CZECH REPUBLIC Law and Practice Contributed by: Eva Nováková, Michaela Šmotková, Martin Sztefek and Kateřina Chizzola Bardonová, JŠK, advokátní kancelář, s.r.o.
of the insured vehicle is covered although the poli- cyholder is the vehicle operator or owner, and D&O insurance, where coverage extends to anyone who becomes a statutory body during the policy period. Beneficiaries who are not named insureds have no disclosure obligations when the contract is made. Disclosure duties apply only to the policyholder and any named insured, who must answer the insurer’s questions truthfully. 6.6 Consumer Contracts or Reinsurance Contracts For consumer insurance contracts, the process of drawing up insurance contracts follows the general framework under the Civil Code, with additional con- sumer protection rules. If the consumer is a party, Act No 634/1992 Coll., on Consumer Protection, applies, setting out obligations for insurers and penalties for specific offences. Special provisions in Sections 1841 to 1851 of the Civil Code govern financial services contracts with consumers, including rules for distance contracts, withdrawal periods and prohibitions on claiming com- pensation for unordered performance. In life insur- ance, consumers also have access to out-of-court dispute resolution through the Financial Arbitrator, whose decisions are binding but reviewable by civil courts; proceedings are free and simplified for con- sumers. Reinsurance contracts differ fundamentally. They are agreements between insurers to transfer or share risk and do not involve consumers or individual insureds. Consumer protection rules and beneficiary-related provisions do not apply. The process focuses on nego- tiation between professional parties, risk assessment, and treaty or facultative terms, governed by principles of utmost good faith. 7. Alternative Risk Transfer (ART) 7.1 ART Transactions Alternative risk transfer (ART) transactions such as industry loss warranty contracts and insurance- linked securities are not widely used or subscribed to
by Czech companies in practice. Their presence on the Czech market is very limited and, where they are used at all, they are typically accessed cross-border, through foreign insurers, reinsurers or special purpose vehicles rather than structured domestically. However, recent catastrophic events (such as floods or storms) and evolving market conditions are gradually increas- ing interest in instruments such as parametric cover- age. Czech law does not contain a specific legal regime for ART products as a distinct category, neither has the CNB issued any specific rules or guidance. Whether a particular ART transaction is recognised as an insur- ance or reinsurance contract depends on its sub- stance rather than its label, focusing in particular on: • the existence of risk transfer; • the presence of an insurable interest; • whether the risk assumed is uncertain and fortui- tous; and • whether the arrangement involves the undertaking of risk in return for consideration. If the ART product is considered insurance, it must comply with all general insurance regulation, includ- ing licensing requirements applicable to insurers and intermediaries, the establishment of an appropriate risk management system, and compliance with sol- vency and minimum capital requirements. On the other hand, purely financial or capital market instruments without genuine insurance risk transfer would not fall within insurance regulation but might be subject to other financial market regulation, mainly to Act No 256/2004 Coll., on Capital Market Undertak- ings and Act No 240/2013 Coll., on Investment Com- panies and Investment Funds. 7.2 Foreign ART Transactions Czech law does not have any explicit rules on ART transactions written in other jurisdictions, and the CNB has not adopted a specific approach to such transactions. Therefore, the information provided in 7.1 ART Transactions also applies to foreign ART transactions.
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