Domestic insurance companies are doing well, their new test showed
Insurance companies operating in our country are in good condition according to the Czech National Bank. The central bank asserts that they are still able to resist worsened economic conditions, should they occur. The entire sector is also doing well. The total value of gross written premium reached more than 230 billion crowns last year, according to the Ministry of Finance.
The Czech economy grew by as much as 2.7 percent year-on-year in the third quarter of this year, as shown by the current numbers from the Czech Statistical Office. Thanks to this, we are among the fastest-growing in Europe. "If the quarterly growth were maintained, it would safely push the Czech Republic into the territory of economic boom," warned CTK analyst Vít Hradil of Investika.
Nevertheless, it is important that domestic banks and insurance companies also prepare for less favorable periods. Therefore, the central bank conducts regular stress tests, the purpose of which is to find out how our financial sector is actually doing. The aim of insurance supervision is to preserve their financial stability and protect policyholders, insured persons and eligible persons.
Insurance companies remain solvent
The latest solvency ratio, which shows the stability of insurance companies, reaches 138 percent. It is clear that anyone who has any contract with an insurance company can be relatively at ease. This figure is indeed well above the 100 percent level. Two years ago, the situation was even better. Solvency for market and insurance risks then reached an impressive 156 percent!
Of the risks monitored, the most significant impact on insurers this time was the risk of a decline in the value of stock investments, a decline in the value of government bonds and flood risks. The data from which the current analysis was based came from the end of 2024.
"The results of the stress test showed that the insurance sector as a whole was sufficiently capitalized at the end of 2024 and was capable of absorbing relatively significant changes in risk factors,"
LP-Life's Director of Communications from the Czech National Bank, Jakub Holas, wrote.
This year, 17 insurance companies, accounting for more than 99 percent of the domestic market, participated in the stress test of the Czech National Bank. The central bank conducts the analysis once every two years. It reflects, for example, the impact of one-off changes in risk parameters on the value of an insurance company's assets and liabilities, as well as equity, interest, property, and currency risk. In case of non-life insurance risks, the test also includes the risk of a drop in premiums and the risk of catastrophic damage caused by floods.
The sector is handling billions
The fact that the domestic insurance market is robust enough is demonstrated by more recent figures: in the first half of the year, members of the Czech Association of Insurance Companies recorded expenses 7.5 percent higher than in the same period last year. These insurance companies together sent over 56.5 billion crowns in insurance benefits to their clients and other injured parties. The volume of risk accepted from insurance contracts increased by 7.8 percent to 114.5 billion crowns in the observed period. The stated value also includes risks underwritten by association members outside the Czech Republic. Association members currently manage almost 31 million insurance contracts, which is about 637 thousand more than last year.
Insurance growth has been ongoing for eight years
The sector has been showing great numbers long-term. It has been growing since 2017. The growth of prescribed insurance, which reached more than 8 percent for the whole last year, was, just like in previous years, driven mainly by the growth of non-life insurance. This was highlighted by the Report on the Development of the Financial Market, issued by the Ministry of Finance in the summer. At the same time, the segment of life insurance was also strengthening.
The total value of gross written insurance reached more than 230 billion crowns last year according to the ministry. Of this, non-life insurance accounted for 172.7 and life insurance for 57.7 billion crowns. The largest share of the increase in written insurance in the non-life insurance segment in 2024 was due to the increase in insurance for fires and other property damage, other motor vehicle insurance, and liability insurance for damage caused by the operation of motor vehicles.
As trends prove, the insurance market is one of the most dynamically developing segments of the financial market, relying on a large amount of capital that flows into it from customers every year. It can be assumed that it will continue to strengthen its position and stability in the following period.
Sources: author's text, own questioning, Czech National Bank, Ministry of Finance of the Czech Republic, Czech Insurance Association
