Royal Decree 39/14 issued on August 12, 2014 introduces new regulatory requirements for insurance companies (“Royal Decree”).
The most significant requirement is that an insurance company must be a public joint stock company. Since many existing insurance companies are closed joint stock companies, this new legislation creates the requirement for these insurance companies to convert to public joint stock companies. Pursuant to the Royal Decree existing insurance companies have been given a period of three years to adjust to the new regulatory requirements.
It is interesting to note that according to recent media reports, many existing companies are considering making initial public offers in the near future. It would appear that existing companies are not waiting or wanting to utilize the full three year period.
When making an initial public offering a closed joint stock company will need to:
- Verify the company is in compliance with all regulatory requirements in Oman (including its insurance license, municipality license etc.);
- Appoint an Issue Manager, Reporting Accountants and Issue Legal Advisors;
- Notify its creditors (if any);
- Restore / increase its paid up capital to at least OMR 10 million;
- Prepare a prospectus and revise its Articles of Association;
- Comply with Capital Market Authority and Muscat Security Market Listing Requirements.
The Royal Decree makes some other changes to the existing Insurance Company Law of 1979 (as amended). These include:
- Shortening the grievance period in case of rejection of application for an insurance license from 90 days to 60 days;
- The fine for any person violating the law is expressly stated as between OMR 10,000 to OMR 100,000; and
- Granting the Board of Directors of the Capital Market Authority the discretion to agree to reconciliation with a person under investigation in exchange for the payment of an amount not less than twice the minimum fine and not more than twice the maximum fine.
With a Royal Decree requiring insurance companies to list, it will be interesting to see how the financial markets price and react to a number of insurance companies listing. It is still not certain the extent to which existing companies will offer their shares to the public.