In Cyprus, insurance disputes are governed by a wide range of legislation and procedural rules, as well as common law principles.

Statutory Regime

Insurance contracts

As insurance contracts are essentially private contracts, the Contract Law (Cap 149) governs disputes relating to the interpretation of insurance contracts, breach of contract, etc. Common law rules are also applicable in insurance contract disputes, as insurance policies have been widely interpreted and regulated by practice. EU Directives and related laws on consumer contracts and protection may also apply to insurance contract disputes, such as Law 93(Ι)/1996, which implements Directive 93/13/EEC on unfair contract terms in Cyprus.

Disputes relating to negligence

Cap 148 governs the regulation of general negligence disputes, including personal injury claims and medical negligence, while common law principles govern the resolution of tort law cases relating to insurance.

Specific legislation

The Cypriot Law on Motor Vehicles (Third Party Liability Insurance) (Law 96 (I)/2000) governs cases relating to motor accidents, and deals with insurance disputes at a contract level, as well as personal injuries. It generally regulates the enforcement of insurance contracts’ terms by third parties.

In addition, EU Directive 2009/103/EC on motor insurance has been implemented by Law 96(I)/2000, which also contains provisions regarding the Motor Insurers’ Fund, a compensatory body for victims of uninsured and unknown drivers. It also deals with insolvent insurance companies that have been involved in car accidents and accidents that took place outside the jurisdiction.

The Law on Compulsory Insurance of Employers Liability (Law 174/1989) requires employers to conclude insurance contracts regarding liability concerning accidents and/or diseases caused in the professional environment.

Procedural Regime

Although parties to an insurance contract are free to choose the way in which their disputes are resolved, in Cyprus such disputes are usually resolved in civil courts, and general civil procedure rules are applicable.

Civil Procedure Rules

In the new Civil Procedures Rules (CPR) that were implemented on 1 September 2023 in Cyprus, specific provisions deal with the resolution and initiation of insurance claims in District Courts, including specific pre-action protocols that must be followed. The old Civil Procedure Rules continue to govern cases filed before 1 September 2023, but no specific procedural rules on insurance claims can be found in the old rules.

Insurance disputes are heard by District Courts and on a second level by the Appeal Court. A third level of review was established in Cyprus in 2023, whereby an appeal from the Appeal Court is heard by the Supreme Court.

Arbitration

The Arbitration Act (Cap 4) governs domestic arbitration proceedings that can take place in Cyprus. Parties to an insurance dispute may incorporate an arbitration clause in their contract or agree to such dispute resolution method after the dispute has arisen. Arbitration is not very popular as a dispute resolution method for insurance claims in Cyprus and is not widely employed to resolve insurance claims.

Financial Ombudsman

Any individual can submit a complaint to the Financial Ombudsman against financial businesses, regarding a dispute of up to EUR170,000 in value, provided that the following conditions are cumulatively met.

• The complaint must be submitted by a consumer.
• Before it is submitted to the Financial Ombudsman, the complaint is submitted to the insurer in writing within 15 months from the date the consumer became, or ought to have reasonably become, aware of the harmful action/omission of the insurer. The insurer must acknowledge receipt of the complaint (whether it responds to it is only relevant in terms of timing).
• The insurer must have been operating on the basis of a lawfully issued licence (or by virtue of the freedom of establishment) at the time the complaint refers to.

The Financial Ombudsman does not undertake the examination of complaints in the following circumstances:

• if the complaint relates to a transaction that does not fall under the competences of the competent supervisory authorities;
• if, on the day of the complaints' submission, a court of the Republic has already issued a decision on the same complaint, or litigation procedures are in progress regarding those complaints;
• if the complaint is submitted to the Financial Ombudsman more than 22 months after the consumer became aware, or ought to have reasonably become aware, of the harmful action/omission; or
• if the transaction did not result in significant loss in the opinion of the Financial Ombudsman.

The CPR regulate, inter alia, the procedural stages of an insurance dispute in Cyprus, which is heard by Civil Courts of first instance. The new CPR have introduced the pre-action protocols that must be followed before the submission of a claim in court. Specific protocols apply to personal injury claims arising out of an accident. The purpose of this pre-action requirement is to ensure that only necessary and genuine claims follow the judicial route through the courts.

The importance of the pre-action procedure is that a party may have to pay costs imposed by the courts in the following litigation proceedings if it fails to comply with the established steps. As a result, parties are strongly encouraged to pursue settlement discussions before the commencement of an action.

Initiation of a Claim

If the pre-action proceedings are not successful, the claimant may proceed with the filing of a claim form exposing the particulars of the claim. After the claim form is served on the defendant, the defendant may proceed with the filing of a defence and/or a counterclaim against the claimant. The claim form must contain all the significant facts upon which the claimant relies, together with the relevant documentation. Rules on proper pleading drafting can be found in the CPR.

Stages of Litigation

The CPR govern and determine specifically all stages of litigation, as well as any interim procedure that parties may choose to follow, pending litigation. Steps such as the disclosure of documents, witnesses and a timetable of the trial process are mandatory steps that parties have to follow. A pre-trial hearing must also be held before a judge by the parties, before the actual trial.

The court remains the regulator of the proceedings and actively encourages parties to resolve their dispute through negotiation and settlement processes, before the commencement of the trial.

Rules on Limitation

In Cyprus, insurance disputes have a limitation period according to the type of claim that is pursued. In contract claims the limitation period is six years, while the limitation period for personal injury claims and general negligence disputes is three years. The relevant legislation for limitation periods is the Law on Limitation of Legal Rights of 2012 (Law 66(I)/2012).

Although ADR is increasingly encouraged in Cyprus, it is not a popular method of resolving insurance disputes; courts continue to be the main resolving authority. However, parties are encouraged by the courts and now the CPR to conduct negotiations, which take place on a “without prejudice” basis.

Arbitration

Rules on arbitration are established in Cyprus through the specific legislation on domestic arbitration (Cap 4). However, parties do not often incorporate such clauses into insurance contracts and do not usually agree to such dispute resolution method after a dispute has arisen.

The new CPR also provide specific procedural rules on the conduct of both domestic and international arbitration, as well as rules regarding the support and supervision of Civil Courts.

Mediation

Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on Certain Aspects of Mediation in Civil and Commercial Matters has introduced mediation in Cyprus as a dispute resolution method that can provide a cost-effective and quick extrajudicial resolution of disputes in civil and commercial matters through processes tailored to the needs of the parties. The Directive has been implemented in Cyprus through the Law Regarding Mediation in Civil Disputes 2012 (Law 159(I)/2012), but mediation is not widely used in insurance disputes.

Jurisdiction

Insurance contracts contain jurisdictional clauses that are widely upheld by Cypriot courts as a representation of parties’ contractual autonomy in cases with foreign elements.

Applicable rules on jurisdiction

The applicable rules are:

• the Brussels Regulation Recast (1215/2012), which applies where both parties are domiciled in an EU member state;
• the Lugano Convention, which is applicable where only one party is domiciled in an EU member state and the other is domiciled in an EEA member state; and
• common law, which is applicable where the defendant is not domiciled in any EU member state or EEA member state (Part 6 of the CPR Rules contains provisions on the jurisdiction of Cypriot courts).

Both Brussels Recast and the Lugano Convention contain detailed rules on insurance contracts regarding jurisdiction, in an attempt to safeguard the insured as the weaker party.

Cyprus is also a contracting party to the Hague Convention on Choice of Court Agreements 2005, which applies in extraterritorial cases with an exclusive jurisdiction agreement between the parties. It should be noted that the EU (of which Cyprus is a member state) has imposed limitations on the applicability of the Hague Convention regarding insurance contracts.

Regarding the limitations imposed, the European Union declared on 11 June 2015 that it will not apply the Hague Convention to insurance contracts, except in the following cases:

• where the contract is a reinsurance contract;
• where the choice of court agreement is entered into after the dispute has arisen;
• where, without prejudice to Article 1 (2) of the Convention, the choice of court agreement is concluded between a policyholder and an insurer, both of whom are, at the time of the conclusion of the contract of insurance, domiciled or habitually resident in the same contracting state, and that agreement has the effect of conferring jurisdiction on the courts of that state, even if the harmful event were to occur abroad, provided that such an agreement is not contrary to the law of that state; and
• where the choice of court agreement relates to a contract of insurance that covers one or more of the following risks, which are considered to be high risks:
1. any loss or damage arising from perils that relate to their use for commercial purposes, of or to:
1. seagoing ships, installations situated offshore or on the high seas, or river, canal and lake vessels;
2. aircraft; or
3. railway rolling stock;
2. any loss of or damage to goods in transit or baggage other than passengers' baggage, irrespective of the form of transport;
3. any liability, other than for bodily injury to passengers or loss of or damage to their baggage, arising out of the use or operation of:
1. ships, installations or vessels as referred to above;
2. aircraft, insofar as the law of the contracting state in which such aircraft are registered does not prohibit choice of court agreements regarding the insurance of such risks; or
3. railway rolling stock;
4. any liability, other than for bodily injury to passengers or loss of or damage to their baggage, for loss or damage caused by goods in transit or baggage, as referred to above;
5. any financial loss connected with the use or operation of ships, installations, vessels, aircraft or railway rolling stock as referred to in a), particularly loss of freight or charter-hire;
6. any risk or interest connected with any of the risks referred to in points a) to e);
7. any credit risk or suretyship risk where the policy holder is engaged professionally in an industrial or commercial activity or in one of the liberal professions and the risk relates to such activity; or
8. any other risks where the policy holder carries on a business of a size that exceeds the limits of at least two of the following criteria:
1. a balance sheet total of EUR6.2 million;
2. a net turnover of EUR12.8 million; or
3. an average of 250 employees during the financial year.

In particular, the declaration aims to exclude certain types of insurance contracts from the scope of the Convention in order to protect certain policyholders, insured parties and beneficiaries who, according to internal EU law, receive special protection.

Choice of Law

Cypriot courts typically uphold choice of law clauses once incorporated into parties’ contracts.

Applicable rules on choice of law

The following rules apply:

• Regulation (EC) No 593/2008 on the law applicable to contractual obligations (Rome I), Article 7 of which provides specific rules on insurance contracts in an attempt to safeguard the insured as the weaker party; and
• Regulation (EC) No 864/2007 on the law applicable to non-contractual obligations (Rome II), which may also cover personal injury claims and motor claims.

Foreign judgments by or against insurers may be enforced under the European and international rules or under common law rules.

Under European law, foreign judgments of other EU member states or EEA states are easily enforceable in Cyprus through Brussels Recast, the Lugano Convention and the European Enforcement Order Regulation (805/2004). Common law rules apply for the recognition and enforcement of judgments given in a state outside the EU or EEA, but the enforcement of such cases is not as easy as within the European regime.

In addition, the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters entered into force on 1 September 2023, and accommodates the recognition and enforcement of judgments between contracting parties. The Convention creates a uniform set of core rules on the recognition and enforcement of foreign judgments in civil or commercial matters, facilitates the effective recognition and enforcement of such judgments and provides greater predictability and certainty in relation to the global circulation of foreign judgments.

Insurance disputes in Cyprus are litigated in an adversarial manner, with the courts having an active role, both before and after the introduction of the CPR.

In particular, the new CPR oblige parties to follow pre-action procedures in an attempt to try and reach an out-of-court settlement before a claim is filed in court. Parties are also required to engage in out-of-court settlement discussions or even ADR at any stage of the proceedings. Failure to pursue either pre-action procedures or out-of-court settlement discussions may result in sanctions in the form of costs, which the defaulting party may have to pay instantly.

Another feature of Cypriot insurance litigation is the rule of Article 14 of Law 96(1)/2000, which states that, after they have paid a claim initiated by a third party, insurers can turn to their insured for reimbursement due to a breach of contractual obligations by the insured. However, according to a recent judgment by the Supreme Court of Cyprus, in order for the insurer to pursue a claim against its insured, a court judgment should have been issued against the insurer prior to the reimbursement proceedings.

In Cyprus, arbitration clauses found in commercial insurance and reinsurance contracts are enforceable. Having ratified the New York Convention, Cyprus is deemed a pro-enforcement jurisdiction, for both arbitration agreements and awards.

The relevant legislation in Cyprus regarding arbitration procedures and enforcement (of both agreements and awards) is as follows:

• the relevant law for domestic arbitrations is Cap 4 (the Arbitration Act), which governs arbitrations without a foreign element; and
• the relevant laws for international arbitrations are the International Arbitration Act (Law 101/1987) and the Law ratifying the New York Convention (Law 84/1979).

Both laws give Cypriot courts the power to stay court proceedings upon the application of one party if the other party is in breach of an arbitration clause or agreement, unless the arbitration agreement is null and void, inoperative or incapable of being performed.

Both laws also set the necessary requirements for the type and form of the arbitration agreements or clauses. Arbitration clauses in Cyprus are viewed as separate contracts, as the courts follow the separability presumption of an arbitration clause, so that such clauses can be autonomous from the whole contract and, as a result, can generally be enforced.

Cyprus has ratified the New York Convention through Law 84/1979, so courts in Cyprus operate with a pro-enforcement bias, following the provisions of the Convention in the enforcement of foreign arbitral awards (and agreements).

Foreign arbitral awards are enforceable in Cyprus under the provisions of either Law 84/1979, which ratified the New York Convention, or the Law on International Arbitration in Commercial Matters (Law 101/1987), which is essentially based on the UNCITRAL Model Law on International Commercial Arbitration.

In cases where the country in which the foreign award was rendered (seat of the arbitration) has also ratified the New York Convention, the relevant application for the recognition and enforcement of the foreign arbitral award in Cyprus can be based on the New York Convention and/or Law 101/1987. In cases where the country/seat of arbitration had not ratified the New York Convention, the legal basis for the recognition and enforcement should be Law 101/1987.

Article 35 of Law 101/1987 governs arbitration disputes of an international and commercial nature, and provides that “a foreign arbitral award shall be recognised as binding” unless there are valid grounds for refusing its recognition and enforcement, establishing the same pro-enforcement bias as the New York Convention.

Basically, and in combination with the New York Convention (and Law 84/1979), an application filed before the Cyprus courts needs to be accompanied by:

• a duly authenticated original award or a duly certified copy thereof;
• the original arbitration agreement or a duly certified copy thereof; and
• a translation of the above documents into Greek by an official or sworn translator, or by a diplomatic or consular agent.

Moreover, Section 5 of Law 121(I)/2000 sets out that, for recognition, the applicant (which may be either the relevant authority or the person in favour of which the judgment was issued) files an originating summons application on a by summons basis, which must be accompanied by an affidavit stating all relevant facts.

Under the new CPR, any application for the recognition and enforcement of arbitral awards is submitted in accordance with Form 92. Once the form is served, the respondent has to proceed with the filing of appearance.

Article V of the New York Convention and Article 36 of Law 101/1987 set out the following limited grounds on which an application for the recognition and enforcement of an arbitral award may be rejected:

• the contractual incapacity of the parties or the invalidity of the arbitration agreement;
• the lack of proper notice as to the appointment of the tribunal or of the arbitral proceedings;
• the fact that the award deals with a dispute that does not fall within the terms of the submission to arbitration or goes beyond the scope of the submission;
• the fact that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties;
• the fact that the award has not yet become binding on the parties or has been set aside or suspended by the competent court of the country in which, or under the law of which, the arbitration took place;
• the fact that the subject matter of the dispute is not capable of settlement by arbitration under the laws of Cyprus; and
• the fact that the recognition and enforcement of the award would contradict the public policy of Cyprus.

Moreover, the respondent may object to the summons on the grounds that the Cyprus courts lack jurisdiction, or if the award or judgment has been satisfied.

Arbitration is not a common form of resolving insurance disputes in Cyprus, although certain insurance disputes are resolved by arbitration, such as disputes relating to reinsurance matters and contractors' all risk policies.

As mentioned in 3.1 Enforcement of Arbitration Provisions in Commercial Contracts, the relevant law for domestic arbitrations is the Arbitration Act (Cap 4), which governs arbitrations without a foreign element. For international arbitrations, the relevant laws are the International Arbitration Act (Law 101/1987) and the Law ratifying the New York Convention (Law 84/1979).

Arbitration is a private method of resolving disputes, as confidentiality is one of the privileges of this dispute resolution method. It should also be noted that neither of the above laws contains provisions addressing the possible appeal of awards regarding their substance. Awards cannot be appealed, and can only be set aside in the seat of arbitration or refused recognition and enforcement when such application is filed only for the exhaustive reasons stipulated in the above-mentioned laws.

Insurance contracts are private commercial contracts that are not individually negotiated. As such, implied terms regarding consumer protection and unfair contract terms apply regarding insurance contracts as well, by operation of the Law on Unfair Contract Terms (Law 93 (I)/1996).

Law 93(I)/1996 implements Directive 93/13 on unfair terms in consumer contracts, which sets out the context in which a contract term can be deemed unfair and all the necessary steps that member states should take to ensure effective protection of consumers regarding the conclusion of, inter alia, insurance contracts.

The terms of insurance contracts must comply with the requirement of good faith. Article 3 of the Directive specifies that “A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer”.

In order to safeguard the risks deriving from a certain insurance policy, insurers have the right to request the following non-exhaustive list of documentation and/or proof from proposed insureds prior to the inception of an insurance policy.

• For property insurance, they may request a property inspection and a valuation of both the property and the equipment.
• For life insurance, they may request thorough medical documentation as well as medical history, examination results and possibly medical reports.
• Generally, insurers may request the completion of a specific questionnaire in which the insured should disclose all the correct and true facts and every material circumstance, in line with the principle of utmost good faith, without omitting any significant fact that is directly relevant to the insurance contract.
• In addition, insureds are required to disclaim that all the information provided in their application and/or proposal form are the true and correct facts, which will form the basis of the insurance contract/policy. If any of the information provided by the insured is not factually correct and/or true, the insurer reserves the right to dismiss any potential claim made by the insured even while the insurance contract is still in force, as well as the right to render the insurance contract void ab initio.

In the past 12 months, the significant trend in policy coverage disputes in Cyprus has been the rise of inflation, due to the economic implications of the war in Ukraine and conflicts in the Middle East causing the underinsurance of insureds.

Furthermore, due to extreme weather conditions resulting from climate change, weather-related claims have increased, so policies are now covering such risks with an increased premium.

Another significant trend is the demand by businesses for the coverage of cyber-attacks in insurance policies, again with an increased premium. However, cyber-attack coverage is not a standard term and is only covered upon request.

In Cyprus, insurance coverage disputes are usually resolved through court processes and litigation. The vast majority of disputes are resolved in an out-of-court settlement, now following the assisting procedure of the new CPR and the pre-action protocols that must be followed by the parties.

Arbitration and ADR in general are not popular methods for resolving insurance disputes, although reinsurance contracts frequently include arbitration clauses, which are enforceable.

The position for the resolution of a dispute involving consumers is no different from any other insurance coverage dispute, with litigation through court being the main method of resolving such disputes.

However, disputes involving consumers may be resolved by submitting a complaint to the Financial Ombudsman against financial businesses, regarding a dispute of up to EUR170,000 in value; see 1.1 Statutory and Procedural Regime (Financial Ombudsman) for more detail.

The specific circumstances in which a third party can enforce an insurance contract or sue an insurer in connection with an insurance contract are as follows:

• in cases of motor accidents on the basis of Law 96(I)/2000, a third party can initiate an action against the insurer;
• in cases of accidents caused on a construction site, the injured may sue the insurer of both the main contractor and the subcontractor; and
• in cases where the insured is insolvent, Law 174/1989 gives third parties the right to initiate proceedings against the insurer.

The concept of bad faith is not found in any legislation in Cyprus.

However, Law 93(I)/1996 on unfair terms in consumer contracts implements Directive 93/13 on unfair terms in consumer contracts, which introduces the concept of good faith that has essentially been interpreted by the European and Cypriot courts.

No penalties for late claims payment are imposed by legislation in Cyprus, although insurers must meet a reasonable timeframe in paying a justifiable claim.

According to Contract Law, Cap 149, Article 186, an insured is bound by representations made by its broker, unless the broker has acted ultra vires. The relevant provisions of contract law regarding agency can be found in Section XIII of Cap 149.

In Cyprus it is not common to delegate claims to an external company handling authority arrangements, nor is it common to outsource underwriting matters. Usually, insurance companies have internal departments dealing with underwriting issues. If an insurance company has to outsource matters, strict criteria are imposed by the Insurance Regulator and there are specific guidelines for such exercise.

In rare cases in which claims are handled externally, it is not common for such arrangements to give rise to litigation.

Insurers usually fund many areas of liability claims for the defence of insureds, including:

• motor accidents and personal injury claims;
• professional indemnity claims;
• public liability claims;
• claims brought by third parties; and
• employers’ liability claims.

Insurers’ defence funding for their insureds regarding liability claims is unlikely to change in the future, since defence costs form part of insurance policies.

The new CPR have introduced new, more comprehensive procedures regarding insurance claims in the form of specific pre-action protocols that must be followed. These procedures are accompanied by possible sanctions in the form of costs, which may be imposed if one of the parties to the litigation fails to comply with them once the action has been commenced. The reason for this new function of the CPR is to reduce litigation and encourage parties to reach an out-of-court settlement.

This new development has had a huge impact on the reduction of litigation costs. However, insurance companies tend to request the involvement of external lawyers in handling insurance claims at an earlier stage, before the commencement of an action.

Protection against costs risks is not a standard insurance policy in Cyprus. It is an independent field of insurance that usually applies to professionals, in order for them to be covered in case an action is commenced against them. Such product usually forms an extension in the policy cover, and a separate sum is used to cover such claims and actions.

Notably, this product is requested to be bought by claimants in professional indemnity policies (medical, legal, architectural, and directors’ and officers’ liability).

Insurers can recover sums from third parties in the form of subrogation. This principle has its foundation in common law and it constitutes a standard clause in insurance contracts.

On the basis of the right of subrogation, in case of a loss caused by a third party to their insured, insurers satisfy the claim of their insured and can subsequently pursue an action in the name of the insured to recover some or all of the sum of money they have already paid.

Subrogation applies to all insurance contracts that are contracts of indemnity, such as fire insurance, vehicle insurance, loss of profits insurance, property insurance and liability insurance. However, it does not apply to life insurance nor prima facie to personal accident insurance.

Subrogation is a principle arising out of common law and forms part of the insurance contract as a standard clause. Such claims are pursued in the name of the insured and concern the recovery of the whole and/or part of the sums already paid to the insured as a result of the loss incurred.

However, in Cyprus the right of subrogation concerning the Motor Insurance Fund is set out in detail in the Law on Motor Vehicles (Third Party Liability Insurance) (Law 96 (I)/2000), Article 30 of which states that the Motor Insurers’ Fund has the right to pursue an action in the name of the person who has provided compensation.

The COVID-19 pandemic was an unprecedented experience, raising multiple challenges in the insurance sector. Insurance companies were faced with an unexpected number of claims relating to business interruption and the inability to cover employees’ salaries as a result of the pandemic. Insurance-related claims and lawsuits are and will, therefore, increase due to the consequences of the pandemic.

The COVID-19 crisis also resulted in a significant increase in cyber-risks but also in an opportunity for the insurance sector, due to cyber underwriting policies with the appropriate risk management. In addition, due to war in Ukraine and conflicts in the Middle East, there has been increased interest from corporate clients (mostly hotel owners) demanding coverage for terrorism – a risk that is usually excluded from an insurance policy. If this demand increases, it will definitely have an impact on the amount and complexity of litigation.

As long as the armed conflicts continue, insurance disputes over the coverage of terrorist attacks will need to be tackled and addressed by insurance companies and their lawyers.

The factors mentioned in 7.1 Type and Amount of Litigation have rendered necessary the inclusion of business interruption clauses in insurance contracts, which in turn will result in the need to interpret those clauses in line with the new realities and effects of the COVID-19 pandemic.

The factors mentioned in 7.1 Type and Amount of Litigation have affected the scope of insurance cover and influenced the appetite for risk, as it has become imperative for new clauses to be included in insurance contracts related to the effects of the pandemic, alongside evolving new factors such as cybersecurity, terrorism and ESG.

ESG factors affect insurance companies in their non-financial risks and opportunities.

In reference to the effects of insurance risks on underwriting, underwriters have had to implement ESG aspects into their risk assessment analysis, resulting in the creation of a more thorough risk assessment. These factors have impacted the underwriting sector regarding not only motor insurance but also property insurance, from an early stage of the conclusion of the insurance contract.

Regarding the effect of ESG factors in litigating insurance risks, it appears that the result of lower coverage and/or discounts on insurance policies will have an impact on the number of claims ending in court. In addition, due to climate change, insurance policies covering property damage for certain areas that are rendered to be more dangerous than others will result, most probably, in an increase in litigation, since premiums will need to differentiate to a higher level. In implementing ESG factors, directors’ and officers’ liability claims could also increase in cases of poor governance.

On the other hand, improvements in the health and safety of workplaces could reduce the number of accidents and related claims.

Currently, since ESG factors are incorporated into insurance policies, companies that implement ESG policies could benefit from reduced premiums, thereby eliminating insurance risks.

In Cyprus, the full implementation of ESG factors and strategies by insurance companies into their policies is expected to take place over the coming year.

The Data Protection Law (Law 125(I)/2018) was adopted for the effective implementation of certain provisions of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and has impacted the underwriting and litigating of insurance risks.

Underwriting risks have been affected in the sense of thorough assessment procedures, as the implementation of the EU Directive has resulted in more restricted data processing within insurance companies and between them. In addition, many insurance companies need to employ external reinsurers and certain personnel for underwriting purposes. Investigations concerning insurance disputes have also been impacted, since data protection laws permit only strictly necessary data to be collected and requested. As a consequence, litigation on insurance claims has become more difficult and unpredictable regarding the evidence that parties can provide throughout the trial.

Insurance Coverage

One of the most significant legislative developments regarding insurance coverage has been the compulsory insurance of medical professionals and medical service providers who have entered the General Health System in Cyprus. As a consequence, the number of policies will increase in the coming years as will possible litigation claims.

Interestingly, this will also affect the claims that insurers will fund the defence of, as litigation claims will rise.

Insurance Litigation

The new CPR set out specific provisions that govern the resolution and initiation of insurance claims in District Courts, including specific pre-action procedures that must be followed.

If these pre-action protocols are not followed by parties, the court reserves the right – once an action has been commenced – to impose sanctions on the defaulting party, in the form of costs that will have to be paid as soon as they are imposed.

Another form of sanction that courts may impose is the reduction of interest in the awarded sum of damages or to order that no interest will be awarded at all. The court may also order the stay of the proceedings if it rules there is a “lack of compliance with both the letter and the spirit of the pre-action Protocol”.

Another major development introduced by the new CPR is the parties’ obligation to disclose all the relevant documentation to their claim at a very early stage, and to provide the other side with the proof upon which they will base their claim if an action is commenced later on.

New Legislative Development Regarding Road Accidents

In 2025, the Motor Vehicles and Traffic Law (Law 86/1972) was amended regarding road accidents with no obvious physical injuries to any of the involved parties.

In particular, in the event of a road collision between motor vehicles on any road (including an open space, square and/or public space), the vehicles involved are moved to the nearest point where they will not obstruct other traffic, provided:

• the drivers involved consent to the movement of the vehicles;
• there are no obvious physical injuries to any of the parties involved;
• the intervention and/or presence of the Cyprus Police at the scene of the road collision is not necessary;
• the motor vehicles involved in the road collision can be moved without towing and without causing further damage to them or the road surface; and
• moving the vehicles is reasonable under the circumstances prevailing at the time on the road surface and the road.

Before the movement of the motor vehicles involved in the road collision, the drivers involved shall:

• immediately inform their insurance companies of the occurrence of the road collision;
• exchange their names, the numbers of their insurance policy certificates, their driving licence numbers, the details of their vehicle and their telephone numbers;
• promptly take photographs of the scene of the road collision, which include the motor vehicles in their final position after the road collision, their registration numbers, the damage caused and the surrounding area, in compliance with the principle of data minimisation in accordance with the provisions of Article 5 paragraph 1 point c) of Regulation (EU) 2016/679; and
• exchange the photographs taken among themselves and send them to a person indicated to them by their insurance company and/or its representative.

Furthermore, it is noted that the movement of a motor vehicle from the scene of a road collision does not constitute an assumption of liability for said road collision. Also, in a case where any driver does not suffer any apparent bodily injury during the road collision, any movement of his or her vehicle shall not deprive him or her of the right to claim compensation for such injury from the at-fault party at a future time. The movement of motor vehicles shall not be considered as abandonment of the scene of a road collision, nor shall it be deemed to be a breach of any term of an insurance policy in force at the time of the road traffic collision.

In any case, this newly adopted reform of Law 86/1972 will eventually have a significant impact on insurance claims, and is likely to minimise the litigation of such claims and disputes.