CMA Organize Introductory Workshop on the Regulation for Bancassurance

Al Harrasi: The Regulation Enhances the methods for bancassurance and limits disputes between the parties in the insurance transaction

The Capital Market Authority organized an introductory workshop on the regulation for bancassurance issued by Decision No. 84/2023, within the framework of creating communication between the entities concerned with implementing the regulation, with the aim of clarifying the mechanisms of implementation and receiving inquiries to ensure developing regulatory practices in bancassurance with full awareness, understanding and certainty. In addition, the workshop represents an opportunity to emphasize the importance of cooperation between insurance companies and banking institutions to implement the provisions of the regulation in a way that achieves the regulatory objectives that provide the necessary protection for the insurance policyholder and related parties.

Ahmed  Salem Al Harrasi, Director General of the Market Prodentials  and Development Sector, commenced the workshop with an opening speech, emphasizing the importance of the insurance sector keeping pace with the most important transformations in the insurance industry, such as increased use of technology in insurance and the emergence of a number of new insurance and financing solutions, in addition to the changes in customers’ behaviors and expectations, which requires  the companies to provide innovative insurance solutions and strengthen partnerships with all relevant parties to enhance the spread of insurance services and improve them in accordance with best practices.

Al-Harrasi explained in his speech that the experiences of many countries prove that the most important and best effective means to enhance the spread of insurance is to strengthen the partnership between banks and insurance companies, and therefore the CMS  has sought, over the past years, to strengthen this partnership, which provides a number of advantages and services to the customers of such companies and banks and reduces various risks such as credit risks, and on the other hand,  provides the ability for insurance companies to benefit from the networks and branches of the banks.

 Al Harrasi pointed out that the regulation for bancassurance represents a legislative framework that enhances the use of effective channels and mechanisms for bancassurance, which contributes to reducing potential disputes and rejected insurance claims due to the customer’s lack of awareness as required when selling the insurance product.

The workshop reviewed and explained the provisions of the regulation emphasizing that the regulations prohibits insurance companies from selling any insurance product through the banks except after obtaining approval from the CMA. The regulation has specified the insurance products that can be marketed through banks, which are insurance products for life and general insurance and products related to small and medium enterprises, whereas more than one company cannot sell the same insurance product in the same bank. The regulation also obliges insurance companies to retain a percentage of not less than 40% of the net premiums for insurance products marketed through banks, with the exception of life insurance, property insurance and insurance products related to small or medium enterprises where no less than 25%  may be retained.

On the other hand, the regulation confers on the CMA the right to supervise and regulate the processes of selling and marketing the products in a set of provisions, the most important of which is internal audit of bancassurance and notifying the CMA of any violations, and setting controls to ensure that employees working in bancassurance comply with the provisions of Anti-Money Laundering and Combating Financing Terrorism Law.

It is worth noting that the issuance of this regulation comes as an affirmation of the CMA’s keenness on the necessity of improving the processes of bancassurance as an important marketing channel to enhance the spread of insurance products and their ease of access in various geographical regions in the Sultanate of Oman. Such spread would also play a role in expanding the level of insurance awareness as an essential part of the financial inclusion system. The process of drafting the regulation was based on consultation with the relevant parties represented by the Central Bank, the Omani Insurance Association and the Omani Banks Association, in addition to benefiting from international experiences to develop bancassurance business in the Sultanate of Oman and ensuring its commitment to achieving the best levels of international practice for regulating this important aspect in the Omani insurance market.