To protect the Rights of Policyholders and to ensure sustainable performance

CMA Announces Implementation of Risk Based Approach for Calculation of Solvency Margin of Insurance Companies on the Audited Financial Statements of 2022

In continuation of  the methodology of continuous development and evaluation of the legislative structures  and regulatory  tools adopted by the Capital Market Authority to protect all the stakeholders in  the capital market and insurance sectors, the CMA  has started since the beginning of this year to adopt a new  approach in calculating the solvency margin  of insurance companies, which reflects the  ability of the  insurance company  to discharge its obligations towards insurance policyholders. The risk-based approach for calculation of solvency margin measures the amount of the insurance company’s capital to support its business in light of the risk exposure, which varies from one company to another.  Previously the calculation of the solvency margin was measured according to the adequacy of assets compared to the liabilities.

The CMA had issued Decision No. (18/2022) regarding amendment of certain provisions of the Executive Regulations of the Insurance Companies Law published in the Official Gazette No. (1428) on February 6, 2022, which includes the necessary amendments for calculation of the risk-based solvency margin. This move comes after consideration of the most appropriate approaches used in calculating the solvency margin of insurance companies in order to develop methods, processes and basis for risk management in the sector companies in the Sultanate of Oman, and to adopt the regulatory process and offsite audit of their performance. The solvency margin calculation approach focusing on risk based capital adequacy to cover the various risk factors is one of the best internationally applicable practices in recent years recommended by the International Association of Insurance Supervisors (IAIS).

The CMA  emphasizes  that the risk based calculation of solvency margin approach  contributes to achieving a number of objects such as enhancing the capital of insurance companies, the possibility of identifying the risks to which each company is exposed according to the nature and size of its business, and determining the appropriate methods for  management of such risks, as well as its importance in protecting the rights of insurance policyholders , shareholders, related parties, and developing sound management practices in insurance companies, which will clearly reflect in enhancing investor confidence in the insurance sector in the Sultanate of Oman.

CMA calls on all insurance companies to adjust their situations during the current year in accordance with the requirements of the new solvency calculation approach in preparation for the actual implementation on the audited financial statements for the financial year that ends in December 2022 as the first financial statements to which the new approach will be applied for calculating the solvency.

The CMA also emphasizes its steady endeavors to adopt the latest and best regulatory and supervisory practices on all the regulated companies.