XPRIMM: Which were the most important changes/trends, both - in the Czech economy and insurance industry - in 2013?
Tomas SIKORA: Last year was for the Czech insurance market quite challenging due to the persistent stagnation of the economy and because of political instability. At the national level we were hugely employed by preparation for the implementation of the new Civil Code. From the European perspective our key issue was Solvency II and the discussion about IMD 2 regulation, which will significantly change the rules for the intermediation of insurance products.

XPRIMM: How would you characterize the local insurance market's evolution in 2013?
T. S.: Growth in life insurance was negatively affected and declined in recent years, while non-life insurance is still slowing down. The dynamics of premiums written in current premium payment contracts fell from 2.2% at the end of 2012 to the current 0.7% and we can also trace a decrease in premium volume for single premium contracts. In terms of citizens' risk coverage a decline in current premium payment contracts of life insurance (-14.2%) and a further reduction in the volume of life insurance contracts are considered to be negative. The annual loss of nearly 200,000 contracts indicates that the trend of decreasing insurance penetration in the life risk sphere is continuing. Compared with the situation recorded four years ago, the number of inhabitants with life insurance in the Czech Republic is currently half a million lower.

The decline in motor third-party liability insurance moderated, rising from -5% in 2012 to -1% in 2013. The figures confirm the announced gradual increase in premium prices in motor third-party liability insurance. Last year the average price growth was 7%. Further price increases can be expected in 2014 in connection with legislative changes and the introduction of the new Civil Code. Collision insurance (Editor's Note: Motor Hull) also experienced a moderated decline and we can expect increasing premium rates here as well. However, the reasons are different. Premium rates in collision insurance are closely linked to vehicle prices. Falling vehicle prices and preference for basic equipment in new vehicles during the crisis resulted in a decrease in collision insurance premiums. It is important to point out that this decrease in the amount of damage will only be of significance in case of total destruction of the vehicle or theft. For the vast majority of cases where the vehicle can be repaired the payment of claim does not change despite the decline in premiums. That is why premium prices no longer correspond to the costs of damage cover incurred by insurance companies.

To compensate for stagnation of the Czech market some insurance companies opt for business development outside the Czech Republic where the growth more than doubled. Among the most successful abroad are CESKA Pojistovna, a.s. and AXA Pojistovna a.s. The volume of business, however, is not a considerable one and it is unrelated to insurance protection in the Czech Republic. Although the insurance market at the end of 2013 did not produce negative figures, we don't expect it to react to the incipient economic recovery this year. Full recovery of the insurance market can be anticipated probably in 2015.

XPRIMM: For the local insurance industry, the year 2014 started better or worse than previous years (2008-2013)? Why?
T. S.: Due to the unfavorable development of legislation this year began rather worse. We estimate that the Czech insurance companies will increase their costs up to CZK 3 billion. This will be caused by the new Civil Code. The cost increase will also occur as a result of the obligation to pay the funds to the Fund Loss Prevention and because of new obligation to pay the flat reimbursement intervention of firefighters during traffic accidents.

XPRIMM: Are there any major changes to be made in the near future that will target the insurance industry?
T. S.: We will expect major changes in the context of new European directives in the sphere of distribution of financial products. In the Czech Republic the main changes occur in the context of the distribution of insurance products and sphere of consumer protection.

XPRIMM: What are your expectations for the end of 2014?
T. S.: Development in the insurance industry in 2014 will mirror the economic and political situation in the Czech Republic. General forecasts suggest a slight recovery of the economy and a slight increase in the wage bill sector. But we do not expect a radical change in the behavior of individuals and firms. The insurance sector will be probably affected by legislative measures. Because of these not very positive signs we can indicate, we have to be prepared for continued stagnation or very very slight market growth.