Improvement of the supervisory review process relating to the assessment of adequacy of reinsurance programmes

The Commission aimed at enhancing the Czech National Bank’s supervisory approach towards insurance risk mitigation techniques, including reinsurance programmes, used by Czech (re)insurance undertakings. 

Context

Reinsurance is important for the stability of (re)insurance undertakings in adverse scenarios. However, it is a complex topic and undertakings often lack sufficient capacities and expertise to make well-supported decisions. Thus, challenging reinsurance schemes within supervisory reviews is crucial. By enhancing the CNB’s ability to do so, the project aligns with the EU policy priority of building a resilient economy and ensuring financial stability across the whole financial sector.

Support delivered

Over the course of the project, the support provider gathered information about the current approach of the CNB, the local market and approaches of other national competent authorities with respect to the supervision of the use of insurance risk mitigation techniques, with a specific focus on reinsurance programmes. Based on the outcome of this extensive review, methodologies, tools, and guidance documents were created to enhance the supervisory review process, and recommendations for further development have been formulated. Furthermore, several training sessions on reinsurance have been held for the CNB’s staff.

Results achieved

By using the methodologies and tools developed over the course of the project and following-up on the action plan established by the project parties, the CNB will be able to ameliorate its capacity to prevent the building up of risks arising from the inappropriate use of insurance risk mitigation techniques, including reinsurance programmes, by supervised (re)insurance undertakings.