INSURANCE companies yesterday sought to downplay the possible impact on policy holders as a result of the deposits haircut.

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Panicos Demetriades

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 measure will also include charities licensed by the finance ministry, and private schools registered with the education ministry. However, 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. ‘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,’ explained 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 highlighted. Now losses may spread to the whole of the financial sector.