Cyprus Insurance Market as one of the main
Strategic Partners for Insurance Professional Education

Good afternoon everyone and welcome to Cyprus. I’m very pleased to be here with you today in this very important event. This gathering is a great opportunity to share information, know-how and experiences from across the EU, and to hear different views on important issues which shape the industry priorities on a subject as important as it is insurance education. As the title of this conference denotes our common aim is to achieve professional excellence.

The organizers have asked me to give you a short overview of our domestic insurance market. So, before I present our thoughts on education in the context of the new IDD directive, allow me first to introduce you to our insurance market.

This small island today has 41 insurance undertakings which transact business in or from Cyprus. Of these 32 are Cypriot registered companies, one is foreign and 8 are from EU which transact business in Cyprus on FOE basis. There are moreover, 426 EU insurers that have registered with our supervisor to operate in Cyprus under freedom of services though I must emphasize that not all actually make use of their license. Evidently we talk about a very competitive market.

• 29 are non life undertakings substantially more when compared to 9 on the life side, whilst 2 write both classes of business.

• It is a highly concentrated market with the top 5 life business insurers controlling 78% market share compared to a market share of 42% for the top 5 non-life insurers.

The Insurance Association of Cyprus which is the official representative of the insurance industry in Cyprus and an active member of Insurance Europe and other international Associations its members account for 96 % of the premiums written domestically.

• 2015 total gross written premium income was 763mn, of which 442mn is Non-Life and 321mn Life.
Interesting to note that market productivity was much higher back in 2010. This has been significantly reduced due to economic recession which was culminated in the unprecedented bail-in of the island’s two main banks. The good news is that the industry proved very resilient and was able to gradually weather the storm and, since 2015, has returned to positive growth in both classes that is expected to accelerate in 2016. However we still have some way to go before we reach the pre-crisis levels. Of particular interest is the fact that the industry’s contribution to GDP, estimated at 5,5% is considerably below the European average of 9%, revealing a significant potential.

On the investment side, our members are currently managing 2,3 billion euros worth of assets which makes the industry an important institutional investor.

Finally total payments for benefits and compensation in 2015 were 450mn but it is interesting to note that, during the years of the crisis, the industry paid out a total of 3 billion, thus providing vital liquidity and support to households and businesses at a time that there was no other source for liquidity.
Let me conclude this part of my presentation by quoting our reinsurers, who know the market well to express a credible independent opinion, and who when asked about the Cyprus market they say small, modern and dynamic market but well-disciplined to the rules of free market and insurance. We pride ourselves in the fact that it is a market built on solid foundations, as evidenced by the resilience demonstrated following such severe crises as the invasion in 1974 and the deep recession and haircut of 2013. From a regulatory perspective, the industry is governed by the EU’s Solvency II framework, compliance with which is strictly monitored by the Insurance Supervisory Authority.

Moving now to the main issue of today’s event, professional training and development. I would like to say first and foremost, that the training and skill building of our people and associates represents one of the fundamental pillars of industry strategy and is a matter that remains high up on the agenda of the Board of Directors since 1972 when the Insurance Institute of Cyprus was founded. It was the time that the first Cypriot insurance companies were emerging and their need for qualified personnel was becoming pressing. Until then business was transacted by agencies of international insurance undertakings and the training was done in house and mainly on the job. Underwriting was guided and controlled from head office and so was claims management. With the change of the market landscape came an increase in demand for qualified professionals.
This led the Board of Directors to the decision to establish a distinct entity within the industry exclusively dedicated to the training and professional development of people that the market needed and in fact demanded. The Insurance Institute of Cyprus was then founded.
This was indeed a very good decision considering the immense contribution that the IIC made during all these years.
I think this is best illustrated by simply mentioning that while in 1972 the market numbered only 10 people at the level of ACII and 2 at FCII, today it numbers 65 ACII or FCII, 102 with Diploma in Insurance Studies, 665 LUTCF (Life Underwriter Training Council Fellow), and 265 FSS (Financial Services Specialist). In a market which supports 4000 full time jobs, either as employees of companies or as intermediaries, these numbers clearly indicate the efforts made towards professional development. To these one must add a good number of well qualified actuaries, lawyers, people who specialized in investment and finance as well other specialized staff currently employed by the industry.

Turning now to the future and the challenges that lay ahead, let me tell you that the IAC, in close collaboration with the IIC, is in the process of reviewing the existing training regime with a view to bringing it fully in line with the modern approach that the EU’s new Insurance Distribution Directive envisages.

This is not approached as a compliance exercise, but as an opportunity to bring about significant improvements that can take this industry further and its people to a higher level. The IDD for us is an opportunity to rethink professional education.

We all know that the IDD directive brings an institutional change in that it extends the existing obligation, beyond one of just formally possessing appropriate knowledge and ability, to a result oriented obligation where that knowledge and ability must be appropriate to enable each professional to fulfil his specific duties and role in a satisfactory manner. We are required to link knowledge and ability with product complexity. 

In this context we closely work with IIC on the review and revision of the existing training programs. We need to reflect on how best we can instil in people the kind of knowledge that, when put in practice in real situations, will enable them to carry out their duties effectively in relation to the kind of products they sell ,in contrast to the current approach where education is more theoretical and general. Together with the ICC we need to review our training programs so as to ensure that our people develop such skills and abilities as to be able to consider and act on the clients’ best interests, understand and analyse risks, be transparent and provide adequate explanations and suitable recommendations.

Since knowledge and skills, and by consequence the type of training needed, will be very much dependent on the type of products offered, companies are also revising their in house training programs to complement sufficiently IIC training so that together we deliver a comprehensive result oriented training package. 

Coming now to the issue of continuous professional development. I have to say that at present we are debating how to shape the training programs and mechanisms in order to comply with the IDD’s express requirement to maintain appropriate standards in a continuously changing environment. Updating knowledge is not so perplexing and we have in mind the related EIOPA’s 2013 Report on Good Supervisory Practices. In particular, we will seek to ensure that the training program provides appropriate knowledge in relation to any changes in relevant national or European laws, new products and services, and any changes and trends observed in the insurance field in general.

With respect to the requirement for updating distributors’ abilities, we consider this a much more complex issue, as it has to do with the practical application of a person’s knowledge to real everyday situations and we are looking forward to share views on this. In our understanding, abilities building calls for a rather different training approach, a sort of “applied learning” through case studies, practice workshops, and situational judgement trainings and tests. It should aim to develop those abilities that are key for delivering best service to customers. These can range from hard skills, such as analytical and technical skills to soft skills such as communication and interpersonal skills.

In this context we are reflecting if and how technology can help in providing training through tailor-made e-learning programs, a subject i.e, relating to amendments of relevant laws, new products/services, or case studies. This is something that we are currently inquiring into and we look forward to share your experience on e learning.

Concluding I would like to assure you that in partnership with the IIC we are fully committed to ensuring access to high quality learning and development, aiming to equip our people with the knowledge and skills that will enable them to carry out their role and duties as best as possible and look forward to benefit from this gathering.

Nicosia, 13th October 2016