Christos Christodoulou, Frixos Savvides, and Mehran Eftekhar, on Cyprus insurance | Trust International | Video

Transcript

Cryprus’ insurance industry is relatively small, but EU membership is helping the country to attract international insurance management and reinsurance operations. Christos Christodoulou, Frixos Savvides, and Mehran Eftekhar from Trust International Insurance, discuss the challenges in Cyprus’ insurance industry caused by Solvency II and other EU regulations, but also the opportunities for consolidation as banks are forced to divest their insurance arms.

World Finance: Christos – you’re the fastest growing insurance company in Cyprus. Tell me what the secret is behind this success?

Christos Christodoulou: In 2009 we decided to enter the Cypriot market. The new board has said, from the beginning of its operations, that we will become a leading insurance company through innovation and customer service excellence. Because the Cypriot market was a very crowded and mature market; we needed to separate ourselves from the competition.

Therefore the board saw this opportunity to innovate. So we produced a new approach to general insurance, and we have established good systems, to provide to customers excellent support.

“The whole structure of the insurance business in Cyprus is changing”

World Finance: Tell us how the industry has developed from its British heritage to international influences.

Christos Christodoulou: In 1960, insurance was offered mainly from the UK, that maintained branches in Cyprus. It was not done until 1969 that the first insurance company was established on the island.

Currently we have 30 insurance companies operating on a small island with a population of less than one million. The Cypriot people are accepting insurance, and they are insurance-literate.

The market in Cyprus is relatively small, but due to EU membership, we expect it to grow.

World Finance: Frixo – what challenges does the Cypriot insurance market face?

Frixos Savvides: We have gone through a lot in these past few months. Definitely the whole structure of the insurance business in Cyprus is changing. And either it has to change by force, or it has to change voluntarily.

Traditionally, Cyprus insurance market was predominantly led by the two major banks through their subsidiaries. Now the two major banks: one of them is gone, Popular Bank has gone, and Bank of Cyprus is going through an unbelievable restructuring and redevelopment of the capital, and a load of other activities; and naturally as a process imposed by the European Union, the banks have to get rid of their insurance arms. And they have to be on the same level of competition as everybody else.

Thus, the major change which is going to be very painful to the banks, but also it will give the opportunity to young companies like us, to buy out or merge with other companies in order to absorb these unbelievably valuable businesses which will become available.

“Banks have to get rid of their insurance arms, presenting an opportunity to buy or merge with these companies”

World Finance: Mehran, how do you see cross-border business developing?

Mehran Eftekhar: In order to do cross-border, you need passporting. Passporting really means that your regulator, in the country that you’re operating in, will allow you to do business in other European Union countries, or actually any other country in addition to the EU. And for the regulator there to also accept you as a company that can transact business in that country, and therefore it will be very difficult.

World Finance: You already mentioned regulations – what are they key regulations, and what kind of impact have they had on the country?

Mehran Eftekhar: The main regulation is European Union directives on the insurance industry. We have also international financial reporting standards, that Cyprus applies through its local institute of accounting and other bodies.

We also have the local laws which they have to abide by, and now Solvency II.

“Trust International Insurance is a step ahead, because we are mostly ready for Solvency II”

World Finance: In terms of Solvency II, Christos, perhaps you can give us some detail about the technicalities?

Christos Christodoulou: As from the first of January 2014, the whole way of evaluating solvency in an insurance company will be changing. Depending on the speed things will change, it will affect the market, because due to the financial crisis we are going through the financial position of the different companies from the island has been affected. Solvency II makes things tougher; it corrects things, but it makes them tougher. So the timing of applying the Solvency II, and the speed with which it will be implemented, will change the insurance industry. Some of the players will not be able to take this rate.

This is again where Trust International Insurance is a step ahead, because we are not affected, and we are mostly ready for Solvency II. We are ready to implement all its provisions, and our assets are solid. Therefore we look to a future with a lot of prosperity, and we hope it will be turned to our favour.

World Finance: Christos, Mehran, Frixos, thank you very much for your time.

Christos Christodoulou, Fixos Savvides, Mehran Eftekhar: Thank you, thank you very much.