How do the current political developments and economic conditions in Czech Republic influence the insurance industry and clients’ risks?

KULAS: GDP grew in 2019 by approx. 2,7% which means moderate slow-down compared to 3% GDP growth in 2018. Positive factors are very low unemployment rate and increase of average income. Before the outbreak of coronavirus pandemic it was expected that the GDP growth will continue to slow-down to approx. 2% in 2020 mainly because of the situation on other EU markets and Brexit as the Czech Republic is very export oriented country. The overall good economic situation had also positive effect for the insurance market. It is reflected in an 5,7% increase of written premium in 2019. The main driver of this solid increase was non-life insurance which grew by 7,3%.

In 2019 the insurance market faced some major legislation/regulatory changes. The first one was IDD which imposed many new duties on insurance sector, e.g. examination of professional competence of insurance intermediaries which has to be passed until November 30th 2020. The other one is the one-off taxation of technical reserves of the insurance companies from 1.1.2020 which will represent an amount corresponding to approx. 1 year profit of the whole Czech insurance market. It will very likely lead to premium increase.

In which economic segments/industries do you expect increasing investments in the coming years?

KULAS: Due to the fact that Czech Republic is an export oriented country it is apparent that the transport infrastructure is not adequate to the traffic. Therefore we can expect large investments into the construction/reconstruction of roads and railway. All analyses show that if the economy wants to stay competitive it is absolutely necessary to invest into sectors/products/services with high value added. Of course automotive sector will play an important role also in the future.

What are the biggest risks foreign companies doing business in the Czech Republic need to consider?

KULAS: The Czech Republic, long known for attracting top multinational companies and talented workers, was in fact recently named among the world’s best countries for cross-border trade, and one of the easiest nations to do business in. But there are still some challenges to consider. Some of the major ones are ongoing changes to the tax system, language barrier when dealing with Czech authorities, complex bureaucracy, speedier judicial process and greater transparency in public procurement is needed.

What are the main facts of the insurance market in the Czech Republic?

KULAS: The total premiums written in 2019 was CZK 136.72 billion. This represents an increase of 5.7% compared to 2018. I tis important to mention that these figures don´t include health insurance because it is not a commercial insurance but there is a state scheme in the Czech Republic.

Life insurance premium written amounts to CZK 45.12 billion in 2019, up by CZK 1.15 billion, or 2.6%, compared to 2018. On the other hand the number of active insurance contracts decreased by 1,5% and new contracts dropped by 13% compared with 2018.

Non-life insurance in 2019 – especially in the second half of the year – confirmed a robust growth rate, with premium written for the year rising by 7.3%. Compared to 2018, it strengthened by CZK 6.19 billion and currently amounted to CZK 91.6 billion.

Corporate insurance (excl. Motor Hull and Motor Third Party Liability) shows written premium of CZK 20.24 billion, up by 5,5% compared to 2018.
It is difficult to estimate the premium volume placed by insurance intermediaries because there are several intermediaries associations in the country. However taking into account just corporate insurance we can estimate that 95% of the premium is placed through insurance intermediaries.

What are the most interesting recent developments?

KULAS: MTPL is currently strengthening by 8.3%, surpassing 3.4% growth in the number of insured vehicles, but the average loss in this sector is growing at an increasing rate of approx. 7% for property damage (now CZK 45,000), resp. 8% for health damage (now CZK 400,000) than average premiums (growth of approximately 5%).

Motor Hull insurance maintains a high 10.1% growth rate. This continuing significant trend is due to the increasing number of motor vehicles insured.

Corporate insurance confirmed solid growth exceeding 5.5%. Despite the expected slowdown of the Czech economy, compared to 2018 (+ 4.9%), growth in premiums written in this cross-cutting segment continued to accelerate.

What specifics differ from those in other countries?

KULAS: As already mentioned there is no commercial health insurance. The only exception are expats where a commercial insurance product is available. The other non-commercial insurance is employer´s liability / workers compensation. This cover has to be bound with only two insurers directly without broker´s involvement. No insurance tax is imposed on insurance premium.

Brokers account for about 95% of all corporate insurance sales in the Czech Republic. The share in life business is by far smaller as it is dominated by MLM structures such as internationals like OVB, Swiss Life or locals like Partners or Broker Consulting. Our company is not involved in Life business but we have established collaboration with one of above mentioned international MLM´s.

Can international insurance programs be implemented? Which special features have to be considered? How is this done at GrECo CZ? How do you ensure excellent client servicing? How do you coordinate with the controlling broker?

KULAS: Implementation of the global insurance programs with the local fronting partners in the Czech Republic works mostly without difficulties, some companies in the Europe are covered on FOS basis. The local fronting Policies are usually issued either in Czech language or in both, Czech and English language. For communication with our foreign partners or some clients about insurance Policies in Czech language we use the standard forms – Policy Digests or Policy Summaries in English or German language.

In order to meet the Czech law stipulations, Motor Third Party Liability Policies (and the Green cards) can be issued only by insurance Companies licensed in the Czech Republic.

Please describe incoming business servicing capabilities? How many and what languages are spoken in your international team? How many years of experience does your team have in international client servicing?
Can you tell us about your most complicated case when dealing with international clients?

KULAS: The servicing capacities of GrECo Czech Republic Incoming business department are five Account Managers and one Account Executive, English or German speaking. GrECo CZ was established back in 1992 and the incoming business is provided since the very beginning, i.e. for almost 30 years.

MAZANEC:For international clients we provide full broker service, including claims handling and advisory works. Complicated cases could be the claims, which are covered on FOS basis under the global programs and settled with a Loss Adjuster abroad, just because all supporting documents are in Czech language and wording of the global program is not available to us. In such cases it is necessary to closely coordinate the claims handling procedure with controlling broker.

What regulatory challenges are companies facing? What types of insurance are mandatory?

MAZANEC: Like in every EU country we have to follow all EU directives and regulations like IDD or GDPR. The local translation of IDD was even stricter compared to some other countries. All insurance intermediaries have to pass a special exam to prove professional qualification.

Compulsory Insurances in the Czech Republic are, like in most countries, Motor third party liability and via a government scheme, employers’ liability. Other compulsory lines are very industry specific, like in aviation or railway operations and clinical trials of the pharmaceutical industry or for risks that could pose a threat to the public like nuclear power plants.

Where do you at GrECo Czech Republic focus on when advising clients and what special expertise have you developed?

KULAS: Our values are market power, industry expertise and experienced broking team. Many of our employees have been working for more than 10 years for GrECo. Our company is regularly evaluated by the professional insurance panel being one of the top 5 brokers in the country – usually as the only international broking house. Furthermore we are following GrECo Group´s strategy of Specialties. We are able to offer specialist knowledge to our clients in areas like Aviation, Financial Institutions, Transport & Logistics, Construction & Real Estate, Sports & Entertainment, etc.