A parliamentary study examining insurance supervision, motor insurance pricing and the handling of consumer complaints has highlighted differences between Cyprus and several other European countries.
While Cyprus broadly follows European practices on insurance supervision, the study found no evidence of a specialised mechanism for systematically analysing motor insurance data, including loss ratios, claim frequency and average claim costs by age group or driver category.
The study was conducted by the Research and Studies Section of the House of Representatives' Research, Studies and Publications Service at the request of Nicosia MP Alexandra Attalides. Its aim was to record, analyse and compare practices with a view to improving the supervisory framework in the Republic of Cyprus.
As part of the research, a request was submitted to the European Centre for Parliamentary Research and Documentation (ECPRD), focusing on three areas:
- The supervision of insurance companies.
- The collection and assessment of data relating to the conclusion, renewal and pricing of motor insurance policies, particularly loss ratios, claim frequency and average claim costs by age group.
- Procedures for handling citizens' complaints concerning insurance policies.
How insurance supervision works in Cyprus
In Cyprus, the supervisory authority for the insurance sector is the Superintendent of Insurance, who exercises powers granted under the Insurance and Reinsurance Business and Other Related Issues Law of 2016 [Law 38(I)/2016], as amended.
The legislation regulates the taking up, conduct and supervision of insurance and reinsurance activities, as well as the distribution of insurance products.
The Superintendent heads the Insurance Companies Control Service, which operates on the Superintendent's behalf and is required to have the necessary resources, including experienced and competent personnel.
Supervision follows a forward-looking and proportionate approach focused on risks faced by insurance companies and involves a combination of off-site and on-site inspections.
The Superintendent has the authority to grant, suspend or revoke licences, supervise companies' compliance with the regulatory framework, impose administrative sanctions and take measures to ensure compliance.
Insurance and reinsurance companies are also required to provide information necessary for supervisory purposes, which the Superintendent may collect, analyse and evaluate.
As part of the supervisory review process, authorities assess companies' strategies, processes and reporting procedures, as well as their risk-management methods. This assessment is based on quantitative and qualitative reports, statistical data, inspection findings and other supervisory information.
Motor insurance premiums are freely priced
In the case of motor vehicle third-party liability insurance, premiums in Cyprus are not regulated by law and insurers operate under a system of free pricing.
The use of systems such as bonus-malus, as well as the consideration of a policyholder's no-claims history, is left to the discretion of individual insurance companies.
Based on the information available, the Superintendent has broad powers to collect and assess data for supervisory purposes.
These include assessing insurers' solvency, governance and risk management, as well as their compliance with the applicable regulatory framework under Articles 38 and 39 of Law 38(I)/2016.
Article 38 further allows the Superintendent to determine the nature, scope and format of information submitted by insurers, along with how frequently it must be provided, either regularly, following specific events or as part of investigations.
The Superintendent may also collect information on contracts through intermediaries or third parties and request information from external experts, including auditors and actuaries.
What happens when consumers complain
The Superintendent of Insurance does not have the authority to act as a judge or settle private disputes between policyholders and insurance companies.
The Superintendent also cannot order compensation to be paid or interpret the terms of an insurance contract. Those powers rest with the competent courts of the Republic of Cyprus.
Consumers must first submit their complaint directly to the insurance company.
The company is required to respond within 15 working days, or within a maximum of 45 days where the nature of the complaint justifies a longer period.
If a response is delayed or considered unsatisfactory, a complaint may then be submitted to the Superintendent of Insurance for assessment within the scope of the Superintendent's supervisory powers.
If the dispute remains unresolved, consumers may approach the Financial Ombudsman / Unified Agency for the Out-of-Court Settlement of Financial Disputes or take the matter before the competent courts.
How Cyprus compares with the EU
The comparative study found that the countries examined largely share the same basic approach to insurance supervision.
In almost all of them, supervision is preventive, forward-looking and risk-based, linked to the Solvency II framework and primarily aimed at ensuring insurers' solvency, capital adequacy, sound governance, effective risk management and the protection of policyholders.
Supervision therefore extends beyond basic checks on legal compliance and includes a broader assessment of the financial position and operations of insurance companies. In several countries, it also covers insurers' business conduct.
Differences emerge, however, over which authority is responsible for supervision and how concentrated those powers are.
In countries including the Czech Republic, Greece, Hungary, Lithuania and Slovakia, insurance supervision is carried out by the country's central bank.
Elsewhere, supervision is handled by other regulatory bodies with either specific responsibility for insurance or broader financial supervisory powers.
These include the Institute for the Supervision of Insurance (IVASS) in Italy, the Federal Financial Supervisory Authority (BaFin) in Germany, the Insurance and Pension Funds Supervisory Authority (ASF) in Portugal, the Financial Supervisory Authority (FIN-FSA) in Finland, the Financial Supervision Authority (FSA) in Estonia and the Commissariat aux Assurances (CAA) in Luxembourg.
In Spain, supervision is primarily linked to the Ministry of Economy and the Directorate-General for Insurance and Pension Funds.
Cyprus broadly follows the same supervisory philosophy, with a preventive, forward-looking and proportionate approach focused on insurers' risks.
However, it differs institutionally from countries where insurance supervision is assigned either to the central bank or to an independent financial supervisory authority. In Cyprus, responsibility rests with the Superintendent of Insurance, who heads the Insurance Companies Control Service and exercises powers under Law 38(I)/2016.
The key difference in motor insurance data
The study identifies motor insurance as the area where the most significant differences between countries emerge.
Free pricing is the general rule across the countries examined, with premiums neither set by the state nor subject to prior approval by supervisory authorities.
Insurance companies instead determine prices according to actuarial and commercial criteria, taking into account risk factors such as claims history, the type and use of a vehicle and, in some countries, a driver's age or experience.
However, there are substantial differences in how countries collect, publish and use motor insurance data for supervisory purposes.
Some have more specialised statistical collection systems, claims databases or mechanisms for monitoring the motor insurance market, while others rely on more general supervisory reporting.
Cyprus follows the general principle of free pricing, with motor third-party liability premiums neither regulated by law nor subject to prior approval by the supervisory authority.
The Superintendent of Insurance also has general powers to collect and assess information for supervisory purposes.
Unlike some other countries, however, the study found no evidence that Cyprus has a comparable specialised mechanism for systematically analysing indicators such as loss ratios, claim frequency and average claim costs by age group or driver category.
Complaints follow a similar European model
The approach to consumer complaints is more consistent across the countries examined.
Most operate a tiered system under which consumers first approach the insurance company through its internal complaints procedure.
If they remain dissatisfied, they may, depending on the country, turn to a supervisory authority, financial mediator or ombudsman, arbitrator, consumer dispute authority or another form of alternative dispute resolution.
Access to the courts generally remains available as the final stage.
Cyprus follows this broad model. Consumers first approach their insurer and, if the issue is not resolved, may submit a complaint to the Superintendent of Insurance, approach the Financial Ombudsman / Unified Agency for the Out-of-Court Settlement of Financial Disputes, or take the case before the competent courts.
The study therefore concludes that Cyprus follows the basic principles seen across most of the countries examined, providing successive stages for the examination and resolution of insurance disputes.
