Insights | 08 September 2021 | Insurance Association of Cyprus

Andreas Athanasiades , Director General, Insurance Association of Cyprus (IAC)

We see great opportunities in cyber insurance – providing coverage for loss of data and privacy protection. This new market is expected to grow exponentially in the next few years within the local economy.

How would you assess the current situation in the Cyprus insurance sector?

Our industry continues to prove its strong foundations and resilience while remaining a key pillar of the economy and conducive to economic growth. Our sector employs approximately 4,000 executives, insurance consultants and administrators, significantly contributing to the country’s employment levels with the economic input to the economy reaching 4.5% of the national GDP. 

Our customers' trust leads to an increase of our industry’s economic activities every year. Notably, in 2020 total gross premiums climbed to €917 million, an increase of 2.8% compared to 2019. The sector remains strong even after the implementation of a universal national health system, which proves our adaptability, but also the optimistic prospects for the development of the industry. We are very optimistic for the current year despite the global crisis. In fact, during 2021-22 we expect the growth of the sector to continue with a stable and positive trend.

We are now almost two years into the Covid-19 pandemic, what kind of effect is it having on the Cyprus insurance sector and how are the insurance companies coping? 

The insurance market noted excellent durability and absorbed vibrations without losses. The headwinds caused by Covid-19 affected the insurance industry less than other financial sectors. Even now, almost two years from the beginning of the crisis, insurance companies support customers in multiple ways. We are proud of our members who minimised the number of contract terminations and life policy surrenders while keeping their company’s financial records in good shape. 

Overall, IAC members have managed to adjust to their operating models and continued to service their customers and associates with empathy and devotion throughout the lockdowns. On the other hand, the Covid experience has accelerated the industry’s path to digitisation and increased operating efficiencies. It also educated customers, employees and consultants on how to use the tools of the new era: e-commerce and e-payments. Insurance companies are empowered more than ever to digitise their services and products.

There is a large number of insurance suppliers in Cyprus compared to the population, how do companies compete in this small market and is there room for new entrants?

Τhe previous year’s growth shows that the market is open and attractive, so any new entrants who believe they can compete, are more than welcome to do so. IAC believes in a free market with equal rules for all, where competition works to the benefit of their consumers. Any insurance company that operates in the local market must operate in accordance with the current law, including the European Solvency II requirements which are the same for all member states.  

What new opportunities or developments are you seeing in the insurance landscape, for example new service lines or tech solutions?

Technology is rapidly evolving. Artificial intelligence, automation, and other advancements set the stage for more opportunities and therefore new insurance products. New mobility devices such as scooters, electric bicycles, and vehicles are also presenting new challenges, since not enough risk assessment data exists. Meanwhile, we are closely monitoring progress in the real estate market, which includes tall buildings and large-scale residential developments that undoubtedly affect the insurance market. We also see great opportunities in cyber insurance – providing coverage for loss of data and privacy protection. This new market is expected to grow exponentially in the next few years within the local economy. Finally, the insurance industry can play an important, positive role by supplementing the earnings of pensioners with a range of programs, maximising the potential of citizens for a decent life after they retire.

Are there specific insurance segments that are doing particularly well or showing signs of potential growth?

As mentioned earlier, there is great potential for growth in a number of general insurance sectors in the next few years. Life insurers see over 5.1% year-on-year growth. Meanwhile insurance retirement schemes operating under Class 7 of the Cypriot insurance law, provide great products for those who wish to secure their retirement period. We are pleased to say that motor remained a key player in the insurance market.

Are there any new regulatory or legislative changes happening or coming up that will affect the Cyprus insurance sector?

The regulatory and legislative landscape of the insurance sector is constantly changing. There are several legislative and regulatory changes coming up stemming both from local and European bodies. Solvency 2020 review is in the final stages of its release. Solvency II, the regulation that defines the way the insurance industry functions is undergoing its first review and the changes are in the final stages of being approved by the European bodies and it will take effect soon. A large scale revamp of the accounting standards is underway with the implementation of IFRS17. These new standards change the way insurance companies book their profits. Its implementation will require hundreds of millions of euros of expenditure from the European insurers. The updating of the Motor Insurance Directive, which affects the automotive side is also expected to take place in the next several months.  New regulations on PRIIPs (Packaged Retail Investment and Insurance-based Products) and PEPPs (Pan-European Pension Products) are also expected to become effective soon. Locally, a recent change in the retirement regulations brought several changes in the insurance pension-related products, while new legislations enforcing new requirements for insurance are currently in the pipeline for the next months.

In addition to attracting more companies to headquarter on the island, Cyprus has also made technology, research and innovation a key focus. Are these two factors opening up any new possibilities for insurance firms?

The insurance market is well regulated by a stable and accessible supervisory authority. The market operates in a competitive, yet transparent and open environment. That is why we expect new entrants in the market. Last year, two large marine insurance organisations chose Cyprus as the place to establish their head offices. While their presence in the local market is minimal, this can certainly be seen as a vote of confidence for our country. 

What are your expectations for Cyprus and its insurance sector over the next few years?

The market is expected to continue its growth. The companies’ strong capital ratios and capability on operational abilities of the insurance sector leave no doubt that we will see more progress. If market conditions allow, it will not be a surprise to see mergers taking place. Finally, it is expected by the industry that underinsurance will remain an issue, but we see it as a place of opportunity which the insurance companies are ready to explore.

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