Supervisory Review Process
Hanfa conducts supervision in accordance with the Act on the Croatian Financial Services Supervisory Agency, the Insurance Act and other regulations governing the business operations of the following supervised entities:
- insurance companies, reinsurance companies with their registered offices in the Republic of Croatia and their branches in the Republic of Croatia and outside it
- mutual undertakings with their registered offices in the Republic of Croatia and their branches in the Republic of Croatia and outside it
- insurance agencies, insurance and reinsurance brokerage companies, insurance representation crafts, authorised insurance agents and authorised insurance and reinsurance brokers in the Republic of Croatia and their branches in the Republic of Croatia and outside it
- insurance or reinsurance groups
- insurance or reinsurance pools
- national insurance bureau
- holders of qualifying holdings in the insurance company and persons having close links to the insurance company or persons performing outsourced activities or key functions for the insurance company
- third-country insurance companies, which conduct insurance business in the Republic of Croatia through a branch
- certified actuaries
- service provider performing outsourced activities or a function
- other legal and natural persons, which Hanfa has the right to supervise pursuant to the Insurance Act
- the Financial Agency, the Croatian Post and investment firms and credit institutions when conducting insurance representation business
- insurance companies and reinsurance companies from other Member States that pursue the insurance business under the right of establishment or the freedom to provide services in the territory of the Republic of Croatia
- legal and natural persons performing the insurance representation activities or insurance and reinsurance brokerage activities under the right of establishment or the freedom to provide services in the territory of the Republic of Croatia
- persons having close links with an insurance company, if this is necessary for the purposes of supervising the insurance company’s operations.
Supervision is based on a prospective (forward-looking) and risk-based approach, and it constitutes verification on a continuous basis of whether supervised entities operate in accordance with the Insurance Act and other regulations, risk management rules, internal by-laws and standards, professional rules and whether they operate, in general, in a manner that ensures the proper functioning of the insurance company, and the implementation of measures and activities to remove the identified illegalities and irregularities.
Hanfa may give written recommendations to supervised entities in order to improve their business operations, financial stability and position or to reduce risks to which they are exposed or may be exposed.
Hanfa shall, in the exercise of its powers, in particular in emergency situations, duly consider the potential impact of its decisions on the stability of the financial systems in the European Union, taking into account the available information.
During supervision, Hanfa shall in particular:
- verify the system of governance, the strategies, policies, processes and reporting procedures which are established by the insurance company to comply with the provisions of the Insurance Act and other regulations
- verify and assess the financial stability and the financial position of the insurance company and the risks to which the company is exposed or could be exposed in its business operations
- verify the state of solvency of the insurance company, the establishment of technical provisions, its assets and eligible own funds, in accordance with the provisions of the Insurance Act and other legislation
- verify the adequacy of the methods and practices of the insurance company designed to identify possible events or future changes in economic conditions that could have adverse effects on the overall financial position of the insurance company concerned
- verify the establishment of technical provisions in line with accounting regulation and assets covering technical provisions in line with accounting regulations, in accordance with the provisions of the Insurance Act and other regulations.
Such verification shall in particular include the reviews and assessments of:
- the system of governance, including the own risk and solvency assessment
- technical provisions
- solvency capital requirement and minimum capital requirement
- investment rules
- quality and quantity of own funds
- ongoing compliance of the internal model with the requirements of the Insurance Act and regulations on risk management
- ability of the insurance company to withstand possible events or future changes in economic conditions
- other information necessary for the supervision.
When verifying and assessing the financial stability and financial position and when assessing the risks to which the insurance company is exposed or could be exposed, Hanfa shall take into account the nature, scale and complexity of the risks inherent in the business of the insurance company concerned.
Supervision of insurance companies includes the appropriate combination of off-site and on-site examinations, and based on the procedure that has been carried out, Hanfa may impose supervisory measures laid down in the Insurance Act.