Hanfa Council meeting: stronger protection against earthquakes and other natural disasters in Croatia needed

At its meeting, the Hanfa Council discussed, among other things, preconditions and initiatives important for the implementation of the green transition and the development of corporate governance, climate disaster protection, future laws and regulations that will regulate the financial market and other current developments in the financial services sector.

Council members were presented with initiatives of the Ministry of Finance aimed at supporting the financial sector and other stakeholders in the green transition process and meeting the objectives set out in the European Green Deal and the Paris Agreement. Timely and adequate adjustment of the financial sector will be crucial for the success of the transition towards a sustainable economy. A common platform has therefore been set up to exchange information and encourage the contribution of the financial sector. Financial sector support will be encouraged through continuous building of the necessary administrative capacities, but also through cooperation at the global level, in particular through the activities of the European Coalition of Finance Ministers for Climate Action, and the full operationalisation of the Sustainable Financing Support Forum's activities.

Furthermore, members of the Council were made familiar with the potential damage caused by natural disasters. In the Croatian insurance market, the offer of insurance against natural disasters includes insurance against various risks such as hail, storm, flood, earthquake and subsidence. Although these insurance types are available, the proportion of their premiums remains relatively low. The earthquake risk accounts for an average of 1.2%, while flood risk makes up only 0.5% of all insurance premiums.

The European Insurance and Occupational Pensions Authority (EIOPA) has developed an online dashboard showing the level of insurance and vulnerability of European countries to natural disaster risks. Croatia ranks third in terms of insufficiency of insurance against these risks, behind Greece and Italy. Given the increasing intensity and frequency of these events, consideration should be given to mandatory natural disaster risk insurance models adopted by other EU Member States. Examples of good practices such as the French, Icelandic, Liechtenstein (Swiss) and Romanian models can serve as guidelines for raising the level of insurance in Croatia.

Members of the Council also discussed current developments on the Zagreb Stock Exchange, including turnover, listings and execution of financial instruments. Particular attention was paid toadjustments of the CDCC's business model of financial instruments accounts, in order to comply with EU market practices, which is essential for the migration of CDCC operations to European systems.

As regards the strengthening of ESG regulations, it was pointed out that the Zagreb Stock Exchange is working intensively on establishing ESG ratings and indices that will transparently assess the relative performance of issuers in terms of ESG standards. Such projects are part of the Zagreb Stock Exchange development strategy, aimed at strengthening capital market capacity in line with modern sustainability goals.

The Council also discussed participation in the Advisory Group on Market Infrastructures for Securities and Collateral (AMI-SeCo) led by the ECB, and the establishment of the National Advisory Group on Capital Markets Infrastructures, in accordance with the CNB's decision of 16 February 2024. This initiative brings together Hanfa, CDCC, CCP Smart Clear, issuers, brokers, custodians, the Zagreb Stock Exchange and credit institutions with the aim of supporting the development, implementation and operation of the T2S.

Another topic of the meeting was the importance of drafting amendments to the Companies Act with the purpose of implementing the OECD recommendations for the development of corporate governance. The discussion focused on the need for a clearer framework for authorising and verifying the authenticity of related party transactions, clarifying the rules of shareholder agreements and fostering the independence of supervisory and audit committees in companies.

_{The Hanfa Council is Hanfa's advisory body that meets regularly and provides opinions and expert and scientific advice to develop and improve supervisory practice. It consists of nine members: President of the Hanfa Board (ex officio), five members elected by representatives of supervised entities' associations at the Croatian Chamber of Economy and three members appointed by the Government of the Republic of Croatia.}