Mergers in the insurance sector and what market insiders thought of Hellenic acquiring CNP

The recent acquisition of CNP Cyprus Insurance Holdings by Hellenic Bank is considered a significant development for the insurance sector in Cyprus.

Acting Superintendent of Insurance Constantinos Kalopsidiotis has said he is in favour of insurance firm mergers, particularly when it comes to the smaller ones, emphasising that the supervisory authority encourages such strategies due to the relatively small size of the Cypriot market compared to other EU countries.

Addressing the general assembly of the Insurance Association of Cyprus (IAC), Kalopsidiotis stated: “We are interested in seeing further mergers in the local insurance market, particularly among smaller insurance companies, with the aim of creating larger and more resilient organisations. This would enhance their capital adequacy and increase competitiveness, resulting in greater stability for the insurance industry.”

He added, “The reason I specifically refer to smaller insurance companies is that, due to their limited size and the significant administrative costs they face to operate within a complex regulatory environment, they are particularly vulnerable to any market fluctuations”.

For example, he pointed out, “A potential downturn in both the real estate market and international markets could lead to a significant devaluation of their assets, thereby creating pressure to secure additional capital in order to maintain solvency and operational stability.”

Evangelos Anastasiades: "The acquisition of CNP Cyprus was unexpected"

On his part, IAC president Evangelos Anastasiades, briefly touched on the matter, describing the acquisition of CNP Cyprus by Hellenic Bank as both interesting and unexpected.

As he stated, “Contrary to expectations of mergers among smaller companies, we recently saw the acquisition of two of the largest companies — one in life insurance and one in general insurance — by a banking group that already owns two other companies.”

“This represents an interesting development for the sector, and I dare say it was unexpected, at least for the majority of those present at the assembly,” he added.

Lack of permanent superintendent of insurance causing issues

Meanwhile, the absence of a permanent superintendent of insurance for the past six years appears to be causing a multitude of problems, with Anastasiades urging the immediate filling of the position.

Referring to a hypothetical scenario in which the Central Bank lacked a Governor to make critical decisions about the future of the financial sector, he stressed, “The insurance industry has been without a permanent Insurance Commissioner for approximately six years”.

“Despite our repeated appeals to the state, no official has yet been appointed who can institutionally make structural decisions and implement reforms to address the issues facing our sector,” he stated. He further pointed out that “this absence leaves us exposed even at the European level, as the upgrade of supervision was also a demand by the European Insurance and Occupational Pensions Authority (EIOPA)”.

Anastasiades added: “Our position at IAC is that the position needs to be filled immediately so as to provide our sector with the momentum needed to move forward.

At the same time, he pointed out, “It has been our long-standing demand to strengthen the Insurance Companies Control Service with additional staff capable of meeting the increased demands brought about by the new supervisory directives governing our sector and adequately fulfilling its role”.

It is noted that the Acting Superintendent of Insurance stated, “As a Supervisory Authority, our constant goal is to oversee the healthy development of insurance and the protection of consumers. Undoubtedly, for our role to become increasingly effective, it requires continuous specialisation, upgrading, and staffing of the Insurance Companies Control Service”.