Zagreb - MPs on Friday backed amendments to the Insurance Act and a new law on the recovery and resolution of insurance and reinsurance companies, aimed at boosting financial stability and improving protection for policyholders and insurance beneficiaries.
Finance Ministry State Secretary Stipe Župan said the bills would align Croatian legislation with EU acquis, strengthen the resilience of the financial system and reduce administrative burdens.
He said shareholders and creditors would bear the costs of any disruption or crisis first, followed by the insurance sector through funding arrangements, with reliance on the state budget kept to a minimum.
The COVID-19 pandemic, geopolitical shocks and growing climate and cyber risks had exposed gaps in liquidity monitoring and the management of systemic disruptions, highlighting the need to update the existing framework to ensure a timely response to market shocks, Župan said.
The proposed Insurance Act amendments would further develop prudential rules, align supervision with companies' actual risk profiles and reduce unnecessary red tape.
Key changes include higher thresholds for classifying insurers as small companies and a new category of small and non-complex insurers, in line with the principle of proportionality.
The supervisory framework would also be expanded with additional macroprudential tools to identify and mitigate liquidity risks early and safeguard the financial stability of the insurance sector.
If significant liquidity risks are identified, the Croatian Financial Services Supervisory Agency (Hanfa) will be able to require insurers to strengthen their liquidity positions. In exceptional circumstances threatening policyholders or financial stability, it may temporarily restrict or suspend dividend payments, share buybacks, bonuses and other variable remuneration.
Župan said the proposed law on the recovery and resolution of insurance and reinsurance companies would introduce, for the first time, a comprehensive and harmonised resolution framework, with Hanfa designated as the resolution authority.
Both the Social Democratic Party (SDP) and the Croatian Democratic Union (HDZ) supported the proposed legislation during the parliamentary debate.
Boris Lalovac (SDP) welcomed the fact that the proposed legislation would bring insurance company recovery and resolution plans into line with those for banks, strengthening insurers’ resilience and helping prevent potential shocks to financial markets.
He warned that a major shock had hit US financial markets two weeks earlier, when the artificial intelligence (AI) "bubble burst", causing technology companies to lose between 5% and 10% of their market value.