Development of the Insurance Sector

Insurance Companies operating in Cyprus were originally being registered in England under the English Insurance Law, due to lack of specific local legislation. It took nine years after the Independence of Cyprus for a Law to be passed allowing the establishment of local Insurance Companies. Since the Insurance Companies Law was passed, a great deal of progress was observed in the insurance sector,in the number of Insurance Companies formed and also in the volume of premiums generated.

With the application of the Insurance Companies' Law of 1969 and the creation of Local Insurance Companies, as mentioned above, the institution of an Association became necessary and more independent from the British Association and started developing its own initiatives and policies on the different issues concerning its members.During the 1970's, the Premium Tarrifs applied by all Insurance Companies in Cyprus, were no longer used and after a short period of time had completely disappeared from the market. This was due to the fact that Insurance Companies were employing more and more professional people.

As early as 1925, the Insurance companies then operating in Cyprus, which were mainly Agencies of British Companies, formed three Associations. The Fire Insurance Association, the Marine Insurance Association and the Accident Insurance Association. With the continuous growth of the Life Assurance Business, a fourth group was formed in 1976, which led to the establishment of a Unified Body which was registered as a Company Limited by Guarantee under the name 'Insurance Association of Cyprus'.

Insurance companies operating in Cyprus, which are fully prepared to meet the challenges of all times, cover all insurance sectors, even the most specialized ones.Today there are twenty-six (26) Local and twenty-four (24) Non-Local Insurance Companies transacting business in Cyprus. In addition, the existing legislation allows for the operation of Offshore Insurance Companies. At present there are about thirty-five (35) Offshore and Captive Insurance Companies in Cyprus. The functioning of all the Insurance Companies is controlled, according to Cypriot legislation, by the Office of the Superintendent of Insurance which is a Department of the Ministry of Finance.

The development of the insurance sector in Cyprus has been very rapid. During the period 1992-1997 the Average Annual Premium Growth has been 18,09, compared to the Average Annual Economic Growth which is estimated to be 9,2%. Cyprus ranks 18th when comparing the per capita total premium between twenty-nine (29) European Countries. Numerically, the per capita premium during 1996 was CP257m. The equivalent number for Greece was CP90,for Britain CP847, for Switzerland CP2.253, for Italy CP337, for Germany CP950. These numbers show us that there is still a lot of room for improvement in the insurance sector.

The Total Premium Income written by all Licensed Offices in 1997 reached approximately CP185,8 million compared to CP167,6 million written in 1996. This represents an increase of 10,8%. The contribution of the Insurance Industry to the Cyprus economy as a whole, is estimated to have increased during 1997, to a ratio of 4,3% of Gross Domestic Product at current market prices. It is noteworthy that the corresponding ratio in 1986 amounted to only 2,4%. The percentage figure achieved by the Industry during 1997 is favourably comparable to that of the European countries.

The insurance sector in Cyprus does not only offer services to the public and to insurers but, at the same time, strengthens Cyprus' economy with considerable amounts in the form of investments. Funds placed by Insurance Companies in investments approved by the Minister of Finance are estimated to be CP406 million.

It is obvious from all of the above, that insurance plays a significant role in the economic activities of the private and public sectors as well as internationally. It also blunts the economic consequences from road or industrial accidents, from floods, earthquakes, other catastrophes and natural disasters, that would otherwise burden the people and the State as a whole.It is believed that a very important development in the insurance sector will result from the further widening of the Health and Retirement Schemes and with the management of Provident Funds by Insurance Companies.

Also, some necessary legal regulations must be made in relation to the above Schemes/Funds. These regulations are expected to reform the whole Life Assurance system, as we know it today by increasing its range of services.As far as Liability Insurance is concerned great developments have been made as a result of legislation that has been enacted for the protection of the Employers' Liability Insurance. This legislation oversees the protection of employees; a legal requirement which has been rendered as compulsory since the 1st November 1997. Also, the legislation for Product Liability which already exists, and creates increasing liabilities to the producers and sellers of products, has been implemented to the advantage of the consumers.