The Croatian Actuarial Association (CAA) organised the sixth Croatian Actuarial Conference entitled “Approaching the challenges of the new environment”.
The Conference, attended by distinguished domestic and foreign insurance experts and scientists, was held on September 16th and 17th 2021 under the auspices of the Ministry of Finance and the Croatian Financial Services Supervisory Agency and, for the first time this year, under the auspices of the Ministry of Economy and Sustainable Development. The partners of the Conference were the Croatian Chamber of Commerce and the Croatian Insurance Bureau.
Introductory speeches were given by the President of CAA, Ms. Lidija Pecigoš Višnjić, Director of the Economy and Financial System of the Ministry of Finance, Ms. Ana Zorić, Head of the Climate Policy Department of the Ministry of Economy and Sustainable Development, Ms. Višnja Grgasović, and Deputy President of the Croatian Financial Services Supervisory Agency, Ms. Ilijana Jeleč.
After thanking all sponsors, partners and lecturers, Ms. Pecigoš Višnjić pointed out that the focus of this year’s Conference is two key topics, namely climate change and the role of the insurance industry and the actuarial profession in the new environment of risk perception and implementation of the new accounting standard IFRS 17. which has been intensively in preparation for some time.
Ms. Zorić stressed the importance of continuous adaptation to new situations and the need for exchange of knowledge and skills for the development of the financial industry and public administration, with this Conference being an example of that. She also referred to the future challenges facing the industry, the process of introducing the Euro as a currency in Croatia and the implementation of the National Recovery and Resilience Plan, which focuses on the implementation of 76 reforms and 146 investments. The European Union has allocated 6.3 billion euros to Croatia for these developments, which is almost 12% of Croatian GDP.
“Climate changes are already happening today, so we need to build a more resilient tomorrow,” said Ms. Višnja Grgasović at the beginning of her introductory speech. She warned that the impact of climate change is so widespread that our response to it must be systematic. This requires the cooperation between the private and public sectors in order to achieve smarter adaptation to climate change through improved knowledge and management of the uncertainty. Ms. Grgasović emphasized the importance of promoting insurance against natural disasters in order to reduce economic and social losses, but also the importance of developing national disaster insurance programs that will encourage users to invest in adaptation.
In the second part of her introductory speech, Ms. Grgasović referred to the second goal of the EU climate policy, the reduction of greenhouse gas emissions in the transition of society to low carbon development. It is necessary to cooperate with the business world in order to achieve the greatest possible effect in reducing emissions, with the use of innovative financial instruments with limited available financial resources.
In her presentation, Ms. Jeleč referred to the period behind us and gave an overview of the next period. She presented the trends in gross written premiums, which show that the total gross written premium of the market in 2020 remained at the level of the previous year, while in 2021 motor liability insurance is the main driver of the recovery of non-life insurance premiums. The effects of the Covid-19 crisis and the long period of low returns are visible in the negative premium trends in life insurance, but there is still a slight recovery in 2021.
Ms. Jeleč commented on the noticeable growth of liquidated life insurance claims, 18.3% in 2020, which is a consequence of the mature portfolio in which natural life insurance policies expire. The similar trend is expected in the coming periods. In the non-life insurance segment in 2020, claims paid increased by 3.9% as a result of the earthquake.
“The structure of investments of insurance companies remains dominantly focused on government bonds”, said Mrs. Jeleč and added that despite a slight diversification of the portfolio, concentration risk exposure, which intensifies the exposure to liquidity risk, remains significantly more pronounced in Croatia than in other similar EU countries.
“Suppressed life insurance profitability is one of the biggest challenges in the recent period,” said Ms. Jeleč, adding that life insurance profitability is at its lowest level since 2013, given the significant decline in premium income with a simultaneous increase in claims expenses and long-term challenge of generating adequate returns. The solvency of insurance companies remains preserved despite the crisis and above the regulatory minimum. Ms. Jeleč presented the part of the results of the stress test for years 2021 and 2022 on likely macroeconomic indicators and the result showed that, despite the simulated strong stress, insurance companies would still be stable.
Finally, Ms. Jeleč drew attention to the ESG and sustainable investments that will mark the management of insurance companies in the coming period and the introduction of the Euro as a currency in Croatia on January 1, 2023, which will have an impact on the SCR of insurance companies.
Dr. sc. Kristijan Horvath presented “Understanding the Past and Predicting the Future: Weather, Climate and Climate Change” emphasizing the importance of climate modeling using existing statistics.
Prof. dr. sc. Hansjoerg Albrecher in his lecture “On Recent Advances in Flood Risk Modeling” presented interesting achievements in flood risk assessment.
Through the lecture “Global warming and the response of the Zagreb climate”, prof. dr. sc. Ivana Herceg Bulić commented on the characteristics of the urban climate and local and global influences on it.
Christopher Genillard in his lecture “Risk Management 3.0” highlighted the challenges in managing the risks due to the climate change.
Ms. Ana Cvitan Penezić and Ms. Antonija Lovreković in a lecture entitled “Sustainable investments – steps forward” spoke about the current topic of responsible and sustainable investment.
As part of the Conference, a round table on the Climate Change topics was held, as well as, for the first time this year, an online Pub quiz.
Prof. Ermanno Pitacco opened the second day of the Conference with a lecture “Revisiting annuities” where he stressed the need to revise life annuities. After his lecture, several other experts discussed some key topics related to the implementation of the new accounting standard IFRS 17, which was the main topic of the second day of the Conference. In the lecture “IFRS 17 and reinsurance”, Imrich Lozsi spoke about the calculation of reinsurance within IFRS 17, while Arkadiusz Kramza in presentation “IFRS 17 and risk adjustment” spoke about the adjustment reflecting the risk and explaining the possibilities how to calculate it.
Kristoffer Bork spoke about the curves for IFRS17 in his lecture “IFRS 17 and interest rate curves”, while Roger Gascoigne Measuring in his lecture “Performance under IFRS 17 – the numbers might be “right” but what will they actually mean“ tried to explain what will IFRS 17 change in the insurance world and how the newly obtained results should be interpreted.
The Conference was closed by Valentina Car, Jasna Komljenović Lončar and Marjana Rajić with the topic “IFRS 17 and the Croatian market”.
The Conference was moderated by Snježana Bertoncelj. The gold sponsor of the Conference was “Croatia osiguranje”, the silver sponsors were “Hrvatsko mirovinsko osiguravajuće društvo”, “Uniqa osiguranje” and “Merkur osiguranje”, while the media sponsors were “Osiguranje.hr” and “Svijet osiguranja”.