XPRIMM: How do you comment on the 2015 overall results of the Croatian insurance market? What are the main opportunities and the challenges that the Croatian insurance market is currently facing?

Petar-Pierre MATEK: The main indicators such as gross-written premium and its structure show that there were some shifts in our market in 2015 in life insurance. In a nutshell, the market was primarily marked by a decrease in premium related to MTPL, increase in some non-life lines (health, kasko, other liabilities), significant increase in life premium (11%) and final preparation for Solvency II (i.e. the new Insurance Act that became effective on 1 January 2016). Total GWP increased by 1.9% as compared to 2014 whereas GWP for life insurance increased by 11.2% and non-life decreased by 2.2%.

Companies are generally well prepared for Solvency II. I am glad to be able to report that Croatian insurance companies recognized the importance of this issue from the very beginning and we have had a successful cooperation in preparatory phase (stress-test, system of governance, FLAOR and general exchange of information according to EIOPA guidelines). There are still a lot of opportunities for growth in insurance sector in general, although it is reasonable to expect that more favorable macroeconomic environment and intensive marketing activities of the industry may further improve this situation in this area.

XPRIMM: Following the market's liberalization, the MTPL tariffs fell drastically in your market, while paid claims remained on a slightly ascendant trend. How do you comment on this issue? Did this phenomenon affect the insurer's profitability or jeopardized their financial stability?

Petar-Pierre MATEK: First of all, the data you mentioned do not necessarily show that there are market problems in this area. For instance, recorded decrease for 2015 shows that market has been in the process of stabilizing (as compared to 2014). It is true that some companies whose focus was primarily on MTPL now have different type of challenges in their business operations to a certain degree. However, these companies' managements should adjust their business models to stiff competition and current business environment. It is possible that some of these companies will be forced to reduce their costs, examine some new possibilities in sales channels etc. We consider this as a part of a usual business cycle. Furthermore, needless to say, special consideration should be given to users of the services, that is, customers. In this situation, many customers benefit from the current business dynamics and not necessarily from lower prices, but from other available options such as personalized contracts, additional benefits and services related to contracts (for example, partial kasko) etc.

XPRIMM: While not being allowed to interfere with the companies' pricing policies, does the supervisory authority have any means of controlling the MTPL market's evolution in order to avoid critical situations in the market?

Petar-Pierre MATEK: We as a regulatory authority find it important that companies have sufficient premium to cover all the insurance obligations (claims, costs, technical reserves). Of course, we are interested in financial stability of the whole sector. We monitor insurance companies on a daily basis, as the risk-based supervisory approach is an integral and important part of our daily business. We have a wide range of supervisory tools available in case we notice any irregularities, depending on how serious an irregularity is.

XPRIMM: According to the available data for 2015, it seems that the Unit-Linked insurance products' popularity significantly increased last year. How do you comment this trend?

Petar-Pierre MATEK: The insurance industry is a very competitive segment of the financial services sector and companies are continuously designing new products. Of course, UL insurance products have been present on our market for a long time, although they have only recently become more recognized. The current development in interest rates, requirements related to Solvency II and increased marketing activities of insurance companies should be taken into consideration while discussing their increased visibility. So, these are not primarily demand-driven products but they are becoming more visible and are clearly aimed at a certain group of customers (i.e. clients with more knowledge of finance in general and willing to be more exposed to risks).

XPRIMM: Which are the main priorities for the Croatian supervisory authority in 2016?

Petar-Pierre MATEK: As this is the first year of Solvency II implemented in practice, we are focused on supervising insurance companies' risk assessment and risk management and reporting. Furthermore, there are other EU level acts on the horizon which, once when implemented, will have a serious impact on our market (PRIIPS, distribution directive). Our activities at EIOPA remain of great importance for us and will certainly stay in our focus. The key is to keep an eye on the market, communicate with market participants and continuously monitor changes in the legislative framework, especially at its earliest stages of drafting.