G22 - Insurance; Insurance Companies; Actuarial StudiesReturn

This paper deals with the experience of third pillar reform in the Czech Republic, executed in 2013. The core of our study is formed by a comparative analysis of newly introduced supplementary pension savings and its substitute products (investment funds, life insurance) from two main aspects: product features and distribution features. The outcomes are supported by empirical sales and population penetration of the surveyed products. The results indicate that even a pension product with a very attractive product design, such as supplementary pension savings, will be hampered by its substitutes as long as its distribution features are unattractive. This is an important lesson, particularly for the discussed European solution, the pan-European portable pension product (PEPP).

In the globalised world of the past decade, the characteristic movement of the real economy in Europe has been in the lower amplitudes of the economic cycle and has been complicated by the low effectiveness of fiscal and monetary policy tools and instability on the financial markets, which, in relation to the real economy, display features of autonomy and virtuality. The exchange rates of the euro, rouble and Czech crown display exceptional volatility, while the yields from financial instruments are at a historic minimum. These phenomena are the result of the stagnation of the European economy, a high level of indebtedness and an inability to effectively solve escalating political problems, such as military conflicts, terrorism, mass migration, economic sanctions, etc.

The authors of the article point out that economic theory has failed to yield a solid theoretical background in critical situations such as the current financial and economic crisis and the transformation of post-communist economies. Mainly the present crisis opens the question of the unsatisfactory status of economic science. While classical liberal or Keynesian concepts are failing, theorists cannot look to mathematical modelling for help. It seems that traditional concepts malfunction, and the financial market is particularly predisposed for this process. The application of mathematical models is overvalued. The article calls attention to the possible influence and adequacy of regulatory attitudes on a return to equilibrium. It seems that the part of ethics must be upgraded decidedly. The challenge for today's theoretical economists is to find a new paradigm of economic science for today's global era.

Our rapidly changing world has been challenging insurers to keep the pace. Given the qualitative changes in risk trends, the insurance industry has encountered a problem of insurability limits and shifting boundaries of the private insurance sector. The possibilities of covering enormous uncertainties, particular risks and new or modified risks are discussed in this paper. The basic problem of how the nature of risks has evolved over time and obstacles to insuring against certain risks are explained in this paper, and some innovative ways to overcome the mentioned obstacles are listed. One of the most recently discussed issues is the impact of catastrophic losses and man-made disasters since their frequency and extent have been continuously growing recently. In order to handle the rapid changes in our world and to maintain its stable position, the insurance industry has found some ways to heighten the limits of insurability, i.e., adjustments of terms and conditions, careful risk selection and pricing, reinsurance, innovations, public private partnerships, or multi-source financing of incurred losses have been used recently. However, given the more stringent regulatory requirements which are going to be implemented by 2013, capital requirements may increase and thus the capacity of the insurance industry might be reduced and the industry might have to find other solutions for heightening its capacity.

Amongst the most significant macroeconomic functions of reinsurance are the stabilizing, innovative and accumulative functions. The most important microeconomic functions of reinsurance are the protection of the cedent and the protection of the insureds. Reinsurance increases the insurance companies' capacity, diversifies their risk portfolios, allows for quantitative and qualitative broadening of the accepted risks' spectrum, strengthens their solvency and economic stability and enables them to gain necessary know-how. In the long run, reinsurance is a stabilizing factor for not only individual insurance subjects but the entire economy as well.

The paper concentrates on the description of the Czech institutions which provide credit support to small and medium-sized entrepreneurs, farmers and exporters. The paper analyses the operations of the Czech-Moravian Guarantee and Development Bank and the Support and Guarantee Agricultural and Forestry Fund. The activities of these institutions are covered in the general context of development and guarantee banking, and the European Union's Common Agricultural Policy. A separate section of the paper is devoted to the operational programs of the European Union.

The paper show the main reason for a general decline of ratings of insurance and reinsurance companies and gives several practical examples of disasters situations in the past few year, including floods in Czech Republic.
The paper also deal with some recent examples of fundamentals changes of risks cause by decesion of state administration that were not consulted with insurance companies and may cause futer deteratioration of the overall situation. The conclusion is, however, rather optimistic, the brunch is stabil and relatively safety, insurance companies behaving with utmost care.