§ 15:1 Regulatory Bodies and Sources—Legal Framework
When Cyprus became an independent state in 1960, the English-based legal system which operated during the period of British rule was maintained. Section 29(1) of the Courts of Justice Law1 provides that English Common Law and the principles of equity apply in Cyprus, provided that they do not conflict with the Constitution or with any laws passed since independence by the Cypriot Parliament.
Given the relatively small size of the jurisdiction and the corresponding amount of Cypriot case law, much reliance is placed on English legal digests and text books, although these are not binding. Cyprus has been a member of the European Union (EU) since 1 May 2004, and its legislation has been aligned with the acquis communautaire.
§ 15:2 Regulatory Bodies and Sources—Insurance Regulation
Insurance companies operating in Cyprus were originally registered in England under English insurance legislation. In 1969, a law was passed to allow the establishment of local insurance companies.
The insurance regulatory regime in Cyprus is governed by the Insurance and Reinsurance Services and Other Related Issues Law1 ("the 2016 Law"), which came into force on 11 April 2016. The 2016 Law was amended in 20172 to incorporate the requirements of EU Directive 2009/138 EC on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (recast). The 2016 Law expressly abolished the Insurance Services and Other Related Issues Law 2002-2013 and thoroughly revised the system of insurance and reinsurance administration in Cyprus. It may be supplemented from time to time by Regulations issued by the Council of Ministers.3 Like all laws in Cyprus, the 2016 Law is written in Greek, and the original Greek version prevails over any English translation.
All the Directives, Decisions, and Other Administrative Acts issued under the provisions of the Insurance Services and Other Related Issues Law 2002-2013, which is abolished by the commencement of the 2016 Law, remain in force and are binding to the extent not opposing the 2016 Law, until they will be repealed or be replaced. The wording of 2016 Law is the latest development to regulate the necessary and sufficient administration and performance, implementing European Directive 2009/138/EC of the European Parliament and Council on reinsurance.
Specific objectives of the Reinsurance Directive, which is being implemented into Cypriot national law, are to establish a sound and prudent supervisory regime in the interests of policy holders; to allow reinsurers headquartered in the European Union (EU) to carry on business throughout the EU under the freedom of establishment and the freedom to provide crossborder services; to abolish collateral requirements within the EU or EU reinsurers; and to enable the negotiation and establishments of reciprocal treaties with other regulatory regimes.
The Directive provides a harmonized regulatory framework for reinsurance in the European Union. By establishing a reliable system of supervision of the cross-border reinsurance market, the Directive aims to strengthen the insurance markets. This Directive brings about such harmonization as is necessary, and sufficient to achieve the mutual recognition of authorizations and prudential control systems, thereby making it possible to grant single authorization valid throughout the Community and to apply the principle of supervision by the home member state.
§ 15:3 Regulatory Bodies and Sources—Scope of Regulatory Framework
The 2016 Law applies to all insurance and reinsurance businesses, including mediation businesses1 that conduct:
- Insurance business from direct Life and Non-Life insurance undertakings2 which are established in in Cyprus or which wish to become established there;
- Insurance or reinsurance business from undertakings which are established in a member state other than Cyprus and pursue insurance business in Cyprus under the status of free establishment or the provision of free services;3
- Insurance or reinsurance business by insurance or reinsurance third country undertakings which are registered in Cyprus, by virtue of the Companies Law, as an overseas companies and operate as branches of third country insurance or reinsurance undertakings and pursue insurance or reinsurance business within and/or outside Cyprus;4 or
- Reinsurance business, either within or outside Cyprus, by reinsurance undertakings pursuing only reinsurance activities and which are established within Cyprus or that wish to be established therein.5
Also included are insurance businesses with their head offices in member states of the European Union or European Economic Area (EEA), seeking to provide services in Cyprus under the freedom to provide services or the freedom of establishment.6
However, the 2016 Law does not apply to insurance forming part of a statutory system of social security.7 The 2016 Law does not apply to insurance undertakings which fulfil all of the following conditions and are exempt from the statutory authorization:
- The undertaking's annual gross written premium income does not exceed €5-million;
- The total of the undertaking's technical provisions, gross of the amounts recoverable from reinsurance contracts, and special purpose vehicles does not exceed €25-million;
- Where the undertaking belongs to a group, the total of the technical provisions of the group defined as gross of the amounts recoverable from reinsurance contracts and special purpose vehicles does not exceed €25-million;
- The business of the undertaking does not include insurance or reinsurance activities covering liability, credit and suretyship insurance risks, unless they constitute ancillary risks; and
- The business of the undertaking does not include reinsurance operations exceeding €500,000 of its gross written premium income or €2.5-million of its technical provisions gross of the amounts recoverable from reinsurance contracts and special purpose vehicles, or more than 10% of its gross written premium income or more than 10% of its technical provisions gross of the amounts recoverable from reinsurance contracts and special purpose vehicles.8
Additionally, the 2016 Law does not apply to the provision of reinsurance cover carried out or fully guaranteed by Cyprus for reasons of substantial public interest, in the capacity of reinsurer of last resort, in particular where, because of a specific situation in a market, it is not feasible to obtain adequate commercial cover.9
Additionally, the Law 2016 apply to all insurance or reinsurance undertakings seeking authorization to pursue insurance and reinsurance activities of which the annual gross written premium income or technical provisions gross of the amounts recoverable from reinsurance contracts and special purpose vehicles are expected to exceed any of the amounts set out above within the following five years from the date of submitting the relevant application. However, the obligation to obtain authorization will cease to apply to those insurance undertakings for which the Superintendent has verified that none of the thresholds set out above has been exceeded for the three previous consecutive years; and none of the thresholds set out above is expected to be exceeded during the following five years.10
1 Courts of Justice Law, Law Number 14 of 1960.
1 Insurance and Reinsurance Services and Other Related Issues Law, Law Number 38(I) of 2016.
2 By the Insurance, Reinsurance and Other Related Matters (Amendment) Law of 2017, Law 88 (I) / 2017.
3 Insurance Services and Other Related Issues Law, section 431.
1 Insurance and Reinsurance Services and Other Related Issues Law, section 3(a)(d).
2 Insurance and Reinsurance Services and Other Related Issues Law, section 4(1)(a).
3 Insurance and Reinsurance Services and Other Related Issues Law, section 4(1)(a).
4 Insurance and Reinsurance Services and Other Related Issues Law, section 4(1)(a).
5 Insurance and Reinsurance Services and Other Related Issues Law, section 4(1)(a).
6 Insurance and Reinsurance Services and Other Related Issues Law, section 4(1)(b).
7 Insurance and Reinsurance Services and Other Related Issues Law, section 5.
8 Insurance and Reinsurance Services and Other Related Issues Law, section 6(1).
9Insurance and Reinsurance Services and Other Related Issues Law, section 12.
10 Insurance and Reinsurance Services and Other Related Issues Law, section 6(4).
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