The insurance and reinsurance brokerage sector in Cyprus plays a pivotal role in the stability and growth of the financial services industry. As intermediaries, brokers facilitate the management of risk for businesses and individuals alike, crafting solutions that align with specific needs and regulatory demands.
Overview of Insurance & Reinsurance Brokerage in Cyprus
Insurance and reinsurance brokerage involves advising clients on risk management and arranging insurance coverage on their behalf with insurers. While insurance brokers typically deal with direct insurance policies for individuals and businesses, reinsurance brokers focus on securing reinsurance, which is insurance for insurers, providing them a safety net against large claims events.
The concept of brokerage has evolved significantly in Cyprus, keeping pace with global trends and the local regulatory environment. The island’s strategic location at the crossroads of major trade routes has historically made it a hub for maritime insurance, and over the years, this has expanded to include a wide array of insurance services. Today, Cyprus offers a robust regulatory framework that adheres to both European Union standards and international best practices, making it an attractive destination for brokerage firms.
Regulatory Framework
The insurance and reinsurance brokerage industry in Cyprus is primarily regulated by the Insurance Services and Other Related Issues Law of 2016 (Law 38(I)/2016), which aligns with European Union directives, particularly the Insurance Distribution Directive (IDD). This regulatory framework ensures that brokers adhere to high standards of conduct and professionalism, aiming to protect clients and promote fair market practices.
Licensing Requirements
To operate as an insurance or reinsurance broker in Cyprus, companies must obtain a license from the Insurance Companies Control Service (ICCS). The licensing process is stringent, designed to ensure that only capable and financially sound entities engage in brokerage activities.
A. Initial Conditions
Entities must satisfy the following initial conditions:
- Legal Form: Companies must be incorporated as a limited liability company or European Economic Area (EEA) entity with a branch in Cyprus.
- Minimum Capital Requirements: The minimum capital depends on the type of risk and volume of business, as stipulated in ICCS guidelines.
- Fit and Proper Test: Directors and key management personnel must pass a fit and proper test, proving they possess the necessary experience and integrity.
- Professional Indemnity Insurance: Brokers must obtain professional indemnity insurance to cover liabilities that may arise from professional negligence or other risks.
- Continuous Professional Development: The ICCS mandates ongoing training and professional development for licensed brokers to ensure they remain knowledgeable about current laws and market practices.
