Cosmos Insurance Public : 2023 – Solvency & Financial Condition Report (SFCR)

SFCR 2023

Solvency and Financial Condition Report 2023

COSMOS INSURANCE COMPANY PUBLIC LTD

HEAD OFFICE: 46 Griva Digeni Avenue, 1080 Nicosia

P.O.Box 21770, 1513 Nicosia

T: [phone] | F: [phone]

			Solvency and Financial Condition Report
			for the year ended 31st December 2023
Table of Contents
Executive Summary	3
A.	Business Performance	7
	A.1	Business		7
	A.2	Underwriting performance	11
	A.3	Investment Performance	13
B.	System of Governance	17
	B.1	General information on the system of governance	17
	B.2	Fit and proper requirements	23
	B.3	Risk management system including the own risk and solvency assessment	25
	B.4	Own Risk and Solvency Assessment (ORSA)	32
	B.5	Internal control system	34
	B.6	Internal Audit Function	35
	B.7	Actuarial Function	36
	B.8	Outsourcing	37
	B.9	Adequacy of the system of governance	40
	B.10 Any other information	40
C.	Risk Profile		41
	C.1	Underwriting Risk	42
	C.2	Market risk	47
	C.3	Counterparty Default Risk	53
	C.4	Liquidity risk	56
	C.5	Operational risk	59
	C.6	Other material risks	61
D. Valuation for solvency purposes	63
	D.1	Assets		63
	D.2	Technical provisions	67
	D.3	Other liabilities	72
E.	Capital Management	75
	E.1	Own Funds	75
	E.2	Compliance with the MCR and SCR	80
F.	Appendices		82
	Appendix A:	Cosmos Organisational Structure	82
	Appendix B: Extracts from Annual QRTs	83
	Appendix C:	Abbreviations	94
	Appendix D:	Auditors Report	95

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 2 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

Executive Summary

1. Purpose of the report

The purpose of the Solvency and Financial Condition Report ("SFCR") is to satisfy the public disclosure requirements according to Article 304 (1) of the Delegated Regulation (EU) 2015/35.

The Report discloses the information referred to in Articles 292 to 298 of this Regulation under the following main headings: business performance, system of governance, risk profile, valuation for solvency purposes and capital management.

The present SFCR has been prepared with reference date 31st December 2023 and has been approved by the Company's Board of Directors on 28th March 2024.

1. Overview of the Company

Cosmos Insurance Company Public Limited (hereinafter "Cosmos") was established in Cyprus on October 17, 1981 as a Private Limited Liability Company and on December 6, 1999 the Company became listed in the Cyprus Stock Exchange Market.

Cosmos operates island-wide through its large network of insurance intermediaries and through its offices in Nicosia, Larnaca, Limassol and Paphos. The Company employs sixty-six

1. well-trainedindividuals and maintains cooperation with more than one hundred and twenty-five (125) insurance intermediaries throughout the island.

The Company maintains a loyal network of insurance agents and clients. Service standards and claim settlement have remained intact and Cosmos enjoys a very good reputation in the market.

Cosmos insurance revenue of 2023 surpassed €19,5mil. Motor insurance is the Company's biggest line of business followed by the Medical Expense and the Fire and other damage to property lines of business.

On 1 January 2016, the Company transitioned into the Solvency II regulatory framework after completing a comprehensive program of regulatory requirements in corporate governance, risk assessment and management, solvency and reserving as well as supervisory and public disclosure.

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 3 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

1. Business and Performance

The Company's main lines of business ("LoBs") are Motor (Third Party Liability and Own Damage), Medical Expense, Fire and other damage to property and General Liability.

The Company's net insurance and financial result for 2023 amounted to €2,5m profit as follows:

Financial Result

split per LoB	MOTOR	FIRE	OTHER	A&H	LIABILITY	TOTAL
Amounts in EUR (€)
Insurance revenue	12.604.642	2.503.372	270.349	2.915.302	1.216.866	19.510.531
Insurance service	(10.715.011)	(972.475)	(321.250)	(2.237.397)	(442.303)	(14.688.436)
expense
Net expense from
reinsurance	(1.025.023)	(822.327)	112.247	(564.040)	(351.201)	(2.650.344)
contracts held
Insurance service	864.608	708.570	61.346	113.865	423.362	2.171.751
result
Total investment	424.407	84.290	9.103	98.160	40.973	656.933
income
Insurance finance
expenses for	(371.737)	(5.441)	(2.777)	(1.575)	(21.645)	(403.175)
insurance contracts
issued
Reinsurance finance
income for	55.871	4.213	1.845	1.058	10.870	73.857
reinsurance
contracts held
Underwriting Result	973.149	791.632	69.517	211.508	453.560	2.499.366
	Table 1: Underwriting Results 2023 per LoB

Overall, Company's insurance revenue was approximately €19,5m in 2023, recording a small increase of 0,53% or €103k compared to 2022. During 2023, Cosmos experienced an increase of insurance revenue, across all lines of business except General Liability.

Company has implemented increases in its premium calculation model in the Motor line of business effective from 1st June 2023, in response to the higher costs observed recently due to the rising inflation in both vehicle repairs and other expenses.

On the other hand, Company's efforts to penetrate in other profitable line of business such as Fire and other damage to property resulted in a notable increase of its share, taken into consideration, the aggressive approach from Bank-affiliated insurance companies.

Moreover, Company's expenses increased compared to prior year, mainly due to the deterioration of loss ratios in Motor and Medical lines of business.

The Business performance of the Company is further analysed in Section Aof this report.

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 4 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

IV. System of Governance

The corporate governance framework of the Company is based on the "Three Lines of Defence" model which supports the implementation of a robust internal control system and is aligned with the "four eye principle" that the Company is required to comply with.

Moreover, the Company has established the following functions to ensure effective oversight of its operations, in accordance with the requirements of Solvency II for an Internal Control System:

• Risk Management Function;
• Compliance Function;
• Internal Audit Function; and
• Actuarial Function.

The Company ensures that all persons who effectively manage the Company or have other key functions are fit to provide sound and prudent management through their professional qualifications, knowledge and experience and are proper by being of good repute and integrity.

The Company has also defined its own risk management system and performs an Own Risk and Solvency Assessment ("ORSA") at least once a year.

The System of governance of the Company is further analysed in Section Bof this report.

1. Risk Profile

The Company uses the standard formula to estimate its Solvency Capital Requirement ("SCR") according to which the SCR calculation is divided into risk modules.

The components of the SCR (before diversification) for the reporting year ended 31 December

2023 together with their allocation of SCR are presented below:

Health	Operational Risk
6,36%
Underwriting risks
1,43%
Counterparty risk
13,57%

Non-Life

Underwriting risks

52,65%

Market Risk

25,98%

Figure 1: Cosmos SCR Components as at 31/12/2023

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 5 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

The main components of Company's SCR are Non-Life Underwriting risk, Market risk and Counterparty Default risk.

Non-life underwriting risk is comprised from Premium & Reserve risk, Lapse risk and Catastrophe risk, which are mitigated mainly through the purchase of reinsurance cover.

SCR from Market risk is relatively high and is substantially driven due to the large portfolio of properties and the significant exposure of the Company in Property risk.

The Risk profile of the Company is further analysed in Section Cof this report.

VI. Valuation for solvency purposes

The valuation of assets and liabilities for Solvency II purposes is in line with the Company's financial statements prepared under International Financial Reporting Standards ("IFRS") except for:

• Differences in the valuation of technical provisions and associated reinsurance recoverables;
• Intangibles recognised as asset under IFRS but valued at zero under Solvency II;
• Differences in the valuation of Deferred tax assets/liabilities;
• Difference in the valuation of Insurance receivables.

The Company does not apply any matching and volatility adjustments nor any transitional measures for the valuation of technical provisions.

The valuation for solvency purposes of the Company is further analysed in Section Dof this report.

VII. Capital Management

The Company's SCR as at 31 December 2023 was estimated at €6,96m compared to Own Funds of €11,243m, resulting in a SCR coverage ratio 161,68%.

In accordance with Solvency II Directives, all insurance entities, at any given time must have adequate available capital to meet the Minimum Capital Requirement ("MCR") to retain its license and operate in the Cyprus insurance market.

Company's MCR as at 31 December 2023 as determined by Solvency II was determined at €4m, which indicates that the Company can cover its minimum capital requirement by approximately 2,81 times.

The Capital management of the Company is further analysed in Section Eof this report.

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 6 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

A. Business Performance

A.1 Business

A.1.1 Name and legal form of undertaking

Cosmos Insurance Company Public Limited (hereinafter "Cosmos") was established in Cyprus on October 17, 1981 as a Private Limited Liability Company and on December 6, 1999 the Company became listed in the Cyprus Stock Exchange.

Its registered address is 46 Griva Digeni Avenue, 1080 Nicosia, Cyprus.

A.1.2 Supervisory authority

The Company is authorised and regulated by the Superintendent of Insurance. The Superintendent of Insurance is the competent authority of the insurance sector in the Republic of Cyprus and exercises all the powers granted by the Law on Insurance and Reinsurance Services and Other Related Issues of 2016 [Law 38(I) 2016] and by the relevant Regulations, for the purpose of protecting the policyholders and the insurance beneficiaries.

Contact Information:
Address:	P.O. Box 23364, 1682 Nicosia
Telephone Number:	[phone]
Fax Number:	[phone]
E-mail:	[e-mail]
A.1.3 External Auditors

The Company's external auditors are PricewaterhouseCoopers Limited.

Contact Information:
Address:	PwC Central, 43 Demostheni Severi Avenue,
	CY-1080 Nicosia, Cyprus
Telephone Number:	[phone]
Fax Number:	[phone]

A.1.4 Holders of qualifying holdings in the undertaking

Cosmos is a Company listed in the Cyprus Stock Exchange. Its main shareholders are:

Major shareholders	% of share capital
Kyriakos M. Tyllis and Co Ltd	40,98
Kyriakos Tyllis	18,81
Charalambos Panayiotou	9,74
Elias Mavromatis	9,74

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 7 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

A.1.5 Material lines of business and material geographical areas where the Company carries on business

The Company carries out business in Cyprus under the following non-life insurance lines of business:

Financial statements ("IFRS")	Abbrevation	Solvency II
Accident and Health	A&H	Medical Expense,
Income protection
Motor	Motor	Motor vehicle liability,
Other motor
Other	Marine	Marine, aviation and transport
Miscellaneous	Miscellaneous financial loss
Fire	Fire	Fire and other damage to property
Liability	Liability	General liability

Table 2: Cosmos Lines of Business (LoB)

Cosmos has a wide distribution network in Cyprus which is monitored through its head office in Nicosia and branch offices situated in Limassol, Paphos and Larnaca. The Company's network of insurance agents is located throughout Cyprus and provides a very personalized level of service to their customers.

A.1.6 Any significant business or other events that have occurred over the reporting period that have had a material impact on the undertaking

1. Macroeconomy & Geopolitical landscape
   The geopolitical conflicts of the region, from the ongoing Russia - Ukraine war which commenced in early 2022, to the most recent Israel - Hamas war and the Yemen crisis caused by Huthi in late 2023, all of which are still in development as at the time of preparation of this report, create widespread uncertainty.
   Cosmos does not have a direct exposure to any of the above-mentioned regions. Nonetheless, the instability caused by the conflicts inadvertently impacts the global economy.
   Furthermore, due to Cyprus' geographical position, in the middle of these areas, it is expected that businesses with activities or investments in the war zones are affected significantly. Furthermore, the sanctions in financial transactions imposed by the US and the EU against Russia, in response to the Russian-Ukrainian war, continue to be updated and have impacted businesses across Cyprus with Russian interests or clientele.
   Cosmos' management and BoD review and discuss any new developments and are prepared to adjust the Company's strategy or take action to mitigate the Company's probable exposure, if deemed necessary.

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 8 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

1. Climate change & Earthquake risk
   The natural disasters in 2023 resulted in above-average economic losses, especially in the Mediterranean-Middle East region.
   The earthquake sequence that hit Turkey and Syria in early February 2023, was followed by the Emilia-Romagna Floods in May and a hailstorm of enormous proportions in July - both in Italy, as well as the wildfires in North Greece (Evros) and Cyclone Daniel, which caused a biblical catastrophe in the region of Thessaly, Greece, both in August 2023.
   Climate change consequences have become more and more apparent, particularly on physical risk exposures (frequency and severity), as the natural disasters of 2023 showcased. On a global scale, 2023 has been reported as the warmest year on record, and the largest in terms of deaths caused by natural disaster related since 2010 (estimated at 95.000 human lives lost).
   Cyprus has reported an increased number of extreme weather events in recent years; none of which, however, had catastrophic proportions. At the same time, it is expected that as the frequency of these events increases, the materiality of their impact will inadvertently deteriorate.
   The severe economic losses sustained by the (re)insurance market, have caused a hardening of the reinsurance market conditions, especially under the catastrophe (CAT) programmes.
   Cosmos has adjusted the budget of the year 2024, to reflect both the increase in frequency of the CAT events, as well as the hardening of the reinsurance market conditions.
2. Regulatory updates: IFRS17 implementation
   The Company in 2023 complied with the provisions and requirements of the new accounting standard for insurance contracts IFRS17, which has been effective since January 1st, 2023. Cosmos has gone through a thorough implementation and transition phase, which included the engagement of experienced external advisors and advancements to the in-house software systems. As a publicly listed company, Cosmos has successfully published its interim financial statements under the new requirements in mid-2023 and its audited Annual Financial Statements for the year on 28 March 2024.
   Given that Cosmos is a non-life insurance company with no exposure to long term business, all Company portfolios are measured under the simplified method i.e. Premium Allocation Approach (PAA).
   Even though, the concepts of the PAA measurement model do not materially differ to those of the IFRS4 standard, the transition to IFRS17, has triggered the establishment of new studies and the reassessment of the methodologies employed in determining the actuarial provisions. The Solvency II Balance Sheet and solvency position of the

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 9 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]

Solvency and Financial Condition Report for the year ended 31st December 2023

Company however, remain immune to any changes in the statutory reporting regulation, with minor movements possibly stemming from the deferred tax assets or liabilities; thus the results presented in the AQRTs and the present SFCR Report, are not affected by the transition.

1. Product Development
   Cosmos' strategic plan includes the development of its Non-Motor portfolio with innovative products that service the clients' current and future needs.
   In order to meet this goal, in late 2023, the Company created the position of a Business Development Manager, who among others, acts as Project Manager in any product development process.
   Furthermore in 2023, Cosmos launched petCARE, a new Pet Insurance product (falling under the Miscellaneous Financial loss portfolio), replacing its existing Pet insurance plan with more covers and extensions.
   In late 2023, Cosmos finalised its officeCARE plan, a completely new package insurance plan which will be launched officially in April 2024, an innovative product compared to what the market currently offers and includes a number of office business-related covers.
2. Digital transformation and strategy
   Cosmos aims to be a pioneer among the Cyprus insurance market in using technology in its day-to-day operations and has a range of in-house software systems which are believed to be valuable tools for both the personnel and the network of intermediaries collaborating with the Company.
   Cosmos Online, an online portal for both customers and intermediaries launched in 2022, was further updated in 2023 to include automisations, which aim to:
3. • be user friendly;
   • reduce time and bureaucracy in processes for both the intermediaries and the customers of Cosmos;
   • reduce printing;
   • reduce the Company's exposure to operational risk; and
   • gather more data in respect of a risk, in order to build a data-driven underwriting strategy.

Furthermore, Cosmos has decided to transition to a full electronic claim folder environment by 2025 and in late 2023 started to design the development a Claim Processing system, with automations that allow the claim handlers to perform their duties faster and more effectively, with reduced operational risk exposure and zero printing required. In early 2024, Cosmos is in the process of engaging a third-party provider to execute this project.

COSMOS INSURANCE COMPANY PUBLIC LTD
HEAD OFFICE	Page 10 of 95
46. Griva Digeni Avenue, 1080 Nicosia
P.O. Box 21770, 1513 Nicosia
T: [phone] | F: [phone]