The ninth Croatian Actuarial Conference entitled “In the Company of Artificial Intelligence” was held on December 11 and 12, 2024 in the hotel “Dubrovnik”. The conference was organized by the Croatian Actuarial Association (CAA).
Mrs. Lidija Pecigoš Višnjić, president of the Croatian Actuarial Association, opened the conference by thanking the sponsors, the Ministry of Finance and the Croatian Financial Services Supervisory Agency (Hanfa), and the partners, the Croatian Chamber of Economy and the Croatian Insurance Bureau.
The welcoming speech was also joined by Dr. Ante Žigman, President of the Board HANFA, who, along with an overview of trends in the insurance market and actualities in the regulatory environment, immediately emphasized the significant role of actuaries as a factor in the stability of insurance companies.
After reviewing the macroeconomic environment characterized by a stable economic growth, a continued decline in the inflation rate, and an improvement in the Credit rating of the Republic of Croatia to a historic high, Dr. Žigman presented the insurance market indicators. In 2023, a 7.1% increase in the premium of the total insurance market was noted thanks to the growth of the non-life insurance segment of 13.9%, while the life insurance segment saw a decline of 15% compared to 2022. In 2024, there is an increase in premiums in both insurance groups, but there is still significant dominance of non-life insurance within the premium structure, contributed by the higher prices due to high inflation rates as well as increasing number of insured vehicles.
Presenting an interesting comparison of technical provisions movements under Solvency II and IFRS17, Dr. Žigman went on to emphasize the stability of solvency positions in the Croatian insurance market, which was contributed by the conservative approach of the Croatian market when calculating solvency capital requirements on the basis of the standard formula.
Unfortunately, low insurance penetration, which is far below the average of developed countries, remains a challenge for the Croatian financial market, and the growth in insurance density is primarily a consequence of negative demographic trends in Croatia. Very low insurance penetration, together with high exposure to natural catastrophe risks, results in a high underinsurance against natural catastrophe risks in the Republic of Croatia.
The long-awaited revision of the Solvency II Directive, which is expected to be adopted in 2025 and implemented as from 2027, is likely to affect many actuaries.
Actuaries can also expect increased attention from the regulator on the use of new technologies. In doing so, Dr. Žigman emphasized the protection of personal data as a challenge when using them, especially when using open-source systems.
Mrs. Ana Zorić, Director of the Directorate for Economy and Financial System at the Ministry of Finance, draw attention to the importance of promoting the concept of sustainability in the financial industry during her lecture on ESG. After highlighting examples that underscore the importance of sustainability, Mrs. Zorić presented the development of the European Union’s green deal policy, emphasizing the recovery and resilience mechanisms as a strong tool, which Croatia is utilizing to a great extent. Mrs. Zorić also stressed that the mentioned sustainability requirements should be used as an advantage, aiming to attract consumers for whom sustainability can be a decisive factor when choosing products.
Mr. Esko Kivisari provided a detailed insight into certain technologies, explaining the risks each technology brings and how the European Union’s legislative framework, primarily through the Artificial Intelligence Act, addresses these risks. He highlighted that actuaries must be aware of and document where and how they use artificial intelligence in the upcoming period. In addition, he presented ways to mitigate the associated risks. Importance of responsible, practical, and economical use of artificial intelligence, as well as the involvement of leadership positions are the key elements when using artificial intelligence.
The lecture concluded with an intriguing statement that artificial intelligence will not replace actuaries, but actuaries who do not use and understand artificial intelligence will certainly be replaced.
Why is “artificial intelligence” referred to in quotation marks? In a thought-provoking lecture, Mr. Dražen Lučić, Head of the Information Security Department at the Croatian Chamber of Economy, posed this question. Through an exploration of sometimes alarming applications of artificial intelligence, Mr. Lučić encouraged participants to engage in critical thinking and to approach the use of new technologies with a sense of responsibility.
By presenting advanced, and at times ethically questionable, examples of artificial intelligence in use, Mr. Tvrtko Tadić initiated a panel discussion on the intersection of artificial intelligence and insurance. Mrs. Iva Ivanković highlighted findings from EIOPA’s research, revealing that at least 50% of insurance companies are currently utilizing artificial intelligence in non-life insurance, around 30% in life insurance, while regulators are also beginning to adopt new technological solutions.
Mrs. Ivanković outlined several areas where artificial intelligence is being applied in the insurance sector, including claims management, insurance distribution, fraud detection, CRM, and risk acceptance. Mr. Zvonimir Matić forecasts that pricing will become a more prominent area of artificial intelligence application in the future. Mr. Lučić, however, emphasized the significant challenge posed by excessive regulation, which he believes is hindering the adoption of innovative technologies.
Pavel Zimmerman provided a more technical perspective, introducing participants to more advanced concepts, such as boosting, gradient boosting, and XG-Boost, using familiar examples. He also discussed the practical applications of these methods. XG-Boost, he noted, could potentially replace Generalized Linear Models (GLMs), suggesting that actuaries using such models will likely focus more on XG-Boost techniques in the future.
The first day of the conference concluded with an engaging presentation by Sven Ebert, who explored the relationship between demographics and inflation, emphasizing their significant impact on the insurance industry.
On the second day of the conference, Mrs. Ivana Mintas Kos delivered an interactive and insightful lecture titled “How to Assertively Set Personal Boundaries and Say No.” Through concrete business examples, she demonstrated how establishing clear boundaries at work can improve productivity by prioritizing tasks, reducing overload, minimizing conflict, and ultimately enhancing professional development through mutual respect. Mrs. Mintas Kos further emphasized the importance of assertive communication and the use of “I” statements, which allow individuals to express their thoughts and feelings clearly and respectfully, while maintaining a balance of respect for both themselves and others.
Mrs. Suzana Dumančić, Head of the Actuarial Analysis Department at Hanfa, provided a regulatory perspective on the implementation of IFRS17. She highlighted the main challenges faced by insurers, including obtaining data at the required granularity, developing systems to support complex models, and fully understanding the standards, which is made more difficult by the lack of detailed guidelines, human resource limitations, and the inherent complexity of the standards. She emphasized the introduction of the Contractual Service Margin (CSM) and the adjustments for non-financial risk (RA) as key components for providing a more accurate representation of the economics of insurance contracts in financial statements. Mrs. Dumančić also announced plans to focus on the quality of collected data, refining reporting templates, and working on market indicators in 2025.
Mrs. Tončica Topić offered a stochastic perspective on the chain-ladder method as part of a broader discussion on stochastic modelling for non-life insurance reserves. She emphasised the importance of considering not only the mathematical model but also the insights provided by the underlying data. Mrs. Andreja Vlahek Štrok, in her presentation, illustrated how the quantile method and the cost-of-capital method can be used to assess the uncertainty of cash flows in the context of IFRS17.
The conference concluded with presentations on pension insurance by Mr. Damir Bakić and Mrs. Ksenija Sanjković. Mr. Bakić provided a comprehensive overview of pension insurance from multiple perspectives, stressing the need for continued refinement of the Mandatory Pension Funds Act, particularly in areas such as basic pensions. He also addressed the topic of pension indexing, commenting on the regulators’ cautious stance toward proposals for greater flexibility in payout programs, which require higher levels of financial literacy but aim to better protect users from specific risks. In her presentation, Ms. Sanjković expanded on other actuarial parameters affecting pension amounts, such as mortality tables, interest rates, pension adjustment rates, inflation, and investment returns, shifting the focus from benefits to the surplus derived from investments of assets that cover technical reserves.