law (Royal Decree 80/98).

The New Code is presented in a novel format of 14 high-level principles of good corporate governance each underpinned by detailed terms for attainment. While primary responsibility for ensuring compliance with the New Code rests with the boards of directors of public companies, executive management and external auditors should note that they also have significant compliance-related obligations under the New Code.

Other key changes include:

• restricting board membership to non-executive members
• stringent qualifications for an individual’s nomination as an independent director
• revised rules concerning related party transactions and avoiding conflicts of interest (including restricting board members from voting on resolutions where he/ she may be an interested party and prohibiting the CEO of a public company from serving as CEO of its subsidiary)
• requiring boards to establish a nomination and remuneration committee in addition to the pre-existing requirement for establishing an audit committee
• requiring board members to undergo periodic training on corporate governance and sustainability and for their performance as directors to be assessed and reported upon by an external agency.

Boards are required to report on compliance with the New Code in their listed company’s annual report for the previous financial year. Accordingly, they will need to ensure that the companies they lead are fully compliant with the New Code no later than December 31, 2016 so that they can certify compliance in the next annual report.

The regulator, the Capital Market Authority (CMA), has been steadfast to date in declining waiver applications for derogation from the New Code which indicates that it fully expects public companies to meet the end of year deadline for compliance. Given the CMA’s track record of rigorously monitoring the compliance of public companies with the previous code through onsite inspections and compliance audits, we anticipate that it will monitor compliance with the New Code equally robustly.

Directors of public companies and auditors interested in advice on developing a road-map for compliance with the New Code, are invited to contact partners Mansoor Malik or Ardeshir Patel.

A recent move to relax secured financing or margin trading is expected to boost liquidity and trading volumes on the Muscat Securities Market (MSM). It also brings welcome clarity to the rules governing margin trading by licensed brokerage companies. On May 24, the market regulator, the Capital Market Authority (CMA) announced that it has replaced regulations governing margin financing by brokerage companies with a new set of regulations (CMA Decision 4/2016). Among other things, the new rules extend secured financing facilities, previously restricted to MSM-30 Index companies, to companies listed in the regular and parallel markets.

In addition, the amount a client can obtain from a broker to purchase securities has been doubled from OMR250,000 to OMR500,000, while the broker’s overall exposure to a single client is limited to 15% of the broker’s total funds deployed in margin financing. However, each broker is permitted to set parameters for securities it is willing to finance on margin. The new CMA rules also increase the maintenance margin to 5 trading days instead of the earlier 3 days.

According to a statement by Abdullah Salim Al Salmi, Executive President of CMA, the amendment is one of a series of measures aimed at creating an attractive environment for local and foreign investors and instilling confidence in Oman’s capital markets as a key driver of economic growth through long-term financing of major strategic projects.

For more information on secured financing or Oman’s capital markets in general, contact Mansoor Malik or Ardeshir Patel.

A recent decision (KH/5/2016, May 25, 2016) of Oman’s Capital Market Authority (CMA) amending the executive regulations of the Capital Market Law (Royal Decree 80/1998) introduced key changes restructuring the markets and significantly increasing capital thresholds for listing on the Regular markets. Following the decision, only companies with paid-up capital of OMR 5 million (increased from OMR 2 million) will be listed on the Muscat Securities Market’s (MSM) Regular market.

Other changes raise the minimum shareholder/unitholder equity threshold from 100% of the paid-up capital to 120%. Several new requirements are that the traded value should be no less than 10% of the paid capital throughout the year, and that the company has issued financial statements for two successive years.

The structural changes introduced to the MSM by the market regulator, limit listing on the Third Market to closed joint stock companies and private investment funds the units of which are offered via private placement. Joint stock companies and investment funds whose shareholders’ equity is no less than 50% of paid–up capital are excluded from listing on the Parallel and Third Markets. In addition, two new specialised markets have been created within the MSM; i) the Continuity Market, reserved for public joint stock companies and investment funds which have suffered a significant (being 25%) capital erosion or which have resolved to be dissolved, liquidated or have their legal form converted; and (ii) the Pre-emptive Rights Market.

These changes, along with a new monthly capital sufficiency reporting requirement for all listed companies (previously quarterly), are indicative of the CMA’s determination to maintain and monitor the financial health of the markets at a time of tightening liquidity and negative market conditions. The restructuring of the markets and introduction of two new markets brings a new level of sophistication to the MSM and aims to stimulate trading by catering to the needs of a broader more diverse base of investors.

The decision takes into account the enactment of the new Sukuk regulation by incorporating a specific provision allowing sukuk to be traded on the MSM’s Bonds Market, which has been renamed the Bonds and Sukuk Market.

For more information on Oman’s capital markets, contact Mansoor Malik or Ardeshir Patel.

A detailed regulation governing the issue and management of sukuk transactions came into force on April 11, 2016. Issued by the Capital Market Authority (CMA), the body authorised to regulate sukuk by an earlier amendment to the Capital Market Law (Royal Decree 59/2014), this is the latest development in Oman’s evolving Islamic regulatory landscape. Investor protections and procedural clarity introduced by the new rules are forecast to spur sukuk issuances particularly among private sector corporates seeking to diversify their financing bases and risk.

The new regulation codifies the trust structure to be adopted for an issuance and the powers and duties of the trustee to manage and invest the trust property and allows the issuance of a sukuk programme. It details the procedure for applying to the CMA for the issuance approval and grant of a licence to establish a special purpose vehicle in the form of a limited liability company or any other dedicated legal entity. The choice of shariah supervisory board (SSB) tasked to ensure that the issuance is shariah-compliant, is left to the issuer. Sukuks may be denominated in omani rials or a foreign currency. There is no restriction on the amount of the sukuk based on the beneficiary’s capital. The CMA has the option to require the issue to be credit rated.

The new regulation will provide a much-needed liquidity management tool and investment avenue base for both conventional and shariah-compliant investors. As a late entrant to the Islamic finance segment, Oman has benefited from the experience and best practice in other jurisdictions and this latest legislative move is no exception. The detailed and transparent nature of the regulation is expected to provide additional comfort to investors and give Oman an edge over regional sukuk markets which lack dedicated sukuk regulations and which, instead, issue sukuk by reference to conventional bond regulatory frameworks with shariah-compliant add-ons. According to Kemal Rizadi Arbi, an adviser at the CMA, “We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy”.

Since this landmark development, approval has been granted for a major corporate to issue a US$150 million sukuk by way of private placement and interest among Oman companies to tap into capital market financing is rapidly rising. For more information on sukuk and other Islamic finance instruments, contact Mansoor Jamal Malik or Asad Qayyum.

AMJ partnered the Islamic Finance News, a leading online industry journal, in organising the inaugural IFN Oman Seminar and Dialogue 2016 in Muscat earlier this year. The event brought together around 170 industry leaders, banks, investors, issuers, legal experts and other key stakeholders in the Islamic finance industry in Oman and the UAE to discuss the future of Islamic Finance in Oman and its role in diversifying the economy of the country.

Strongly supported by the regulators, the seminar opened with a keynote address from Hamoud Sangour Al Zadjali, the executive president of the Central Bank of Oman (CBO), in which he highlighted the successes of Oman’s Islamic financial institutions in achieving, within a short span of three years, OMR2.25 billion (USD582.25 billion) in gross assets and a market share of 7.75 per cent as of December 2015. Overall, Islamic banks and window operations are expected to ramp up market share to 10 per cent of the banking industry by 2018.

Featuring a series of panel discussions, case studies and presentations, the event highlighted the opportunities available in the fast-growing Omani Islamic market for both capital-raising and investment. AMJ’s managing partner, Mansoor Jamal Malik took part in a panel discussion on recent developments shaping Oman’s Islamic Capital Markets in which he summarised the current regulatory and legal framework for structuring Shariah-compliant transactions. Senior associate, Asad Qayyum, participated in a closed afternoon session of experts to discuss a roadmap for the further expansion and development of industry in Oman.

AMJ has also entered into an exclusive media partnership with the IFN’s Islamic Finance Corporate, a new monthly e-newsletter dedicated to promoting Oman’s Islamic Finance.

For more information, contact Bernadette Bhacker-Millard

Oman’s Takaful Insurance Law,approved by Oman’s State Council (upper house) in February 2015, finally came into force on March 6, 2016 (Royal Decree 11/2016). The law is based on the AAOIFI guidelines and provides a robust and comprehensive framework covering all aspects of the shariah-compliant insurance sector. According to Oman’s insurance regulator, the Capital Market Authority (CMA), takaful insurance premiums in Oman totalled OMR39 million (US$101 million), representing a market share of 8.7% of the insurance sector as a whole in 2015.

The new law regulates all aspects of a takaful operator’s activities including oversight and reporting requirements, product standards and liquidity levels. It requires takaful insurers to be publicly listed on the Muscat Securities Market (MSM) with a minimum capital of OMR10 million. This aligns with regulations introduced in August 2014 doubling minimum capital requirements for conventional insurers from OMR5m to OMR 10m and requiring all insurers to list on the MSM by 2017.

Under the law the conduct of takaful insurance business is restricted to dedicated takaful companies. This prevents conventional underwriters from setting up Islamic insurance windows (in contrast with the Islamic banking sector where the regulations allow non-Islamic banks to own and operate Islamic ‘windows’). These combined capital-centred and market regulatory provisions aim to create a level playing field for Oman’s fledgling takaful industry which, like in other GCC markets, faces the challenge of an established and fiercely-competitive conventional insurance industry.

The CMA has extensive powers including to licence, control and oversee takaful operators. Takaful operator licences will be granted for renewable periods of five-years provided the regulator deems the issue of a licence in the economic interests of the country. The CMA may suspend issuance of new licences at any time if it is of the opinion that the market is saturated and may, at any tim, withdraw a licence for breach of a condition. The CMA also has powers to intervene in the management of a takaful insurer in certain circumstances, by conducting administrative investigations, requiring the company actuary or another actuary to report on the financial standing of the company, appointing an non-voting auditor to the board or dissolving the board and appointing a committee to run the company until a new board is constituted.

The law imposes obligations on the takaful operators to constitute a Shariah committee with a minimum of three members including Fiqh specialists in financial transactions and a takaful expert. Other provisions govern the maintenance of solvency margins, fund set-up and management and the transfer of takaful business from one company to another.

This latest regulatory development in the sector is expected to raise awareness and fuel consumer appetite for takaful insurance as well as other faith-based products and services. Industry analysts predict significant growth potential for takaful insurance in Oman due to the low current rate of insurance penetration (1.1%). The global takaful market led by Saudi Arabia and GCC (63%) and Malaysia and Indonesia (30%) has maintained double-digit growth since 2011 and is forecast to be worth $20bn by 2017.

Even prior to its enactment, investor response to two takaful insurer IPOs at the end of 2013 indicate a strong appetite for Shariah compliant insurance products. AMJ advised on these successful deals, one a conversion of Al Madina Insurance into Al Madina Takaful, and the other, Takaful Oman, a new company backed by investors including Kuwait’s T’azur Takaful. Both of these ‘first of a kind’ IPOs were heavily subscribed.

AMJ has won an international award for its advisory role on Oman’s OMR250million inaugural sovereign sukuk issuance.

The firm received the prestigious global Sovereign Deal of the Year 2015 award from the industry leading Islamic Finance News (IFN) at its annual Deals of the Year Awards ceremony in Dubai on February 28.

The Awards recognise those who have participated in the industry’s most groundbreaking transactions each year. The sovereign issuance also won an honourable mention in the top global ijarah and sukuk categories.

Commenting on the award, managing partner, Mansoor Jamal Malik said, “We are delighted that Oman’s first-ever sovereign sukuk issuance has been recognised as the standout sovereign deal of the year in the global Islamic finance space. We are pleased to have contributed to a successful debut offering which is expected not only to boost Oman’s emergent Islamic finance industry but also to strengthen the capital markets and to support the government’s economic diversification drive.”

Although the last of GCC states to embrace Islamic finance, Oman has over the last three years built a strong Shariah compliant banking and finance industry. Today the sector comprises two fully-fledged Islamic banks and six Shariah compliant banking windows, as well as two takaful operators and a several Shariah compliant investment funds. Islamic banking assets accounted for 7.4% of the total banking sector at the end of 2015 and are forecast to reach 10-12% within the next two years.

Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior associate, Asad Qayyum.

For more information, contact Bernadette Bhacker-Millard

AMJ’s Corporate and Capital Markets team recently acted for the Prysmian Group/Draka Holdings on its acquisition of approximately 16% additional shares in OCI, increasing the existing stake held by its fully-owned subsidiary, Draka Holdings BV to just over 51%. The US$110 million deal gives the Prysmian Group, a world leader in the energy and telecom cables and systems industry, a majority stake in one of Oman’s leading public companies.

At a press conference in December, Prysmian’s chief strategy officer and chairman of OCI, cited confidence in Oman’s relatively advanced corporate legal regime, stable platform for business development and foreign investment-friendly policies as a key factor behind the decision to increase Draka’s investment in OCI as well as OCI’s position as a leading cable manufacturer in Oman and the GCC.

Mansoor Malik, AMJ’s lead partner on the deal, commented “We are pleased with the successful conclusion of this deal which posed a number of complex and novel legal issues.” As the transaction was a rare ‘private acquisition in public equity’, AMJ was required to lead discussions in order to obtain the key approvals from the CMA, Oman’s capital market regulator, and the MSM, Oman’s stock exchange, In particular, CMA approval was required to except the transaction from the prohibition under Article 7(b) of the Capital Market Law Article against one or more closely related persons from owning 25% or more shares in a public joint stock company.

Malik was assisted by Corporate and Capital Markets partner, Ardeshir Patel.

AMJ acted as Oman Counsel to Bank Muscat as issue manager and joint lead manager with Standard Chartered Bank on the first-ever sukuk offering by the Omani Government. The OMR200 million (US$517.17 million), 5-year benchmark sovereign sukuk issuance was oversubscribed close to 1.7 times, attracting 22 orders totalling OMR336 million (US$869.75 million) from a wide base of both conventional and Islamic institutions during the subscription period, which ran from Oct. 8 to 22.

The Ministry of Finance expanded the program by 25% to OMR250 million (US$647.13 million) at a yearly 3.5% cut-off yield to accommodate the strong order book. Results of the sale and allocations are awaited.

AMJ’s role included advising Bank Muscat and Standard Chartered on the listing, regulatory and settlement mechanics of the sukuk issue under Omani law as well as on Omani law aspects of the transaction structuring and documentation. Since this was a debut sovereign issue and as the draft sukuk regulations circulated by the Capital Market Authority are not yet in final form the transaction raised a number of novel issues, both substantive and procedural. The issuance also set the record for being the first debt capital market instrument – Islamic and conventional – to be priced through a book-building process with a uniform price auction.

Commenting on the deal, AMJ managing partner, Mansoor Malik, said: “We are pleased to have been involved on this ground-breaking, sukuk issuance which involved a number ‘firsts’ and a steep learning curve for all stakeholders. As such, it establishes a useful benchmark and precedent which we expect to spur future issuances, both by government and private sector.”

The issuance which is rated A1 by Moody’s Investors Service, in line with the Sultanate’s long-term issue rating, is seen as a key development for Oman’s capital markets, broadening Shari’a compliant investment avenues for private and public players, allowing them to diversify their financing base and spread risk.

Mansoor Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior Islamic Finance associate Asad Qayyum. Allen and Overy acted as international Counsel on the transaction.

A new corporate governance code (Code) for companies listed on the Muscat Securities Market (MSM) was recently unveiled by the market regulator (CMA). All MSM-listed companies have until July 22, 2016 to comply with the Code’s mandatory rules save that the provisions governing independent directors will apply to directors elected to boards in the interim.The Code was adopted after two years of detailed review by a multi-sectoral committee formed by the CMA and several rounds of public consultation.

The Code sets down a detailed framework for the management and regulation of public joint stock companies based on the four core values of transparency, accountability, fairness, and responsibility; concepts common to many corporate governance codes elsewhere in the world. It defines 14 key principles of corporate governance with corresponding minimum compliance requirements for each. The level of detail makes this Code far more comprehensive than the 2010 version which it replaces.

One of the primary aims of the ramped-up Code is to separate the board from the executive management of public companies by requiring all directors to be non-executives. Another is to improve the effectiveness of directors by setting out requirements on attendance at board meetings, training in corporate governance and annual performance evaluation by an independent party. The Code also introduces the concept of collective responsibility for board decisions, professional criteria that an individual proposed for election must satisfy, and a mandatory nomination and remuneration committee to assist the board and general meeting in identifying suitably skilled individuals for election.

The requirement for a minimum one third of the board to be independent is the same under the new Code as under the previous code. However, a more rigorous definition of independent director under the Code will potentially impact companies dominated by a large single shareholder or operating in highly specialised fields. Companies will also need to factor in the potential time and cost implications for their operations arising from more stringent related party transaction rules under the Code.

The launch of the Code coincided with the establishment of the Oman Centre for Corporate Governance and Sustainability (OCCGS) under the stewardship of the CMA. The OCCGS is tasked with building the infrastructure, skills and value system to transform corporate behaviours and performance in Oman. A sound, transparent and effective regulatory framework and robust institutions for corporate governance is central to the CMA’s strategy to transform Oman’s capital markets sector into a major engine of growth for the national economy.

For more information on corporate governance or Oman’s capital markets, contact Mansoor Malik or Ardeshir Patel.

Capital Markets Authority (CMA) Chairman, Yahya bin Said Al Jabri, announced last month the appointment of members to the board of the OCCGS. The OCCGS was set up at the end of July by Royal Decree 30/2015 with the remit to build the infrastructure, skills and value system to transform corporate behaviours and performance in Oman. The OCCGS’s main areas of focus are to develop codes and standards; foster awareness and advocacy; build capacity through training and certification programmes and provide support and research to companies.

The OCCGS replaces the CMA’s internal centre for corporate governance set up in 2010. Although the OCCGS is a separate legal entity enjoying financial and administrative autonomy and a much-expanded remit, it remains under the close statutory oversight of the market regulator. The OCCGS board is chaired by CMA head, Abdallah Al Salmi, and its members are appointed by the CMA’s board of directors to which it refers its recommendations.

In addition to the chairman, the first board of OCCGS is composed as follows:-

Executive Director – Abdulghani Dawood Al Zadjali, Central Bank of Oman;
Mohammed Taqi Al Jamalani, Oman Chamber of Commerce and Industry;
Dr. Said Mubarak Al Mahrami, Sultan Qaboos University;
Rashaad Mohammed Al Zubair, Zubair Enterprises,
Talal Said Al Mamari, Oman Telecommunication Company;
Isam Saud Al Zadjali, Oman Oil Company;
Walid Khamis Al Hashar, Bank Muscat.

For more information on corporate governance or Oman’s capital markets, contact Mansoor Malik or Ardeshir Patel.

Oman’s Capital Market Authority (CMA) issued a draft regulation on take-overs and acquisitions of publicly-listed companies (the Regulation) for comment in May. As with take-over codes in other jurisdictions, the Regulation is designed to provide an orderly framework within which a take-over offer for a listed company or fund is conducted, as well as to ensure that all shareholders in a target company are treated fairly and given the opportunity to decide on the merits or otherwise of a take-over.

The Regulation applies to shareholdings in any company or investment fund, whether Omani or foreign, listed on the Muscat Securities Market or any stock exchange in Oman. Under the Regulation, a person (including persons acting in concert) who acquires 25% or more of the voting rights of a listed company would be obliged to make an offer to acquire all remaining shareholders of the target company. The mandatory offer requirement is also triggered when a person (alone or in concert) holding between 25%-50% of the voting shares or voting right increases its stake by acquiring additional shares carrying more than 2% of the voting shares of the target company in any 6 month period. The offer price must be at least equal to the highest price paid by the bidder (alone or in concert) for the shares during the six months prior to the bid.

The CMA has power to grant written exemptions from the mandatory offer obligation or the application of the Regulation in the national interest or the interests of investors at large or for any reason it sees fit. Application for exemption must be made before the mandatory offer obligation is triggered A person intending to launch a take-over bid is required to appoint an issue manager licensed by the CMA (or other CMA-approved person) as adviser to represent him throughout the take-over and would need to do so at an early stage as only an issue manager may file a proposal or exemption application.

Another key principle of the Regulation requires the offeror to afford all shareholders, minority shareholders in particular, with fair and equal treatment and the opportunity to consider the merits and demerits of a take-over offer. The target company board of directors may not perform any action (such as selling material assets or issuing new shares) to frustrate a take-over which they view as hostile or unwelcome without the approval of the shareholders’ general meeting.

The Regulation includes stringent disclosure requirements and detailed provisions on terms of an offer, timelines and respective obligations of persons involved in the take-over as well as any competing offer. This Regulation is a significant development in Oman’s corporate and capitals markets sector and is the latest in a series of CMA initiatives to strengthen and stimulate activity in this key sector.

For more information on the Regulation and its implications for shareholders and boards of publicly-listed companies, contact Mansoor Malik or Asad Qayyum.

The State Council (Oman’s upper house) approved a draft law for Oman’s shariah-compliant insurance (takaful) market in mid-February.  The takaful law is one of a series introduced to regulate the country’s nascent Islamic banking and finance sector. The draft prepared by the insurance regulator, the Capital Market Authority, was reportedly amended after deliberation by the State Council and the Majlis Ash’shura (Oman’s lower house).  Once enacted by royal decree, the law is expected to spur confidence and growth in Oman’s emerging takaful market.

The law will regulate all aspects of a takaful operator’s activities including oversight and reporting requirements, product standards and liquidity levels. It requires takaful insurers to be publicly listed on the Muscat Securities Market (MSM) with a minimum capital of OMR10 million. This aligns with regulations introduced in August last year doubling minimum capital requirements for conventional insurers from OMR5m to OMR 10m and requiring all insurers to list on the MSM within 3 years. Crucially, the new law restricts the conduct of takaful insurance business to dedicated takaful companies. This will prevent conventional underwriters from setting up Islamic insurance windows (in contrast with the Islamic banking sector where the regulations allow non-Islamic banks to own and operate Islamic ‘windows’).

These combined capital-centred and market regulatory provisions aim to create a level playing field for Oman’s fledgling takaful industry which, like in other GCC markets, faces the challenge of an established and fiercely-competitive conventional insurance industry.  According to Moody’s rating agency these types of measures are effective to improve overall underwriting quality and are likely to lead to consolidation among smaller market players in a crowded market.

Industry analysts predict significant growth potential for takaful insurance in Oman due to the low current rate of insurance penetration (1.1%). The global takaful market led by Saudi Arabia and GCC (63%) and Malaysia and Indonesia (30%) has maintained double-digit growth since 2011 and is forecast to be worth $20bn by 2017.  Investor response to two takaful insurer IPOs at the end of 2013 indicate a strong appetite for takaful.  These successful IPOs, one a conversion of Al Madina Insurance into Al Madina Takaful, and the other, Takaful Oman, a new company backed by investors including Kuwait’s T’azur Takaful, were heavily over-subscribed. Both IPOs were handled by AMJ’s Corporate and Capital Market’s team.

Increased activity in the Islamic banking and finance sector overall is likely to raise awareness and fuel consumer appetite takaful insurance as well as other faith-based products and services. A main market driver in 2015 will be the issuance of several sukuk or Islamic bond offerings.  These include the long-awaited sovereign sukuk offering by the government of Oman and several banking sukuks.  The sukuks issuances will help to diversify the limited range of investment options currently available to the shariah-compliant sector within Oman and to soak up the excess liquidity.

The shariah-compliant index (SCI) launched by the MSM in mid-2013 to enable investors to identify suitable investable assets will come more to the fore  as an increasing number of shariah-compliant products and services come online in the coming years.  A the end of 2014, it  included more than 30 listed financial, industrial and services companies that comply with the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) requirements for Islamic investment principles.

Royal Decree 59/2014, which came into force on November 11, has introduced important amendments to Oman’s Capital Market Law (CML).

These include changes in applicable law concerning acquisitions of significant stakes (25% and above) in public joint stock companies. The changes expand the information that a prospective acquirer needs to provide the Capital Market Authority (CMA) in its application for the CMA’s consent to the acquisition and introduce additional obligations that the prospective acquirer needs to fulfill in relation to the acquisition.

Other amendments are:-

• changes to the protocol for constituting the board of directors of the Muscat Securities Market;
• inclusion of new provisions in the CML which deal with the issuance, listing and trading of Sukuk;
• empowering brokers to sell securities purchased on behalf of a client, which are not paid for (i.e. there is a client default) instead of merely allowing a freeze on dealing with such securities as was the case previously;
• augmenting the powers of the CMA to investigate offences and sanction offenders.

For more on the implications of the changes or any aspect of Oman’s capital markets law, contact Mansoor Malik or Ardeshir Patel.

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