Before the COVID-19 lockdown was imposed, the Czech non-life market was set for a period of continuing organic growth and a gradual hardening of the commercial/industrial property and motor third party liability markets. Now, premium income is likely to be sharply down in 2020 because of government measures to combat COVID-19.
The industry also suffered a shock tax raid at the end of 2019 that was expected to wipe out a significant part of its profits in 2021 and 2022. Legislation was passed on 6 November 2019 which requires insurers and reinsurers with operations in the Czech Republic to calculate the accumulated difference between their Czech GAAP reserves and Solvency II reserves as at 1 January 2020 and to pay corporation tax of 19% on this amount. The tax is payable in two instalments in 2021 and 2022. Any further difference between the two reserve calculations which arises in 2020 and subsequent years will be taxable annually at 19%. The tax payable on accumulated non-life reserves in 2021-22 is estimated at CZK 2.5bn (USD 106.39mn) to CZK 3.0bn (USD 127.67mn).
No other environmental changes were expected apart from the adoption of IFRS 17, which has now been deferred to the beginning of 2023. In terms of reinsurance, this adoption is not expected to drive any change in purchasing behaviour.
The large insurers were focused on remediating their legacy portfolios and digitising their businesses for a future in which fewer people would be interested in working as agents or salespeople.
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