CZECH REPUBLIC Law and Practice Contributed by: Eva Nováková, Michaela Šmotková, Martin Sztefek and Kateřina Chizzola Bardonová, JŠK, advokátní kancelář, s.r.o.
• Reinsurance business may only be written by enti- ties holding a reinsurance licence for life, non-life, or both. Requirements for Obtaining a Licence • Applicants must take an approved legal form, namely a Czech joint-stock company, a co-opera- tive, or an authorised branch. • Applicants must meet prudential standards, includ- ing Solvency II capital requirements (MCR, SCR), minimum and solvency capital requirements, appropriate governance and risk management frameworks, fit-and-proper requirements for man- agement, and effective internal control and audit functions. • It must be demonstrated that key management positions are held by suitably qualified and repu- table individuals who are free from conflicts of interest. • A comprehensive business plan is required, sup- ported by realistic underwriting assumptions and solvency projections. • Ownership structures must be transparent, with CNB approval obtained for any qualifying holdings. Differences by Business Type • Consumer insurance is subject to enhanced con- sumer protection rules under the IRDA, Civil Code and Act No 634/1992 Coll., on Consumer Protec- tion – covering advice, disclosure and product oversight. • SME insurance is governed by the standard pro- tections of the IRDA but benefits from fewer statu- tory safeguards than consumer insurance, placing it between the consumer and corporate regimes. • Corporate insurance is treated as non-consumer business and is characterised by greater contrac- tual freedom under the Civil Code and the Insur- ance Act. Excess Layers and Reinsurance • There is no separate regulatory regime for excess layers of insurance, which are treated as standard insurance business and therefore subject to full licensing, capital and governance requirements. • Reinsurance is subject to the same prudential rules, including counterparty risk and capital adequacy under Solvency II.
2.3 Taxation of Premium The Czech Republic does not impose a standalone insurance premium tax on premiums paid by poli- cyholders to insurers. The provision of (re)insurance and services related to (re)insurance provided by (re) insurance intermediaries are also exempt from the VAT under Czech law. However, insurers are subject to corporate income tax on their net profits, which naturally include revenue derived from premiums. 3. Overseas Firms Doing Business in the Jurisdiction 3.1 Overseas-Based Insurers or Reinsurers (Re)insurers registered in a non-EEA country wish- ing to provide (re)insurance services in the Czech Republic must establish a subsidiary or a branch in the Czech Republic and secure a standard licence for (re)insurance activity as described in 2.2 Writing of Insurance and Reinsurance . The same applies to UK entities after Brexit. The Insurance Act prohibits the conduct of insurance or reinsurance activities in the Czech market without a licence from the CNB. An undertaking operating without a licence may be fined up to CZK50,000,000 by the CNB. Such conduct may also constitute the criminal offence of unlawful busi- ness activity under Act No 40/2009 Coll., the Criminal Code. There is an ongoing discussion about introduc- ing a specific criminal offence for the unauthorised operation of insurance activities. If an entity licensed within the European Economic Area (EEA) wishes to provide (re)insurance services in the Czech Republic, it may do so without obtain- ing a separate Czech licence under the EU passport regime. This requires only a notification to the CNB, submitted through the supervisory authority in the entity’s home state. The entity may either establish a branch in the Czech Republic (freedom of establish- ment) or provide services without a branch or other permanent presence (freedom to provide services). In both cases, the entity remains primarily regulated by its home-state authority but must comply with Czech rules on distribution.
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