The outbreak of coronavirus (COVID- 19) has created a new reality, and its impact cannot be foreseen due to its uniqueness and lack of historical data. This evolving situation developed by coronavirus raises concerns about the impact on global economy, markets’ volatility and the consequences on the insurance sector.
In light of the coronavirus outbreak, several measures have been taken to contain the coronavirus spread and strengthen the economy. According to the latest statement dated 17/3/2020 of EIOPA, looking to mitigate consequences on insurance and reinsurance undertakings, it is crucial to ensure the continuity of business operations, the maintenance of sufficient capital reserves while safeguarding policyholders and protecting the safety of all employees. Therefore, national competent authorities (NCA’s) are instructed to relax their submission deadlines on reports and disclosure information, extend their deadlines on the Holistic Impact Assessment for the 2020 Solvency II Review for the 1st of June 2020 and postpone additional reporting and information requirements. Additionally, EIOPA will limit its requests of information to the essential data, necessary for the assessment of the current position of the insurance industry.
Thus, and to comply with the said EIOPA’s directions, the latest announcement of the Acting Superintendent of Insurance, Mrs. Tonia Tsaggari, has postponed the submission of the necessary data for the economic year expiring on 31/12/2019 until further notice. Similarly, the submission of audited financial accounts and national specific forms has also been postponed until further notice.
As the pandemic of coronavirus continues to spread, EIOPA is aiming to amplify economic duress of the insurance industry by ensuring that Solvency II requirements are implemented in full and without deviation. Solvency II Directive is designed to face difficult situations of financial stress, by setting minimum capital requirements, technical provisions and instructing insurance companies to inform NCAs immediately after observing a risk of non-compliance with the Solvency Capital Requirement. According to Section 138(2)(3) of the Solvency II Directive, insurance or reinsurance undertakings in non- compliance with the Solvency Capital Requirement must submit a realistic recovery plan to the NCA, and take appropriate measures within six months of the observation to reduce risk profile and re-establish the level of eligible own funds covering the Solvency Capital Requirement. Significantly, Solvency II Directive provides for an extension of such period of time in the event of exceptional fall in the financial markets, taking account all relevant factors. The said extension of time is provided for as long as the concerned undertaking does not demonstrate progress in its results report. In exceptional situations and where the NCA believes that the financial situation of the insurance undertaking will continue to deteriorate, the NCA may restrict or prohibit the disposal of assets.
Bases on recent tests, EIOPA is positive that the insurance and reinsurance industry will resist an economic fall. Solvency II Directive provides a number of tools and measures to EIOPA and the NCAs to prevent catastrophic consequences on undertakings and protect policyholders which shall be used with no hesitation if necessary. However, insurance and reinsurance undertakings are urged to take prudent decisions on paying dividends and other kinds of remuneration.
Notably, the coronavirus is not expected to have a serious impact on insurance companies offering health plans or life insurance products, as pandemics and public health threats are usually excluded from the insurance coverage.
On a separate note, and in light of the recent developments, a meeting was held on Monday 16/03/2020 between members of the Supreme Court of Cyprus, the Justice Minister Mr. Giorgos Savvides, the Attorney General and the President of Cyprus Bar Association the Supreme Court of Cyprus, as a result of which the Cyprus Courts shall remain open handling only urgent civil and criminal cases. Practically, this means that ordinary Court sessions, hearings and filings of pleading and other court documents are suspended until April 30. Therefore, court claims against insurance companies and actions initiated for the collection of debt are not considered to fall under the wording of “urgent” and therefore, they are currently in a stationary position.