Insurance

The European insurance regulatory landscape has undergone a major overhaul in recent years with the introduction of a modern risk-based regulatory regime known as Solvency II. Cyprus transposed the EU’s Solvency II Directive by enacting Law 38(I)/2016 and Regulations 116/2016 in April 2016. The basic EU legal act is supplemented by legislative acts of secondary law, including a very large number of technical standards, as well as non-legislative acts in the form of guidelines. 

The new regime introduces harmonised and robust prudential requirements designed to ensure that insurance firms can withstand severe shocks, with capital requirements tailored to the specific risks borne by each company. It also introduces detailed rules for the calculation of assets and liabilities, with special emphasis on the actuarial calculations for determining the level of technical reserves. Drawing from the approach followed in the case of the capital requirements Directive, Solvency II also includes a pillar on corporate governance and another pillar on public disclosure and supervisory reporting. 

Another major development relates to the adoption in February 2016 of a new EU Directive on Insurance Distribution (IDD) that replaces the Insurance Mediation Directive. The new Directive is much broader in scope and introduces a large number of new requirements with respect to pre-contractual information, disclosure, advice, conflicts of interest and inducements, product governance and assessment of suitability and appropriateness. Cyprus transposed IDD into the Insurance and Reinsurance Services and Other Related Business (Amending) Law of 2019 (Law 38(I)/2019). The European Commission has adopted a number of Regulations which further specify the requirements provided in IDD, with the most important being: 

• Commission Implementing Regulation 2017/1469 of 11 August 2017: lays down the format of the “Insurance Product Information Document” with which the manufacturers of non-life insurance products must provide customers, before the conclusion of the contract. 

• Commission Delegated Regulation 2017/2358 of 21 September 2017: further specifies the product oversight and governance requirements. 

• Commission Delegated Regulation 2017/2359 of 21 September 2017: further specifies the rules on conflicts of interest, inducements and the assessment of suitability and appropriateness. 

A company that receives authorisation as an insurance undertaking by the Cyprus Insurance Supervisor (ICCS) can use that authorisation to provide cross-border services in other Member States, either by way of freedom of establishment or freedom to provide services. EU passporting rights are also enjoyed by insurance distributors who are natural or legal persons (i.e., insurance agents/brokers) provided they are registered and licensed by the ICCS. Home-country supervision means that Cyprus-based licensed insurers or brokers are supervised and accountable to the ICCS regardless of whether they are doing business in one or multiple EU Member States. 

Our team of experts is ready to provide wide-ranging assistance and support to clients who wish to carry out insurance activities in or from Cyprus. In particular, our services involve: 

• Registration of a legal entity; 

• Application and licensing as an insurance undertaking or insurance distributor; 

• Insurance company activation; 

• Advice on compliance with national and EU Laws; 

• Drafting of customer agreements; 

• Advice on policy wording interpretations; 

• Advice on legal requirements on new products; 

• Agency and intermediation agreements; 

• Advice on the calculation of capital requirements and technical reserves; 

• Money laundering compliance; 

• Advice on outsourcing; 

• Advice on advertisements and marketing; 

• Advice on merger control and antitrust issues; 

• Representation before the Cyprus Insurance Supervisor (ICCS); 

• Regulatory opinions; and 

• Accounting and auditing support. 

For more information, please feel free to contact us.