COMPENSATION FOR NON-MATERIAL DAMAGE AND ITS FINANCIAL IMPLICATIONS FOR THE INSURANCE INDUSTRY

This article firstly investigates the determination of compensation for non-material damage within the framework of Czech private law, with particular emphasis on the implications of the 2014 Civil Code reform. It critically examines the extent to which economic variables—such as average wage levels, inflation trends, and macroeconomic stability—influence the quantification of compensation, and it evaluates the broader ramifications for judicial decision-making, the insurance industry, and financial market stability. Employing an economic analysis of law, the study engages with foundational theoretical constructs, including the Coase theorem and principles of corrective justice, to advocate for the systematic integration of macroeconomic indicators into compensation assessment models. The findings highlight the pressing need for a structured, multi-tiered framework that reconciles the demands of legal certainty with the imperatives of economic rationality. Such a model would enhance the transparency, consistency, and equity of non-material damage awards while supporting sustainable legal and financial systems. In addition, the article explores the practical impact of current compensation practices on financial institutions—particularly insurance providers offering non-investment products—and their capacity to respond to economic fluctuations. It demonstrates that inconsistent or overly discretionary judicial approaches to compensation contribute to pricing volatility, distorted risk assessments, and reduced financial predictability. The study concludes by advocating for a comprehensive compensation architecture that accounts for both legal and economic dimensions, ensuring fair, efficient, and predictable outcomes for all stakeholders involved. The novelty of this approach lies in its interdisciplinary synthesis and the proposal of practical implementation tools for courts and insurers. The findings demonstrate the importance of integrating macroeconomic parameters into judicial decision-making to ensure fairness, reduce legal uncertainty, and mitigate systemic financial risks in the insurance sector.