The Capital Market Authority of the Sultanate of Oman (CMA) has decided to adopt a new approach to calculate the solvency margin of insurance companies on the Audited Financial Statements of 2022.
According to the CMA, their decision to switch to a risk-based approach was made to protect the rights of policyholders and to ensure sustainable performance.
The risk-based approach 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 noted.
In a statement the CMA said: “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).”
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.