20.1 International Insurance Companies

The procedure to set up such a company is identical to the one followed for registering local insurance companies. Following its registration with the Registrar of Companies, an insurance company must apply to the Superintendent of Insurance for a licence. Section 8 of the Insurance Companies Law sets out the provisions that must be complied with for an insurance licence to be issued:-

20.1.1 the company must have a paid up share capital of not less than CYP 200,000;

20.1.2 the company's solvency margin is not such that the company may be deemed to be unable to pay its debts;

20.1.3 the class of insurance business in respect of which the application is made will be conducted in accordance with sound insurance principles;

20.1.4 the company is reinsured or has made arrangements for its reinsurance by another insurance or reinsurance company in respect of policies issued or to be reissued;

20.1.5 the name of the company is not identical to that of an existing licensee or of a company which was lawfully carrying on insurance business in the Republic at the commencement of the Law; and

20.1.6 it complies with the provisions of section 9 of the Insurance Companies Law which provides that the Superintendent shall not grant a licence to a company if any director, controller, manager or any principal of the company does not satisfy such standards or requirements as may be prescribed.

According to section 17 of the Insurance Companies Law every insurance company must deposit with the Central Bank of Cyprus the sum of CYP 30,000. The application to the Superintendent must be accompanied by the following:-

  • a guarantee supplied by either the parent company or one of its affiliates or a bank guarantee issued on the strength of the company's invested capital;
  • a business plan setting out the company's intended operations for the first three years including information relating to the administrative structure of the company's head office as well as its branches, the approximate number of agents and/or intermediaries to be appointed and the applicable average commission. It should also include such information as would normally be contained in a revenue account;
  • a specification pursuant to section 3(1) of the Insurance Companies Law setting out the classes of insurance business which the company proposes to conduct; and
  • specimen policy contracts which the company will be adopting in its business.

Cyprus international insurance companies are by definition owned by foreigners and conduct insurance activities outside Cyprus. They enjoy all the advantages of international companies.

20.2 International Captive Insurance Companies

Such a company is defined as a wholly owned or controlled subsidiary company established by a non-insurance parent for the purpose of participating in the risks of the parent and its other affiliates or associates.

Captive insurance companies are often operated by non-insurance multinational groups for the purpose of providing insurance cover for the companies within the group where such cover would not normally be obtainable or would be very costly if provided by third parties.

A captive insurance company can also be formed by an association of companies or individuals having as a common interest the insuring of the risks of that group.

20.2.1 Conditions

The Council of Ministers has the authority to exempt a captive insurance company from the provisions of the Insurance Companies Law, provided that the company complies with any conditions or terms that the appropriate authorities in Cyprus deem necessary to impose.

The conditions currently being imposed are as follows:-

20.2.1.1 The minimum subscription by way of share capital is CY£10,000.- instead of the normal CY£ 200,000.- stipulated in the Insurance Companies Law.

20.2.1.2 There must be full compliance with the provisions of the Insurance Companies Law as to the filing of accounts and other relevant documents.

20.2.1.3 The Superintendent of Insurance must be satisfied both that there is adequate cover to meet the claims of any individuals or third parties and that their claims will rank in priority to the claims of any other company within the group.

20.2.1.4 The captive must not obtain any finance from local sources.

20.2.1.5 All local expenses of the captive must be covered by funds imported from external sources.

20.2.1.6 The captive must advise the Central Bank of Cyprus annually of the funds imported into the country from external sources.

20.2.2 Tax Exemption

As the captive is entitled to international status, it is liable to a reduced tax of 4.25% on its taxable income. The captive also enjoys all the other advantages afforded to international companies as described in Section 9.

The purpose of this publication is to assist clients and associates in clarifying and appreciating the range of opportunities which are available in or through Cyprus. Although every effort has been made to provide the reader with a clear and comprehensive picture of the island's beneficial regime, it should be appreciated that is not possible to cover all aspects comprehensively in a publication of this size.

Individuals or companies who are seriously considering using Cyprus for any of their international business activities are advised to obtain expert professional advice before taking positive action.