How would you assess the current situation in the Cyprus insurance sector, has 2023 been a good year for the industry?

The year 2023 so far follows a positive path, just like 2022, which ended as a year of growth. Detailed final results for 2023 will be released in a few months but we are optimistic that we will manage yet another year of solid growth. From my perspective the public trusts our insurance industry because we have proved to be a trustful partner that stands by our customers during difficult times. The past few years have been challenging from every aspect. First, the covid pandemic occurred which brought the worldwide economy to an unprecedented halt. Then, just about when we were ready to recover, the Russian invasion into Ukraine began which brought another downward spiral of the world economy. With inflation climbing into levels not seen in decades, keeping one’s insurance coverage was difficult but at the same time extremely important. The insurance companies stood by their customers supporting them with their late payments and this has increased customer satisfaction and led to more customers and higher premiums. We are looking forward to repeating this growth pattern in 2024.

How is the insurance sector doing based on key indicators figures?

The Insurance Association of Cyprus (IAC) has 29 member companies which represent more than 98% of the Cyprus market. We are looking to attract more memberships and since Brexit, some marine insurers have transferred their head offices to Cyprus, and more are exhibiting interest. We are looking forward to working with more companies in the future. The year 2022 ended with a combined growth of 9.5% for both Life and non-Life sectors. Life sector grew an amazing 15% while non-Life growth was also very high at 4%. The first half of the current year, for which we have confirmed results, has shown double digit combined growth which we hope will continue to the end of the year.

What have been the most significant developments or milestones in the sector in 2023? And have there been any new entrants setting up in Cyprus?

As of 2023, there are no new market participants we know of. Of course, this is an open market and with the flexibility that is provided by the European laws, a company may participate in any market using the Freedom of Services or Freedom of Establishment rules very easily. We had a few significant milestones happening in 2023. First of all, the long-expected IFRS17 accounting standard effective date was 1 January 2023. The worldwide introduction of IFRS17 was in the works for almost five years and its introduction was delayed a couple of times. Companies spent a significant amount of money and resources to alter their internal IT systems and their accounting processes in order to comply with the new standard. What is important is that the numbers that are resulting from the new accounting rules are not directly comparable with the results of the previous standard. Unavoidably, the insurance companies will need to maintain some of the previous reports so that the management will gain a full understanding of the new results.

At the same time, some significant consultations were held at EU level in 2023. The Motor Insurance Directive (MID) consultation resulted in a lot of changes that have to be implemented in the local legislation by 23 December 2023. Our association has worked closely with the Ministry of Finance and the law amendments are now at the Parliament waiting to be voted. At the beginning of the year, the Insurance Association of Cyprus has devised a code of conduct which was signed off by all the Life companies and its content was supported by all the cancer patient societies and the Ministry of Health. The insurance companies agreed to ignore the medical history of cancer survivors when certain conditions were met, to allow these people access to financial instruments for which life insurance is required. Cyprus was one of the first countries in Europe to introduce the Right to Be Forgotten (RTBF) based on a code of conduct without being obliged to do that through a law.

What new opportunities or developments are you seeing in the insurance landscape at the moment?

A lot has been said about the effects of technology on insurance. While most people believe that this is limited to internet sales, the reality is different. People embrace technology in many different ways and buying through the internet is not necessarily the most important method. Servicing an insurance customer goes way beyond the sale transaction and has to do with the interaction with the customer, the exchange of information, the processing of claims and payments, among other things. Insurance companies are pioneers in the use of technology because the public is becoming more and more demanding when it comes to its interactions with companies and the government. Customers now prefer to send information via internet or phone, rather than physically appear in an office to get serviced. During the pandemic, this happened in an accelerated way and thankfully this continues to be the case. I expect that more and more functions within the operations of an insurance company will continue to be digitalised and save time for both the consumers and the companies.
With regards to new products and services, we are seeing that cyber insurance is gaining ground slowly but steadily. The digital transformation of our society creates large pools of data that become an important asset for companies. At the same time, these large concentrations of data may easily become a liability since they are primary targets for cyber fraud. Companies need to insure their own and their customer’s interests and this can be done with specialised cyber insurance products that are now included in the portfolios of most of the insurance companies in Cyprus. At the same time, we are expecting to see a shift from the traditional motor insurance coverages to more complex ones included in new products that support the new generation vehicles such as electric ones.

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

There has been a rise in pension products over the last couple of years. The changes in the local legislation that were a result of the IORP Directive, have introduced a lot of requirements for the operation of occupational pension funds. As a result, a lot of small funds were not able to continue to operate and their members sought alternatives. Insurance companies offering Class 7 insurance products, which are the occupational pension funds, were ahead of the game. Already operating under the strict requirements of the insurance legal framework, they were able to offer a competitive alternative pension fund that offered transparency, access to a variety of investment portfolios, and at the same time use of state-of-the-art technologies that allowed members to have full control over their pension funds. Citizens have utilised the insurance companies and their pension products and entrusted their retirement funds.

Are there any new regulatory or legislative changes happening or coming up in 2023-2024 that will affect the Cyprus insurance sector?

One thing that you can say about the insurance industry is that we never get bored. We are currently in consultation with the government for several legislative changes. To name a few, we are actively consulting on a new legislation about the management responsibilities for large and small residential blocks including of course their insurability requirements. We are consulting for the Motor Insurance Law for some other changes in addition to the many currently being introduced from the Motor Insurance Directive. There is an active consultation with the authorities about the creation of a life guarantee fund and we are in the final stages of discussions about changes in the Ombudsman’s Law. Recently, an initiative surfaced to formulate a law on the Right to Be Forgotten, which we are already enforcing via our code of conduct. At the same time, we are following several EU initiatives that in due course will materialise into directives or regulations that will be incorporated into the local legislation.

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

As I see it, Cyprus is an attractive destination for any type of corporation to transfer its headquarters. As a country we have worked towards establishing a well-functioning ecosystem to support a corporation, making available world-class services in the areas of legal, accounting and technology. We are also in a position to offer competitive pricing for all these. The insurance sector has the additional benefit to work with a responsive regulatory authority which is a very important factor in heavily regulated sectors such as ours. Overall, I believe that Cyprus is one of the most attractive destinations for an insurance company for the abovementioned reasons. While the market is relatively small, companies can set up their head offices in Cyprus but continue to sell their insurance products in other countries.

What are your expectations for Cyprus and its insurance sector in 2024?

I feel fairly optimistic and expect another great year, even though the Russian-Ukraine conflict and the recent turmoil in Israel cause uncertainties in the world economy. In my impression, Cypriot customers have come to realise that insurance companies are a trustful partner that can stand next to them during difficult times. While underinsurance remains a serious problem in Cyprus, citizens appreciate the value of it, especially in hard times. The insurance industry on the other hand remains busy in an effort to adopt the various regulatory requirements. Despite their small size, insurance companies in Cyprus have the same obligations as any large European operator. This creates enormous pressure in both real and human capital. A typical question that I am often asked is whether this leads to more chances for market consolidations. The answer is always the same: a free market can move in any direction in order to create the most efficient outcome. I believe that market consolidations will occur when they are needed, and any predictions may fall short. We just have to wait and see.