Decree No. 303 / 2004 Coll.
Decree implementing certain provisions of the Insurance Act
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Order
Effective from 14.05.2004
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303
DECLARATION
of 6 May 2004
implementing certain provisions of the Insurance Act
According to Articles 17 (1), (3) and (4), 18 (4), 21a (3) (c) and 7 and 22 (1), (5) and (9) of Act No. 363 / 1999 Coll., on Insurance and on the amendment of certain related laws (Insurance Act), as amended by Act No. 39 / 2004 Coll.:
Subject matter
This decree on the basis of the law of the European Communities (1) provides for:
(a) the procedure for determining the level of the equalisation reserve, its drawing conditions, the upper limit of the harmful ratio and the maximum level of the equalisation reserve;
(b) the maximum threshold of the technical interest rate and the procedure to be followed;
(c) the limits for each item in the composition of the insurance or reinsurance undertaking;
(d) closer conditions for determining the effectiveness of the investment protection;
(e) the method of calculating the own resources of the insurance or reinsurance undertaking;
(f) own resources items constituting the guarantee fund;
(g) determining the value of own resources; and
(h) the method for reporting solvency and the method for reporting the adjusted solvency calculation.
Equalisation reserve
(1) The procedure to determine the amount of the creation of the equalisation reserve of an insurance undertaking pursuant to Article 17 (1) of the Insurance Act, the calculation of the amount and the maximum limit of its formation pursuant to Article 17 (4) of the Insurance Act is set out in Annex 1 to this Decree.
(2) The equalisation reserve may be drawn if the harmful ratio for the insurance sector is higher than the upper limit of the harmful ratio for that sector as set out in the table in Annex 1 to this Decree.
(3) The equalisation reserve shall be drawn on an ongoing basis in accordance with the maturity of the claims arising from fluctuations in the injurious ratio caused by the facts independent of the insurance undertaking. The amount of the drawing-up of the equalisation reserve shall be calculated as set out in Annex 1 to this Decision.
Technical interest rate
(1) The maximum technical interest rate is to be set at a maximum of 60% of the average yield on bonds issued by the Czech Republic, with a maturity of at least 5 years, issued in the last 12 months immediately preceding the six calendar months preceding the date on which the newly determined technical interest rate is to enter into force. The average yield is calculated as the weighted arithmetic average of the long-term government bond yields published by the Czech National Bank in the form of a government bond auction notice.
(2) The maximum technical interest rate is 2,4%. The Ministry of Finance ("the Ministry ') shall amend the maximum amount of the technical interest rate if the average yield calculated in accordance with paragraph 1 is at least 0,5 percentage points different from the applicable maximum amount of the technical interest rate. The insurance undertaking shall bring its technical interest rate into line with the declared maximum technical interest rate within 6 months of its publication.
(3) Paragraphs 1 and 2 shall not apply to insurance contracts:
(a) where the investment risk is borne entirely by the policyholder; or
(b) with a one-off premium with an insurance period of no more than 8 years.
Limits on investment composition items
(1) The following limits shall apply to each item of the investment composition of the insurance or reinsurance undertaking:
(a) for bonds issued by a Member State or its central bank and bonds for which a Member State has taken over the guarantee, 75% of the total technical provisions;
(b) for bonds issued by banks and similar credit institutions of Member States, 50% of the total technical provisions;
(c) for listed bonds issued by trading companies, 20% of the total technical provisions;
(d) for treasury bills, 75% of the total technical provisions;
(e) for quoted municipal bonds 20% of the total technical provisions;
(f) for loans, loans and other claims secured by a bank guarantee, 10% of the total technical provisions;
(g) for notes the fulfilment of which is ensured by the bank exchange handle (bank aval), (2) 10% of the total technical provisions;
(h) for real estate on the territory of the Member States, 20% of the total technical provisions, land or building registered as one property shall not exceed 10% of the total technical provisions;
(i) for mortgage bonds 50% of the total technical provisions;
(j) for quoted shares up to 10% of total technical provisions;
(k) for deposits and deposits confirmed by a deposit certificate, a deposit note or other similar document for banks authorised to operate as a bank in the territory of the Member States, 50% of the total technical provisions; such deposits with one bank may not exceed 20% of the total technical provisions; This item does not cover current accounts from which operating costs are covered,
(l) for objects and works of artistic cultural value valued at least 2 experts, subject to their insurance against damage, destruction, loss or theft with another insurance undertaking 5% of the total technical provisions;
(m) for bonds issued by the European Investment Bank, the European Central Bank, the European Bank for Reconstruction and Development or the International Bank for Reconstruction and Development, 75% of the total technical provisions;
(n) securities issued by a collective investment unit 20% of the total technical provisions.
(2) The investment also includes:
(a) foreign securities, (3) traded on the regulated market of the Member States of the Organisation for Economic Cooperation and Development up to 10% of the total technical provisions;
(b) loans to insured persons who have entered into a life insurance contract up to 5% of the total technical provisions;
(c) hedging derivatives; such hedging instruments may only provide the items referred to in paragraph 1 and paragraph 2 (a); the hedging derivatives as an investment item shall not exceed 5% of the total technical provisions;
(d) claims on reinsurance undertakings up to 50% of total technical provisions; such claims may not be used by insurance undertakings until all liabilities to reinsurance undertakings have been deducted.
(3) Total technical provisions are the sum of technical provisions relating to all life insurance sectors referred to in Part A of Annex 1 to the Insurance Act, with the exception of technical provisions made up of those insurance contracts for which the insurance benefits comply with the provisions of the Insurance Act (4) and the sum of technical provisions relating to all non-life insurance sectors listed in Part B of Annex 1 to the Insurance Act. A mixed-activity insurance undertaking shall calculate the total amount of technical provisions separately for life insurance and for non-life insurance. The financial composition limits shall apply separately for the technical provisions of the life insurance sector and for the technical provisions of the non-life insurance sector.
(4) The investments referred to in paragraphs 1 and 2, with the exception of bonds referred to in paragraph 1 (a), treasury bills referred to in paragraph 1 (d), quoted municipal bonds referred to in paragraph 1 (e) and government bonds issued in a Member State other than that relating to at least two persons within the group (holding), are limited to 15% of the total technical provisions.
(5) The investments referred to in paragraph 1, with the exception of points (a), (d), (h), (k), (l), (m), (f), granted to national or regional or local authorities or to international organisations of which one or more Member States is a member, and the investments referred to in paragraph 2, with the exception of point (d), are limited to 5% of the total technical provisions for one person. The limit for one person under the first sentence may be increased to 10% of the total technical provisions, provided that the insurance undertaking does not invest more than 40% of the total technical provisions in the investment under the first sentence for persons for whom it invests more than 5% of the total technical provisions.
(6) The same security may be included in only one item of the investment composition.
Conditions for determining the effectiveness of investment protection
(1) Investment hedges are effective if, during the hedging relationship, changes in the fair value of the hedging instruments corresponding to the hedged risk are between 80% and 125% of changes in the fair value of the hedged instruments corresponding to the hedged risk.
(2) Changes in the fair value of both the hedging instruments and the hedged instruments are identified on an ongoing basis by the insurance or reinsurance undertaking.
(3) The effectiveness of the provision of each of the hedged instruments is ascertained by the insurance or reinsurance undertaking at least at the date of drawing up the proper, extraordinary and interim financial statements, the date of the statement of the formation and amount of the technical provisions and the composition of the investments of the assets whose source is the technical provisions (Section 13 (7) of the Insurance Act). The results of the determination of the effectiveness of the investment hedges of the items referred to in paragraphs 1 and 2 (a) of Section 4 shall form part of the statement of the formation and amount of technical provisions and the composition of the investments of the assets whose source is the technical provisions.
Solvency
(1) The insurance undertaking determines the value of own resources ("available solvency margin") separately for life insurance and for non-life insurance. The mixed-activity insurance undertaking shall include part of its capital in the calculation of the available solvency margin for life insurance and part of its capital in the calculation of the available solvency margin for non-life insurance in order to comply with the minimum capital requirement for each calculation. Other items used in the calculation of the available solvency margin which cannot be clearly assigned to each activity, the insurance undertaking shall divide between life and non-life insurance in proportion to the amounts of share capital for each activity. The reinsurance undertaking determines the value of own resources in a similar manner to the non-life insurance undertaking.
(2) The available solvency margin is determined from the items
(a) paid-up capital;
(b) reserves;
(c) transfers of profit and loss;
(d) other items;
(e) a fund for future life insurance allocations.
(3) Other items referred to in point (d) of paragraph 2 shall mean cumulative preference share capital, subordinated bond liabilities or other liabilities the repayment of which is subject to the condition of subordination (hereinafter referred to as subordinated debt) and securities without a specified maturity. These items may be included only up to 50% of the lower value of the required and available solvency margin, and up to 25% of them may consist of subordinated debt with fixed maturity or cumulative fixed-term preference equity capital if, in the event of the insolvency or liquidation of an insurance undertaking, there are binding agreements under which subordinated debt or preference shares are classified as claims on all other creditors and may be repaid only after all other debts due at that time have been settled.
(4) Subordinated debt may be included in other items if the following conditions are met:
(a) the funds have actually been paid;
(b) for debt with a fixed maturity, the original maturity must be at least 5 years. No later than 1 year before the due date, the insurance undertaking must submit to the Ministry for approval a plan to maintain the available solvency margin or to achieve the required solvency margin at the due date; This does not apply if the extent to which the debt may be included in the available solvency margin has gradually decreased over at least the last 5 years before the due date. The Ministry may authorise the early repayment of such debts on condition that the issuing insurance undertaking so requests and that its available solvency margin does not fall below the required level,
(c) the five-year notice period shall be respected for debts without a specified maturity; This shall not apply where such debts are no longer considered as an component of the available solvency margin or where prior approval by the Ministry is explicitly required for early repayment. In the latter case, the insurance undertaking must notify the Ministry at least 6 months before the proposed date of repayment, indicating the available and required solvency margin before and after repayment. The Ministry shall allow repayment only if the available solvency margin of the insurance undertaking is not below the required level,
(d) the credit agreement must not contain provisions under which, in certain circumstances, except the liquidation of an insurance undertaking, the debt becomes due before the agreed maturity date;
(e) the credit agreement may be amended only if the Ministry does not object to the change.
(5) Securities without a specified maturity may be included in other items provided that:
(a) they cannot be repaid on the initiative of the holder or without the prior consent of the Ministry;
(b) the issue contract allows the insurance undertaking to defer payment of interest on the loan;
(c) the creditors' claims on the insurance undertaking shall be classified in full only as those of all non-subordinated creditors;
(d) the documents governing the issue of securities contain provisions on the capacity to absorb debt losses and outstanding interest, with the assurance undertaking being able to continue its business;
(e) the amounts were actually paid up.
(6) From the sum of the items referred to in paragraph 2, the value of intangible assets which are part of the capital shall be deducted. At the request of an insurance undertaking, the Ministry may, in determining the amount of the available solvency margin, also add the following items to the sum of the items referred to in paragraph 2:
(a) half of the capital outstanding;
(b) valuation differences, if they are not exceptional in nature,
(c) future gains on life insurance; and
(d) the difference resulting from non-zillmering or partial zillmering of life insurance provisions.
(7) The appropriations referred to in paragraph 2 (a) to (e) constitute a guarantee fund.
(8) For the purposes of this decree, zillmere means the time distribution of the costs associated with the creation of insurance for the whole period of insurance.
(1) The required solvency margin under Section 22 (1) of the Insurance Act is calculated separately for life insurance and for non-life insurance. The reinsurance undertaking shall calculate the required solvency margin by analogy with the non-life insurance undertaking.
(2) For life insurance, the required solvency margin shall be calculated on the basis of the results for each of the life insurance groups as defined in Annex 2 to this Regulation in the Calculation of the required solvency margin, Sections I to IV. The first result shall be calculated on the basis of insurance provisions, including any provisions resulting from active reinsurance, the second result from risk capital amounts for each contract for which the level of risk capital is positive. The risk capital is equal to the difference between the amount due in the event of an insurance loss and the life insurance provision created for the insurance contract. For those classes of insurance for which, taking into account the nature of the insurance, one of the results referred to in the second sentence cannot be calculated, only the results to which the supporting documents are based shall be counted. The required solvency margin shall be equal to the sum of all results for each class of life insurance as defined in the first sentence. The procedure for calculating the required solvency margin in life insurance is set out in Annex 2 to this Order.
(3) In non-life insurance, the required solvency margin shall be calculated separately from the amount of premiums written, including any premiums, and separately from the cost of insurance premiums for the non-life insurance business, including any cost of reinsurance business. The required solvency margin shall be equal to the higher of the values calculated in accordance with the first sentence. The procedure for calculating the required solvency margin in non-life insurance is set out in Annex 2 to this decree.
Solvency shall be reported by the insurance undertaking to the Ministry in writing and at the same time in electronic form in accordance with the model of solvency reporting set out in Annex 2 to this Regulation. The forms shall be sent by the Ministry to the insurance undertaking by electronic means. The comment on the model of the solvency report is set out in Annex 3 to this Decree.
(1) An adjusted calculation of the solvency of an insurance undertaking which carries out a participation in at least one insurance undertaking or reinsurance undertaking, a bank, a savings or credit cooperative, an electronic money institution or a securities dealer (hereinafter referred to as "associated financial person") resulting in an adjusted solvency margin for that insurance undertaking (hereinafter referred to as "holding company") is to be recorded as a two-item calculation. The first item is the sum of the available solvency margin of the insurance holding company and of the corresponding solvency ratios of the related financial entities that are insurance or reinsurance undertakings and of the corresponding equity values of the related financial entities that are not insurance or reinsurance undertakings. The second item is the sum of the book values of the individual shares of the insurance holding company in the related financial entities on the date of drawing up the financial statements and required solvency margin of the insurance holding company and of the corresponding amounts of the required solvency ratios of the related financial entities that are insurance or reinsurance undertakings and of the corresponding capital requirements of the related financial entities that are not insurance or reinsurance undertakings. The adjusted solvency margin of the holding undertaking is equal to the difference between the two items.
(2) In the case of an insurance undertaking which is an insurance undertaking with a mixed activity, the sum of the available rates calculated separately for life and for non-life insurance shall be considered as available solvency margin for the purpose of the adjusted solvency calculation. Similarly, the sum of the required solvency ratios calculated separately for life and for non-life insurance shall be considered as the required solvency margin.
(3) The adjusted solvency calculation procedure and the reporting method are set out in Annex 4.
Transitional provision
The insurance undertaking shall adapt its activities in such a way that the limits referred to in Article 4 (2) (d) are reached no later than 60 days after the date of entry into force of this Decree; until the time of adaptation is governed by the existing rules.
Repeal
The following shall be deleted:
1. Decree No. 75 / 2000 Coll., implementing Act No. 363 / 1999 Coll., on Insurance and on the Amendment of Certain Related Acts (Insurance Act).
2. Decree No. 294 / 2003 Coll., amending Decree No. 75 / 2000 Coll., implementing Act No. 363 / 1999 Coll., on Insurance and amending certain related acts (Insurance Act).
Efficacy
This decree shall take effect on the day of its publication.
Minister:
Sobotka v. r.
Příloha č. 1
Annex No 1 to Decree No 303 / 2004 Coll.
Procedure determining the amount, the creation and drawing of the equalisation reserve
(1) The amount of the equalisation reserve shall be determined in accordance with the formula:
T = T1 +... + Tn,
where
i is the relevant non-life insurance sector, i = 1,..., n;
This is the creation of a balancing reserve for the relevant sector as determined in accordance with point (2);
T is the total creation of the equalisation reserve.
(2) Calculation of the amount of the equalisation reserve formation
(a) Where they apply:
ERPsi + Si * PBi ≤ Mari,
where
Mari is the maximum level of the equalisation reserve for the ith sector;
ERPsi is the initial position of the buffer at the beginning of the current period;
Si is the rate for creating a buffer for the ith sector;
PBi is a net earned premium from the ith sector in CZK during the current period;
* means the numerical action of multiplication
then the amount of the equalisation reserve They calculate the formula
Ti = Si * PBi,
or
(b) If the condition referred to in (a) does not apply, then it shall be calculated from the formula
Ti = Mari - ERPsi.
(3) Calculation of the maximum threshold for the formation of the equalisation reserve
The maximum threshold for the formation of the Mari equalisation reserve is calculated using the formula
Mari = SMARi * PMi,
where
SMARi is the rate for the maximum buffer for the ith insurance sector,
PMi is the value of the maximum net earned premiums for the reference period from the ith sector in CZK.
(4) Calculation of the amount of the compensatory provision
The amount of the buffer for the ith insurance sector shall be determined as less than two variables according to the following formula:
UERi = min {(LQi - MALi) * PBi, ERPsi + Ti},
where
UERi is the amount of drawing the equalisation reserve in CZK for the ith sector;
LQi is a harmful ratio for the sector under Section 17, Section 2 of the Act;
Mali is the upper limit of the harmful ratio.
(5) Rate for the creation of the equalisation reserve and rate for the maximum buffer threshold
| Číselné označení podle přílohy č. 1 k zákonu o pojišťovnictví | Odvětví neživotního pojištění | Sazba pro tvorbu vyrovnávací rezervy Si | Sazba maximální hranice vyrovnávací rezervy SMARi |
|---|---|---|---|
| 14 | Pojištění úvěru | 0,12 | 1,50 |
| 8 | Pojištění škod na majetku jiném než uvedeném v bodech 3 až 7, způsobených požárem, výbuchem, vichřicí, přírodními živly jinými než vichřicí, jadernou energií, sesuvem nebo poklesem půdy | 0,03 | 0,20 |
| 9 | Pojištění jiných škod na majetku jiném než uvedeném v bodech 3 až 7 vzniklých krupobitím nebo mrazem | 0,03 | 0,20 |
| 15 | Pojištění záruky (kauce) | 0,12 | 1,50 |
For the creation and maximum level of the equalisation reserve in other non-life insurance sectors not listed in the table, the rate set for the insurance sector closest to the insurance sector shall be used.
(6) Upper limit of the injurious ratio for each sector
The upper limit of the Mali harmful ratio is equal to that given in the table below:
| Číselné označení podle přílohy č. 1 k zákonu o pojišťovnictví | Odvětví neživotního pojištění | Horní mez škodného poměru MALi |
|---|---|---|
| 14 | Pojištění úvěru | 0,95 |
| 8 | Pojištění škod na majetku jiném než uvedeném v bodech 3 až 7, způsobených požárem, výbuchem, vichřicí, přírodními živly jinými než vichřicí, jadernou energií, sesuvem nebo poklesem půdy | 0,65 |
| 9 | Pojištění jiných škod na majetku jiném než uvedeném v bodech 3 až 7, vzniklých krupobitím nebo mrazem | 0,65 |
| 15 | Pojištění záruky (kauce) | 0,95 |
In the case of the creation of this provision for the non-life insurance sector, which is not listed in this table, the upper limit of the harmful ratio set for that insurance sector that is closest to the insurance sector shall apply.
Příloha č. 2
Annex No 2 to Decree No 303 / 2004Sb.
Příloha č. 3
Annex No 3 to Decree No 303 / 2004 Coll.
Comments on the template Reporting of solvency
COMMUNICATION FOR CALCULATION OF SOLVENCY FOR ENVIRONMENTAL INSURANCE
1. All items in the solvency calculation are shown in thousands of CZK.
2. The results of the calculations, except for the calculation of correction coefficients, shall be rounded to the whole unit. The correction coefficients shall be rounded to two decimal places.
3. The solvency statement shall be supplemented by a separate comment containing the list and amounts of the individual items included in point 4 of Part A Other items; a nominal list of the assets and the amount of the individual items included in point 5 of Part A of the Intangible Assets where they form part of the capital; the value of the own shares held by the insurance undertaking deducted under point 1 of Part A of the paid-up capital.
4. The inclusion of the items in Part C is subject to prior written approval by the Ministry. The comments on the solvency statement for the inclusion of these items shall contain an appeal under the letter of the Ministry approving the procedure.
5. The solvency statement shall be supplemented by a detailed comment setting out the specific accounts for each item of insurance or reinsurance undertaking.
I. DISTRIBUTION OF SOLVENCY
(1) Paid-up capital - the value of the subscribed paid-up capital shall be entered after deduction of the value of the own shares held by the insurance undertaking, of class 4, of the accounting group Capital and capital funds. If an insurance undertaking includes in this item the value of the issue premium and of the accounting grade 4, the accounting group Capital and Capital Funds shall indicate in the notes its amount.
(2) Reserves which do not correspond to insurance obligations,
(2a) the legal reserve - the value of the reserve created under the Commercial Code, from account class 4, the profit group of the Funds and the economic result of previous financial years shall be reported,
(2b) other reserves and capital funds - the amount of other reserves (generated by profit), of account class 4, of the profit group of the Funds and of the economic result of past financial years and of other equity funds from account class 4, of the account group Capital and of the equity funds.
(3) Transfer of profit and loss,
(3a) non-distributed profit of past financial years - the amount of the transfer of profit from the years preceding the last financial year, after deduction of unpaid losses, from class 4, the profit accounting group of the Funds and the economic result of previous financial years,
(3b) the undistributed profit of the last financial year - the amount of the undistributed profit of the last closed financial year, minus the outstanding loss and dividends to be paid, shall be reported from class 4 of account group Economic income.
(4) Other items - the sum of the individual items shall be reported.
(5) Intangible assets transferred to share capital - the value of the long-term intangible assets transferred to share capital shall be reported.
(6) Fund for future allocations - an amount which cannot be allocated to policy holders, but which is not included under (2) and (3).
(7) Half of the outstanding capital - as approved by the Ministry, half of the value of the subscribed capital, up to a maximum of 50% of the lower value of the required and available solvency margins, of account grade 4, of the account group Capital and of the equity funds. This item may be included only if the part of the capital paid up has reached at least one quarter of that capital.
(8) Future gains on life insurance - the amount after approval by the Ministry, on request justified by the actuary responsible, the value of half of the product of the estimated annual profit and the average remaining duration of the insurance contracts, but up to a maximum of 25% of the lower value of the required and available solvency margins, and if not already included in the Valuation Differences,
8a) estimated annual profit - the average profit from life insurance over the last 5 years,
(b) the average remaining life of insurance contracts - the average remaining life of insurance contracts, if less than or equal to 6 years. Otherwise, a value of 6 years shall be used.
(9) The difference resulting from non-zillmering or partial zillmering of life insurance provisions is reported in the value agreed by the Ministry in the event that the premium reserve of normally paid insurance is not zillmetered or is zillmeted at a lower rate than the initial cost rate contained in the premium,
(a) the amount of the difference - for each contract, the difference between the amount of the zillmetered or partially zillmetered premium reserves and the amount of the reserve zillmeted at the initial cost rate included in the premium. The difference may not exceed 3,5% of the risk capital for which zillmering is possible,
9b) non-amortised cost in assets - the value of non-amortised cost of insurance contracts included in insurance assets, item Claims on direct insurance operations.
(10) Valuation differences - the amount resulting from any difference in the market value of the assets and the value of those assets entered in the accounts.
II. REQUIREMENTS FOR SOLVENCY
Section I. (death-only insurance, life-only insurance, life-insurance, life-insurance with return of insurance, marriage insurance or child-support, pension insurance)
These items do not include amounts due to any additional insurance agreed with life insurance.
A. First result
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Regulation Information
| Citation | Decree No. 303 / 2004 Coll., implementing certain provisions of the Insurance Act |
|---|---|
| Regulation Type | Order |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 14.05.2004 |
|---|---|
| Effective from | 14.05.2004 |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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