Insurance


Unfavorable economic environment, strong competition, technological progress, insurance product innovation and increasing requirements of regulators and governments on the financial sector mean that the insurance industry will have to look for more effective ways of operating in subsequent periods. Market growth is only possible if new opportunities and new technologies are utilized.
 

Czech Insurance Banana Skins 2017

Top Threats to Czech Insurance Industry

The biggest insurance threats in the Czech Republic included interest rates, specifically their continuing low level and their related impact on those insurance products with guaranteed technical interest rates. Further significant threats related to the volume of new regulation, in particular in the area of customer protection. Medium to high concerns were raised with respect to the risks brought by technological changes and the industry’s ability to manage related transformations.

 

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Insurance Market Trends

Despite the specifics of the Czech market, we expect global trends to have significant influence. The most significant being:

Business environment

  • Strong competitiveness in the area of insurance tariffs and consequent insurers’ margin deterioration
  • New competition in the form of P2P insurers and technological companies offering insurance products
  • Cases of nonstandard sales practice that may damage the reputation of insurance sector
  • Segmentation of insurance products and utilization of modern methods for pricing existing products

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Influence of regulators

  • Distribution methods – can be impacted by legislative changes and by commissions of the intermediaries
  • Legal structure – increasing regulatory requirements may enhance further centralization and expansion of networks of foreign insurers across European market
  • Tax and capital optimization
  • Executive management and risk management of insurance businesses – application of Solvency II principles implies changes in the management of insurance companies
  • IFRS 17 (reporting, compliance)

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Economic environment

  • Low interest rate environment and consequent low investment returns on assets, and losses from guaranteed products

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Political influence

  • Investment strategies – impact on investment structuring
  • Risk management

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Demographical changes

  • Responding to population ageing and changes in family structure

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Behavioral and social changes

  • Ways of distribution – digitalization of society leads to changes in how customers are approached
  • Products – increasing pressure on product offers, systems and technologies to be more simple and transparent

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Technological changes

  • Ways of distribution – increasing importance of purchases of mobile devices requires technological changes within insurance industry
  • Systems and technologies – cloud computing and response to increasing cyber risk exposure

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Services

Actuarial services

Nowadays, actuarial teams are some of the most important within insurance companies. Insurers face problems when it comes to the effective utilization of employees with specific technical knowledge. The role of actuaries is slowly drifted from one of being supportive to that of being more business related (product segmentation, competition pricing, sophisticated analysis of new and current business, etc.). Implementation of regulatory requirements and calculation of capital adequacy are also important parts of actuarial daily work. Currently, there is a lack of experienced actuaries on both the Czech and international markets so their usage is critical for the success of insurance companies. We can expect that the requirement for actuarial resources will increase in the foreseeable future. This will be caused by competitive markets and new regulatory and legislative requirements (Solvency II, IFRS 17).

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Other services

  • Services of licensed actuaries in accordance with the requirements of the Insurance code
  • Services of experienced members of actuarial teams in the areas of reserving, implementing and improving “cash-flow” models, setting insurance rates, compliance with regulatory requirements, etc.
  • Analysis / assessment of the structure and utilization of actuarial departments in insurance companies, the improvement of efficiency of actuarial knowledge for the benefit of business
  • Audit/review of actuarial methods utilized by the company and recommendation on their further development
  • Revision/review of current segmentation of insurance products
  • Assistance/advisory in the development of new insurance products
  • Revision/review of market strategy and proposal for its improvement during times of constantly developing power of pre-sales channels and internet sales
  • Advisory on the implementation of models in line with IFRS 17 Standard
  • Advisory on the implementation of models for assessing the best estimates of liabilities, risk margin and capital requirements under the Solvency II Regulation
  • Advisory on the calculation of provision for employee benefits in line with the collective contracts of specific companies in accordance with the IAS 39 Standard
  • Advisory on utilization of GLM model (generalized linear model).

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Publications

Insights


 

Contacts

Marek Richter
Partner, Assurance Services
Tel: +420 542 520 170
Email

Mike Jennings
Partner, Advisory services
Tel: +420 251 152 024
Email

Martin Vurm
Advisory services
Tel: +420 251 151 207
Email

Vincent Santamaria
Financial Services
Tel: +420 251 152 071
Email

Zenon Folwarczny
Tax and Legal Services
Tel: +420 251 152 580
Email

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