A Brief Overview of the Legal and Regulatory Framework for the Authorisation and Operation of Insurance / Reinsurance Undertakings in Cyprus

18 May 2021 |

A Brief Overview of the Legal and Regulatory Framework for the Authorisation and Operation of Insurance / Reinsurance Undertakings in Cyprus


The authorisation, operation and supervision of insurance / reinsurance undertakings in Cyprus are governed by the Law on Insurance and Reinsurance Business and Other Related Issues (Law No: 38(I)/2016) (the “Law”). The Superintendent of Insurance is the competent supervisory authority (the “Superintendent”).


A. Authorisation Process


As a prerequisite, the applicant company (the “Company”) must be set up as a limited liability company with or without shares with the exclusive object of carrying out insurance and/or reinsurance activities. The Company must maintain both its head office and registered office in Cyprus and the its name must contain the words “insurance company” or “reinsurance company”, being subject to the approval of both the Superintendent and the Registrar of Companies.


For authorisation, the Company must submit to the Superintendent relevant forms, outlining and providing information on (i) the Company; (ii) the qualifying holders of the Company; and (iii) legal, organisational and, if available, group structure of the Company.


In addition, a scheme of operations must be submitted in English or Greek, containing the details of the Company’s objectives and proposed operations, policies, programmes, strategies and systems, including financial projections of at least the first three years following authorisation together with the respective assumptions.


Authorisation is granted for (i) classes of non-life insurance as listed under Appendix I of the Law; and/or (ii) classes of life insurance as listed under Appendix II of the Law.


The Superintendent must examine a properly completed application including all relevant documentation within six months from the date of application.


As per the Law, there are certain conditions (such as the level of annual gross written premium income and technical provisions) on the basis of which an entity may be exempt from the authorisation requirement.


B. Governance, Board of Directors and Key Functions


All persons on the board of directors and any other persons who effectively run the Company (i.e. the senior executive officer and the general manager) or have other key functions at all times must be duly qualified and experienced and of good repute and integrity. Their appointment and removal is subject to the approval of the Superintendent.


The Company must possess 4 key functions which must have a prescribed role and objective, with reporting obligations are: a) risk management; b) internal audit; c) actuarial; and d) compliance.


In cases of outsourcing, the Company must notify the Superintendent in advance and remains fully responsible for discharging all of their obligations under the Law.


Written policies for risk management, internal control (compliance), internal audit and outsourcing (if applicable) are mandatory and must be reviewed at least annually and be subject to the prior approval of the board of directors.


C. Capital Requirements


(a) Solvency Capital Requirement


The Company must hold eligible own funds covering the Solvency Capital Requirement (“SCR”) either in accordance with the standard formula or using an internal model, as prescribed by the Law. SCR must be calculated at least once a year and be reported to the Superintendent.


(b) Minimum Capital Requirement


The Company must hold eligible basic own funds covering the Minimum Capital Requirement (“MCR”), which must be calculated at least quarterly and with an absolute floor determined by the Law and depending on the type and classes of insurance that the Company is authorised to offer.


D. Reporting Obligations


For the purpose of transparency and effective monitoring by the Superintendent, the Company must prepare and submit, among others, the Own Risk and Solvency Assessment, the Solvency and Financial Condition Report and the Annual and Consolidated Accounts and Auditor’s Report.


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Author: Huseyin Erguven

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