Croatia is preparing significant changes to its insurance regulatory framework, including the introduction, for the first time, of a dedicated recovery and resolution regime for insurance and reinsurance companies, osiguranje.hr wrote quoting top representatives of the Croatian Ministry of Finance.

The Croatian Ministry of Finance has presented two legislative proposals aimed at aligning national legislation with the latest EU insurance rules: amendments to the existing Insurance Act and a new Act on the Recovery and Resolution of Insurance and Reinsurance Undertakings.

One of the most important changes is the establishment of a framework allowing authorities to intervene when an insurer encounters serious financial difficulties, following principles similar to those already applied in the banking sector. Until now, Croatia has not had a dedicated resolution regime for insurance companies.

The new legislation transposes the EU Insurance Recovery and Resolution Directive (IRRD) into Croatian law. Its objective is to provide authorities with tools to manage the failure of an insurer in an orderly manner, while protecting policyholders, beneficiaries and financial stability and limiting the need for public financial support.

The regulatory package will also introduce requirements for insurers to prepare pre-emptive recovery plans, setting out measures that could be taken if their financial position deteriorates. Resolution authorities, meanwhile, will prepare resolution plans for companies considered sufficiently important or exposed to potential failure risks.

The proposed amendments to the Insurance Act are also intended to transpose changes introduced by the revised Solvency II framework, strengthening several aspects of supervision and adapting Croatian rules to the updated EU prudential regime.

Among other areas, the changes concern supervisory powers, proportionality in applying regulatory requirements, cross-border supervision and cooperation between supervisory authorities, as well as requirements related to insurers' risk management and financial position.

The legislative changes are part of the broader EU reform of insurance regulation aimed at increasing the sector's resilience and ensuring that authorities have adequate mechanisms to address financial distress before an insurer's difficulties threaten policyholders or financial stability.

Once adopted, the new framework will significantly expand the crisis-management tools available to the Croatian insurance supervisor and bring the country's insurance regulatory architecture in line with the new EU-wide Solvency II and IRRD regimes.