Cyprus Mail www.cyprus-mail.com
Wednesday, April 24, 2013
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Insurers devalue impact of haircut ’Losses could spread to the whole of the financial sector’ By Elias Hazou
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NSURANCE companies yesterday sought to downplay the possible impact on policy holders as a result of the deposits haircut. Under a decree issued by the Central Bank, insurance companies are no longer exempt from a deposit haircut at the Bank of Cyprus (BoC) and the old Laiki. Authorities had initially excluded various entities from the write-down but were forced to rethink after it became obvious that it would increase the losses on depositors who must chip in to recapitalise stricken BoC. Several previously exempted categories will now incur a 27.5 per cent loss on their deposits over €100,000. These include charities licensed by the finance ministry, and private schools registered with the education ministry. But insurance companies will be hit with a 27.5 per cent hair cut on all deposits (from the first euro) as they are bound by different legislation. To recoup losses, the companies might be tempted to raise premiums; but industry players are understandably wary of calling it one way or the other. “There are so many different types of policies out there, and insurance companies’ money is invested in other assets other than
deposits, such as real estate and so forth,” said Stefi Drakou, head of the Insurance Association of Cyprus (IAC). “Plus, companies keep some of their money in foreign banks. It’s hard to determine how far they will be affected... it’s not one size to fit all,” she told the Mail. Drakou said the previous decree exempting insurance companies from the haircut was the correct one, because it contained the hit to the banks. “Now losses may spread to the whole of the financial sector, of which we are part,” she said. Conventional wisdom has it that life insurance policies run the most risk of being impacted, since payments are made over a long period of time and usually come out of people’s savings. Less so for general insurance (or non-life insurance policies) such as automobile and homeowner policies. IAC data for 2011 shows that the top five life insurance companies had premiums worth a combined €315m. Laiki Cyprialife’s market penetration stood at 29.1 per cent, followed by Eurolife 27.7 per cent, Universal Life 14.0 per cent, Metlife-Alico 6.9 per cent, and Prime 6.5 per cent. Andreas Pirishis, vicepresident of Atlantic Insurance (deals with general insurance) said the company took a “very minor
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Five Israeli navy ships took part in a joint exercise with Cyprus forces yesterday to put search and rescue teams through their paces. FULL STORY PAGE 3
Markets chaos after hackers’ White House explosions tweet HACKERS took control of the Associated Press Twitter account yesterday and sent a false tweet of two explosions in the White House that briefly sent US financial markets reeling. In the latest high-profile hacking incident involving social media service Twitter, an official @AP account reported that two explosions at the White House injured President Barack Obama. AP spokesman Paul Colford quickly confirmed the tweet was “bogus,” but within three minutes of the tweet hitting the web, virtually all US markets took a plunge on the false news in what one trader described as “pure chaos”. White House spokesman Jay Carney
told reporters that Obama was fine soon after the tweet went out a little after 17:00 GMT. Markets quickly recovered their losses after the tweet was knocked down. Some traders blamed automatic electronic trading for the sharp fall and bounce back. At a time when cybersecurity and hacking have become top national security concerns, Twitter and its reach to hundreds of millions of users is coming under growing scrutiny for the risk of data breaches on the site. A group calling itself the Syrian Electronic Army, which has supported the country’s leader, President Bashar alAssad, during the two-year civil war,
yesterday claimed responsibility on its own Twitter feed for the AP hack. The group, which creates new Twitter accounts every time the company suspends its old ones, has recently also claimed credit for similar hacks of Twitter accounts for National Public Radio, BBC and CBS’s 60 Minutes programme, among others. The spate of recent hacks have again turned the spotlight on what critics deem to be Twitter’s thin security offerings. For years, security experts have called on the San Francisco company to introduce a measure called two-factor authentication that they say would greatly reduce such breaches.