Tuesday, 14 October 2025
The Czech National Bank (CNB) has confirmed that domestic insurance companies are well prepared to handle economic or financial shocks, following the latest round of supervisory stress testing carried out this year. The findings show that the insurance sector remains financially strong, even under simulated adverse conditions.
The central bank’s review covered data from the end of 2024 and involved 17 of the largest insurers operating in the Czech market. The exercise examined how a range of challenges — from falling asset prices to natural disasters — would affect their overall financial stability. The results indicated that Czech insurers would still maintain a healthy capital buffer even if multiple risks occurred at once.
Among the factors tested, the most significant potential impacts came from a sharp drop in the value of equity investments, changes in government bond prices, and severe flooding scenarios. Despite these pressures, the CNB concluded that insurers would have enough reserves to continue operating without breaching regulatory safety margins.
The Czech National Bank carries out these supervisory checks regularly as part of its oversight of the financial system. The goal is to measure how resilient the insurance market is to unexpected developments, such as volatility in investment markets or sudden claims surges. According to the CNB, these exercises help ensure that companies remain capable of meeting their obligations to policyholders even in unfavourable economic conditions.
Industry observers welcomed the results, noting that the Czech insurance sector has remained stable despite higher interest rates, persistent inflation, and a slower economy in parts of Central Europe. Analysts say the findings reflect conservative capital management and limited exposure to high-risk assets.
The CNB’s broader financial stability reports also suggest that the country’s banking and insurance systems are generally well positioned to absorb potential shocks. While the central bank acknowledges that no test can predict every scenario, it views the overall picture as reassuring for both investors and consumers.
The next round of insurance stress testing is expected to take place in 2027 as part of the CNB’s regular two-year supervisory cycle.
Source: CTK and CNB
