THE CROATIAN PARLIAMENT

2793 Pursuant to Article 88 of the Constitution of the Republic of Croatia, I hereby issue the

DECISION

PROMULGATING THE ACT ON AMENDMENTS TO THE INSURANCE ACT I hereby promulgate the Act on Amendments to the Insurance Act, passed by the Croatian Parliament at its session on 15 July 2008. Class: 011-01/08-01/110 Reg. No.: 71-05-03/1-08-2 Zagreb, 18 July 2008

The President of the Republic of Croatia

Stjepan Mesić, m.p.

ACT

ON AMENDMENTS TO THE INSURANCE ACT

Article 1

In the Insurance Act (Official Gazette 151/05), in Article 1, paragraph 1 is amended to read: "(1) This Act regulates the terms and conditions for the establishment and management of insurance undertakings and reinsurance undertakings, the conduct of internal audit, and audit of insurance undertakings and reinsurance undertakings, winding-up and bankruptcy proceedings, carrying out of insurance agency business and of insurance and reinsurance brokerage business, powers of the supervisory authority and conduct of supervision." In paragraph 3, after the words "insurance business", the words "by insurance undertakings and of reinsurance business by reinsurance undertakings" are added. Article 2 The title above Article 2 is amended to read: "Insurance undertaking and reinsurance undertaking". Article 2 is amended to read: "(1) An insurance undertaking means a legal person having its head office in the Republic of Croatia that has received authorisation from the supervisory authority to carry on insurance business. (2) A reinsurance undertaking means a legal person having its head office in the Republic of Croatia that has received authorisation from the supervisory authority to carry on reinsurance business. (3) An insurance undertaking or reinsurance undertaking may not be entered in the court register before the authorisation referred to in paragraph 1 or paragraph 2 above is obtained. (4) The words "insurance undertaking" or any derivation thereof as part of the company name or abridged company name may be entered in the court register and used in legal transactions only by the undertaking that has been granted the authorisation referred to in paragraph 1 of this Article. (5) The words "reinsurance undertaking" or any derivation thereof as part of the company name or abridged company name may be entered in the court register and used in legal transactions only by the undertaking that has been granted the authorisation referred to in paragraph 2 of this Article.

(6) By way of derogation from paragraph 4 above, the words "insurance undertaking" or any derivation thereof as part of the company name or abridged company name may be entered in the court register and used in legal transactions by another undertaking which is explicitly permitted to do so under another Act. (7) By way of derogation from paragraph 5 above, the words "reinsurance undertaking" or any derivation thereof as part of the company name or abridged company name may be entered in the court register and used in legal transactions by another undertaking which is explicitly permitted to do so under another Act." Article 3 In Article 3, paragraph 4 is amended to read: "(4) Other life assurance lines referred to in paragraph 3, point 4 of this Article shall be divided into: 1. tontine 2. assurance with paid-up sum assured 3. insurance in the case of marriage 4. insurance in the case of birth 5. the business relating to management of financial resources of mutual pension funds, which include preservation of capital or payment of minimum benefits." Article 4 After Article 3, Article 3a and the title above it are added, which read: "Reinsurance business Article 3a (1) Within the meaning of this Act, reinsurance business constitutes the conclusion and execution of reinsurance contracts, whereby the risk in excess of the retention of an insurance undertaking is transferred to a reinsurance undertaking, that is, the activities involving acceptance of the risks ceded by an insurance undertaking. (2) Unless otherwise provided by this Act, the provisions of this Act that apply to joint-stock insurance undertakings shall apply to reinsurance undertakings. (3) Within the meaning of this Act, retrocession business constitutes the conclusion and performance of retrocession contracts, whereby the risk in excess of the retention of a reinsurance undertaking is transferred to another reinsurance undertaking, that is, the activities involving acceptance of the risks ceded by a reinsurance undertaking." Article 5 In Article 4, paragraph 1, after the words "European Union", the words “and the European Economic Area" are added. Paragraph 3 is amended to read: "(3) An insurance undertaking or a reinsurance undertaking from a Member State is a legal person having its head office in a Member State which has received authorisation from the competent supervisory authority to carry on insurance or reinsurance business." After paragraph 3, a new paragraph 4 is added, which reads: "(4) Home Member State shall mean a Member State in which the registered office of an insurance undertaking and/or a reinsurance undertaking is situated." Article 6

In Article 5, paragraphs 3 and 4 are amended to read: "(3) An insurance undertaking or a reinsurance undertaking from a third country shall mean a legal person established outside the territory of the Republic of Croatia and a Member State, which has received authorisation from the competent supervisory authority to carry on insurance or reinsurance business. (4) An insurance undertaking or a reinsurance undertaking from the Swiss Confederation shall mean a legal person established in the Swiss Confederation which has received authorisation from the competent supervisory authority to carry on insurance or reinsurance business." Article 7 The title above Article 8 and Article 8 are deleted.

Article 8 In Article 10, after paragraph 9, new paragraphs 10 and 11 are added, which read: "(10) Within the meaning of this Act, related persons shall also be deemed to be the persons between whom there are close links. Close links means a relationship in which: 1. two or more natural or legal persons are linked by participation relationship pursuant to Article 9, paragraph 1 of this Act, or 2. two or more natural or legal persons are linked by control relationship pursuant to the provisions of Article 175, paragraph 2 of this Act, or a similar relationship between a natural or legal person and an insurance undertaking, or 3. two or more natural persons are permanently linked to one and the same person by a control relationship. (11) Parent undertaking shall mean a legal person which exercises a dominant influence over another legal person. A subsidiary shall mean a legal person over which a parent undertaking exercises a dominant influence. All subsidiaries of a subsidiary shall be deemed to be subsidiaries of a parent undertaking." Article 9 In Article 12, paragraph 2 and paragraph 3, after the words "insurance activities", the words "and reinsurance activities" are added. Article 10 In Article 15, paragraph 3, the word "insurance" shall be replaced by the word "reinsurance". Article 11 In the title above Article 16, after the words "insurance undertakings", the words "or reinsurance undertakings" are added. In Article 16, paragraph 8, the word "insurance" shall be replaced by the word "reinsurance". Article 9 shall be amended to read: "(9) A reinsurance undertaking shall carry on reinsurance business as an exclusive activity." Article 12 In Article 19, after paragraph 1, a new paragraph 2 is added, which reads: "(2) The share capital funds shall not originate from loans or credits nor be encumbered in any way."

Article 13 In Article 21, paragraph 2, the number "33%" is replaced by the number "30%". Paragraph 3 shall be amended to read: "(3) If a holder of a qualifying holding intends to dispose of his shares, which would result in the holding being reduced below the threshold for which he has obtained approval, the person in question must inform the supervisory authority thereof." In paragraph 5, a new sentence is added, which reads: "Where two or more applications for approval of a takeover or of an increase in the qualifying holding for the same insurance undertaking are submitted to the competent supervisory authority, the applications shall be treated in a non-discriminatory manner." After paragraph 7, a new paragraph 8 is added, which reads: "(8) On an exceptional basis, a holder of a qualifying holding from a Member State is not obliged to notify reaching of the 30% threshold in the case when he registers for acquisition of 33% of the holding. In addition to that, a holder of a qualifying holding from a Member State is not obliged to notify reduction in the holding down to the threshold of 30% in the case when he has notified reduction down to 33% of the holding." Article 14 In Article 22, paragraph 1, after the words "Article 59", the words "paragraph 1" are added. In paragraph 6, after the word "submission", the words "of a complete" are added, and the Croatian word translated as "deemed" is replaced by another Croatian word, with no relevance to the English translation. After paragraph 7, a new paragraph 8 is added, which reads: "(8) The competent supervisory authority may reject the application for issue of the approval to acquire a qualifying holding only in the case when there are justifiable reasons for the rejection based on the requirements set out in Article 23, paragraph 5 of this Act or if the information submitted by the company that is taking over an insurance undertaking is incomplete." Article 15 In Article 23, paragraph 2, the number "33%" is replaced by the number "30%". After paragraph 4, a new paragraph 5 is added, which reads: "(5) In order to ensure that an insurance undertaking operates in accordance with Article 17 of this Act and to maintain financial stability of the undertaking being taken over or merged, at the time of a merger or a takeover, the following considerations should also be taken into account: 1. business reputation of the company which is taking over or merging with the insurance undertaking in question; 2. business reputation and experience of the persons who will manage the insurance undertaking that is being taken over or merged; 3. financial stability of the company which is taking over or merging with the insurance undertaking in question; 4. whether the insurance undertaking will be able to continue to operate in accordance with this Act and, in particular, whether the insurance group, of which the insurance undertaking will become member, will have the structure that will make it possible for the insurance undertaking to exercise an effective supervision, enable efficient exchange of information among the competent supervisory authorities and define distribution of competences among the competent supervisory authorities;

5. prevention of possible money laundering or financing of terrorism through the takeover or merger with the insurance undertakings in question." Article 16 After Article 23, a new Article 23a and the title above it are added, which read: "Mutual co-operation among competent supervisory authorities in deciding on the application for issue of approval to acquire a qualifying holding Article 23a (1) The competent supervisory authorities shall fully co-operate when deciding on the application for issue of approval to acquire a qualifying holding if the qualifying acquirer is: a) a credit institution, an insurance undertaking, a reinsurance undertaking, an investment firm, a management company of open-end investment funds with public offer authorised by another Member State or operates in a sector other than that in which the intention of a merger or a takeover has been declared; b) the parent undertaking of a credit institution, an insurance undertaking, a reinsurance undertaking, an investment firm or a management company of open-end investment funds with public offer authorised by another Member State or operates in a sector other than that in which the intention of a merger or a takeover has been declared; c) a legal or natural person that controls a credit institution, an insurance undertaking, a reinsurance undertaking, an investment firm or a management company of open-end investment funds with public offer authorised by another Member State or operates in a sector other than that in which the intention of a merger or a takeover has been declared. (2) The competent supervisory authorities shall, without delay, exchange the necessary information in order to take a decision on the application referred to in paragraph 1 of this Article. The aforementioned exchange of information shall be provided upon a written request." Article 17 After Article 24, a new Article 24a and the title above it are added, which read: "Qualifying holdings: powers of the supervisory authority Article 24a If the supervisory authority establishes that the person who has acquired a qualifying holding in the insurance undertaking has an adverse influence on the latter, which is incompatible with the operating principles of the insurance undertaking in question, the supervisory authority is authorised to impose an appropriate measure so as to put an end to such actions, including suspension of exercise of his/her/its voting rights at the annual general meeting of the insurance undertaking." Article 18 In Article 25, paragraph 1, the words "of the board of directors" are inserted after the word "members". Paragraph 2 is amended to read: "(2) The procurator may represent the insurance undertaking only together with at least one member of the board of directors." Article 19 After Article 25, a new Article 25a and the title above it are added, which read:

"Management board and executive directors of an insurance undertaking Article 25a (1) An insurance undertaking may stipulate, by virtue of articles of association, that it will have a management board instead of a board of directors and a supervisory board. (2) Members of the management board shall meet the requirements set out in Articles 26 and 27 of this Act. (3) An insurance undertaking shall have at least two executive directors who represent the joint-stock insurance undertaking jointly. (4) Executive directors may not be members of the management board. (5) At least one executive director must have a good command of the Croatian language and have permanent residence in the Republic of Croatia. (6) Unless otherwise provided by this Act, the provisions of this Act that apply to the board of directors or the supervisory board of an insurance undertaking shall apply accordingly to executive directors or the management board of an insurance undertaking." Article 20 In Article 27, paragraph 1, after the third subparagraph, the new fourth paragraph is inserted, which reads: "- the candidate has never been relieved of his/her duties as member of the board of directors of an insurance undertaking by the order of the supervisory authority referred to in Article 162, paragraph 3 of this Act,". The former fourth and fifth subparagraphs become fifth and sixth subparagraphs. After paragraph 2, a new paragraph 3 is added, which reads: "(3) In addition to the requirements referred to in paragraph 1 of this Article, the member of the board of directors of an insurance undertaking may not be a person in whose respect the supervisory authority refused to issue approval to assume the position of a member of the board of directors, and the person in question shall be subject to such restriction for a period of at least one year from the date of issuance of the decision to refuse issuance of approval to assume the position of a member of the board of directors." Article 21 In Article 28, paragraph 4, a new sentence is added, which reads: "When taking the decision on issuance of the approval referred to in paragraph 1 of this Article, the supervisory authority shall also take into account business reputation and financial stability of the company with which the candidate for a member of the board of directors of the joint-stock insurance undertaking was employed, as well as business reputation and experience of the candidate." Article 22 In Article 31, paragraph 3, the words "and if the supervisory authority has imposed additional measures with a view to applying the risk management rules referred to in Article 162, paragraph 3 of this Act," are inserted after the words "employment contract". Article 23 In Article 32, paragraph 1, points 1 and 2, the Croatian words translated as "who is" are added at the beginning of the text, with no relevance to the English translation. In paragraph 3, the words "point 2 of" are deleted.

Article 24 In Article 33, paragraph 1, after point 2, new points 3 and 4 are added, which read: "3. a person who has not been relieved of his/her duties as member of the board of directors of an insurance undertaking by the order of the supervisory authority referred to in Article 162, paragraph 3 of this Act; 4. a person to whom the supervisory authority has not refused issuance of approval to assume the position of a member of the board of directors during a period of at least one year from the date of issuance of the decision by which the approval to assume the position of a member of the board of directors was refused." Article 25 In Article 35, paragraph 1, point 2, the words "referred to in Article 12 of this Act" are added after the words "supervisory authority". In paragraph 3, new point 3 is added, which reads: "3. termination of the duties in the capacity of the member of the board of directors of an insurance undertaking, within three days of the date of expiry of the term of office or termination of the duties in the capacity of the member of the board of directors." Article 26 In the title above Article 38, the words "and supervision" are added after the words "Setting-up". In Article 38, new paragraphs 3, 4 and 5 are added, which read: "(3) An application for issuance of authorisation to set up a mutual insurance undertaking shall be accompanied by: 1. contract concerning setting-up of the mutual insurance undertaking; 2. articles of association in the form of a notary public’s document; 3. evidence of payment of initial capital funds; 4. contracts on outsourced business if the mutual insurance undertaking will authorise other persons to carry on certain operations. (4) The provisions of Articles 60 and 61 of this Act shall apply accordingly to decision-making regarding issuance of authorisation to carry on insurance business to a mutual insurance undertaking. (5) The supervisory authority shall apply the provisions of this Act that relate to supervision of insurance undertaking to supervision of a mutual insurance undertaking accordingly." Article 27 In Article 40, paragraph 3, a new sentence is added, which reads: "The initial capital funds may not originate from loans or credits nor be encumbered in any way." Article 28 In Article 50, paragraph 1, point 3, the word "initiated" is replaced by "opened". Article 29 In Article 58, paragraph 6, in the second sentence, the words "from the supervisory authority" are inserted after the word "authorisation". Article 30

In Article 59, paragraph 1 is amended to read: "(1) An application for authorisation to carry on insurance business shall be accompanied by: 1. a scheme of operations; 2. articles of association of the insurance undertaking in the form of a notary public’s document; 3. a list of shareholders including personal information about them, the company name and its head office, the total nominal value of shares and respective holdings, expressed as percentages, in the share capital of the insurance undertaking; 4. the shareholders which are legal persons and holders of qualifying holdings, shall submit as follows: - an extract from the commercial court registry or another equivalent register; - a joint-stock undertaking shall also submit an extract from the share register relating to the shareholder in question or an authenticated transcript of the notary public’s document showing the list of the persons present at the last annual general meeting in the case of bearer shares; - a limited liability company shall submit an extract from the register of business shares; - foreign legal persons shall submit a certified translation of the concerned documents; - financial statements for the past two financial years, whereas the foreign legal persons shall also submit certified translation of abridged financial statements; - a list of persons who are related to the holders of qualifying holdings and the description of the manner of their relationship; 5. the shareholders who are natural persons and holders of qualifying holdings, shall submit as follows: - name and surname, date of birth and address; - statement of origin of the funds to be paid for the qualifying holding in the insurance undertaking; - list of persons who are related to the holders of qualifying holdings and the description of the manner of their relationship; 6. contracts on outsourced business if the insurance undertaking will authorise other persons to carry on certain operations." Article 31 Article 62 is amended to read: "(1) Authorisation to carry on insurance business shall lapse: 1. if the insurance undertaking does not start its operations within twelve months of the date of issue of the authorisation; 2. as of the date of opening of bankruptcy proceedings over the insurance undertaking or upon issuance of the decision on withdrawal of authorisation to carry on insurance business; 3. upon issuance of the decision on dissolution of the insurance undertaking; 4. upon transfer of all insurance contracts to another insurance undertaking; 5. if the insurance undertaking no longer meets the requirements for issuance of the authorisation; 6. if the insurance undertaking was not able, within the stipulated time limit, to take measures set out in the financial recovery plan referred to in Article 106 of this Act. (2) Should any of the situations referred to in paragraph 1 of this Article arise, the supervisory authority shall take a decision establishing that the authorisation has lapsed.

(3) If the insurance undertaking does not carry on insurance business for more than six months, the supervisory authority may take a decision establishing that the authorisation to carry on insurance business has lapsed. (4) The insurance undertaking is no longer permitted to enter into new business in connection with the conduct of insurance operations in the case: 1. referred to in paragraph 1, point 1 of this Article, as from the date the decision referred to in paragraph 2 of this Article is served; 2. referred to in paragraph 1, point 2 of this Article, as from the date of announcement of the bankruptcy proceedings on the billboard of the court of bankruptcy or from the date when the decision referred to in paragraph 2 of this Article is served by virtue of which the supervisory authority decides on withdrawal of the authorisation to carry on insurance business; 3. referred to in paragraph 1, point 3 of this Article, as from the date of receipt of the decision referred to in Article 200, paragraph 1 of this Act; 4. referred to in paragraph 1, point 4 of this Article, as from the date when the insurance undertaking receives authorisation from the supervisory authority to transfer insurance contracts; 5. referred to in paragraph 3 of this Article, as from the date when the decision is served." Article 32 In Article 63, paragraph 1 is amended to read: "(1) The scheme of operations referred to in Article 59, paragraph 1, point 1 of this Act shall contain: 1. the fundamentals of the business policy; 2. a list of individual classes of insurance in which the insurance undertaking will write insurance business; 3. a forecast balance sheet and profit and loss account; 4. the calculation of the amount of the capital referred to in Article 93 and of the guarantee fund referred to in Article 100 of this Act and the items constituting it; 5. the calculation of the solvency margins (capital adequacy) referred to in Articles 98 and 99 of this Act; 6. estimates of the costs of setting up, organisation expenses and management expenses, as well as the sources of financing such costs and expenses; 7. the planned reinsurance or retrocession programme along with tables of maximum covers for all lines of business; 8. the estimated liquidity and financial resources which will be available to cover the liabilities and ensure capital adequacy; 9. a detailed projection of expected operating results for a minimum period of three years, including in particular expected premium income, expected amounts of claims and insurance premiums, expected commission expenses and other expenses, as well as estimated levels of technical provisions and reserves to be formed." Paragraph 2 is deleted. The former paragraph 3 becomes paragraph 2. Article 33 In Article 64, the full stop is deleted and the following words are added: "within eight days following the date of commencement or discontinuation of insurance operations in a line of insurance in respect of which the authorisation has been granted". Article 34 After Article 65, the title and Articles 65a, 65b, 65c and 65d are added, which read: "Promotional activities

Article 65a Promotional activities and information about insurance undertakings and the products they offer in the market shall contain clear, true and complete information based on credible data. Article 65b (1) Prior to publication, all pieces of the promotional information referred to in the preceding Article shall be submitted to the supervisory authority for approval. (2) An insurance undertaking shall be responsible for clarity, completeness and trueness of the information that is published for the purpose of promotion of the concerned insurance undertaking and its products. (3) Promotional information include all pieces of information communicated to third parties and potential policyholders through advertisements in the press, on the radio, television, through personal visits, by telephone calls, internet network and electronic media, interactive television and in any other way from which a promotion intention arises. Article 65c (1) When providing promotional information on insurance undertakings and products they offer in the market, the insurance undertakings: - shall not conceal or represent in a misleading manner the promotion purpose and the aim of the information; - shall specify a complete, accurate, clear and true description of an insurance product, statutory obligations, estimated yield and loss possibility, as well as a description of the risk arising from such a product; - shall support the facts disclosed in the information by credible evidence; - shall not state false or unverified indicators relating to the insurance undertaking, its position in the market and the products it offers; - shall make sure that all pieces of information, by their appearance, contents and form, are represented equally and consistently. (2) The success and financial indicators of the group, holding company or conglomerate of which the insurance undertaking is a member, cannot be the reason for promotion of the insurance undertaking and the products it offers in the market. Article 65d The supervisory authority shall specify additional contents of and requirements for promotional information, time limits, and the procedure for authorisation, correction of and prohibition against promotional information." Article 35 In Article 66, paragraph 2, point 3 is deleted. The former points 4 and 5 become points 3 and 4. In paragraph 3, after the words "agreement on", the word "mutual" is added. In paragraph 5, after the words "points 3", the words "and 4" are deleted, and the letter "s" in the word "points" is deleted. Article 36 Article 67 is amended to read:

"(1) Prior to commencement of insurance operations, an insurance undertaking must appoint a certified actuary and enable him/her to carry out the duties referred to in Article 68 of this Act. (2) The appointed certified actuary shall not be a person holding in the insurance undertaking the position of a member of the board of directors or procurator, or the person who has a direct or indirect holding in the insurance undertaking in excess of 1‰. (3) An insurance undertaking shall notify the supervisory authority on appointment of a certified actuary within a period of eight days. (4) If the insurance undertaking does not designate an appointed certified actuary within three months or designates, for the performance of the duties of an appointed certified actuary, a person who is not a certified actuary, an appointed certified actuary shall be designated by the supervisory authority." Article 37 In the title above Article 68, after the words "Duties of", the words "an appointed" are added. Article 68 is amended to read: "(1) In establishing whether the calculation of technical provisions is correct, an appointed certified actuary must: 1. check whether the insurance undertaking keeps the relevant data for the calculation of technical provisions, as well as their credibility; 2. check whether the methods and bases of the calculation of technical provisions are in accordance with the rules of the actuarial profession and legislation in force. (2) An appointed certified actuary shall be responsible for ensuring that insurance premiums are formed in accordance with the actuarial profession and the legislation in force, and that these are formed in such manner as to enable the insurance undertaking to cover liabilities under the insurance contracts at all times. (3) An appointed certified actuary must present to the supervisory board and the board of directors, together with the opinion enclosed with the annual report referred to in Article 143 of this Act, a report on the findings with regard to the control he/she exercised in the previous financial year pursuant to paragraphs 1 and 2 of this Article. The report must primarily cover the reasons for issue of a favourable opinion, an opinion with a reservation or an unfavourable opinion of the certified actuary that is enclosed with the annual report. (4) If, in the course of the duties referred to in paragraphs 1 and 2 of this Article, an appointed certified actuary establishes any irregularity, he/she must without delay inform the board of directors of the insurance undertaking. (5) The board of directors of the insurance undertaking shall take measures to bring the operations into line with the report by the appointed certified actuary. (6) If the board of directors of the insurance undertaking fails to take measures in accordance with the report referred to in Article 4 of this Article, the appointed certified actuary shall without delay inform the supervisory authority thereof. (7) If an appointed certified actuary is to cease to carry out that function at the insurance undertaking, he/she shall inform the supervisory authority within eight days of his/her gaining knowledge thereof." Article 38 In the title above Article 69, after the words "Dismissal of", the words "an appointed" are added. In Article 69, paragraph 1, after the word "must", the word "appoint" is replaced by the word "designate", and after the word "new", the word "appointed" is added.

In paragraph 2, after the word "fails", the words "to appoint" are replaced by the words "to designate", and after the word "new", the word "appointed" is added. Paragraph 3 is amended to read: "(3) If the insurance undertaking in the case referred to in paragraph 2 of this Article fails to designate a new appointed certified actuary, an appointed certified actuary shall be designated by the supervisory authority." In paragraph 4, before the word "certified", the words "an appointed" is inserted, and after the word "days", the Croatian words translated as "of the date of dismissal" are added, with no relevance to the English translation. Article 39 In Article 76, paragraph 1, at the end of the sentence, the full stop is deleted and the words "or the conditions set out in Article 77 and Article 78 of this Act." are added. Article 40 The title above Article 77 is amended to read: "Commencement of insurance and/or reinsurance activities in a Member State". Article 77 is amended to read: "(1) An insurance undertaking or a reinsurance undertaking that intends to establish a branch on the territory of another Member State shall notify the supervisory authority thereof. (2) The notification referred to in paragraph 1 of this Article shall contain the following information: 1. the name of the Member State on whose territory it intends to establish a branch; 2. the types of risks which it intends to insure or reinsure; 3. the scheme of operations prepared in accordance with Article 63 of this Act, which shall be accompanied by a certificate issued by a certified actuary to the effect that the concerned insurance undertaking or reinsurance undertaking is capable of ensuring the capital adequacy given the classes of insurance and the volume of business to be carried on by the branch; 4. the address of the branch in the Member State for which the documents may be obtained and to which they may be delivered; 5. the names of responsible persons at the branch and their professional qualifications. (3) On the condition that the supervisory authority does not establish, on the basis of the notification referred to in paragraph 2 of this Article, that there is a reasonable doubt about adequacy of the administrative structure or financial situation of the concerned insurance undertaking or reinsurance undertaking or about the reputation and professional competences or experience of the responsible persons at the branch, it shall submit, within three months of the date of receipt of the notification referred to in paragraph 2 of this Article, the received information to the competent supervisory authority of the Member State in which the insurance undertaking or reinsurance undertaking in question intends to establish a branch, and shall notify the concerned insurance undertaking or reinsurance undertaking thereof. (4) Along with the notification referred to in paragraph 3 of this Article, the supervisory authority shall also submit to the competent supervisory authority of the Member State: 1. a statement to the effect that the insurance undertaking or reinsurance undertaking satisfies the prescribed capital adequacy level; 2. the information on the classes of insurance for which the insurance undertaking has been granted authorisation to conduct insurance or reinsurance business. (5) If the supervisory authority establishes that there is a reasonable doubt about adequacy of the administrative structure or financial situation of the concerned insurance undertaking or reinsurance undertaking or about the reputation and professional competences or experience of the responsible persons at the branch, it shall issue, within three months of the date of receipt of the notification referred to in paragraph 2 of this Article at the latest, a decision by which it will refuse to submit the information referred to in paragraphs 2 and 4 of this Article to the

competent supervisory authority. The concerned insurance undertaking or reinsurance undertaking has the right to institute an administrative dispute against such decision. (6) Before a branch of the insurance undertaking and reinsurance undertaking commences insurance and reinsurance activities respectively, the competent supervisory authority of the Member State shall notify the supervisory authority, within two months of receipt of the information referred to in paragraphs 2 and 4 of this Article, of the conditions under which it should, in the public interest, operate in that Member State. (7) Upon receipt of the notification by the competent supervisory authority referred to in paragraph 6 of this Article or in the case that such notification is not received even after expiry of the time limit referred to in paragraph 6 of this Article, the branch may be established and the operations may be started. (8) If any of the submitted particulars referred to in paragraph 2 of this Article is changed, the concerned insurance undertaking or reinsurance undertaking shall notify thereof the supervisory authority and the competent supervisory authority of the Member State in which the branch has been established no later than one month prior to occurrence of such change, so that the competent supervisory authority of the Member State can meet its obligations in accordance with paragraphs 3, 4 and 6 of this Article. (9) A branch of an insurance undertaking may also start its operations in the field of compulsory insurance within the transport sector in a Member State under the conditions stipulated by the provisions of this Article after it submits to the supervisory authority of the concerned Member State a statement to the effect that the insurance undertaking to which the branch belongs has become a member of the national insurance bureau or the national guarantee fund of the Member State. (10) The provisions of this Article shall apply accordingly to the change of insurance classes in which a branch from a Member State wants to carry on insurance or reinsurance operations." Article 41 The title above Article 78 is deleted. Article 78 is amended to read: "(1) An insurance undertaking or a reinsurance undertaking which intends to carry on insurance or reinsurance operations in a Member State directly, shall first notify the supervisory authority in writing and shall at that time specify the insurance classes in which it is going to insure or reinsure risks. (2) Within one month of receipt of the notification referred to in paragraph 1 of this Article, the supervisory authority shall submit the notification referred to in paragraph 1 of this Article to the competent supervisory authority of the Member State in which the concerned insurance undertaking or reinsurance undertaking intends to carry on insurance or reinsurance operations directly, along with: 1. a statement to the effect that the insurance undertaking or reinsurance undertaking meets the prescribed capital adequacy level; 2. the information on the classes of insurance for which the insurance undertaking or reinsurance undertaking has authorisation to carry on insurance or reinsurance business; 3. the types of risks intended to be insured or reinsured by the insurance undertaking or reinsurance undertaking in the Member State in question. (3) The supervisory authority shall at the same time notify the insurance undertaking or reinsurance undertaking referred to in paragraph 1 of this Article that the obligation referred to in paragraph 2 of this Article has been fulfilled. (4) If the supervisory authority does not submit the information referred to in paragraph 2 of this Article to the competent supervisory authority within the prescribed time limit, the supervisory authority shall take a decision by which it will refuse to submit the information to the competent supervisory authority of the Member State in question. The concerned insurance undertaking or reinsurance undertaking has the right to institute an administrative dispute against such decision.

(5) The insurance undertaking or reinsurance undertaking may commence its insurance or reinsurance operations after it has received the notification referred to in paragraph 3 of this Article. (6) If any of the submitted particulars referred to in paragraph 2 of this Article is changed, the concerned insurance undertaking or reinsurance undertaking shall notify thereof the supervisory authority and the competent supervisory authority of the Member State no later than one month prior to occurrence of such change, so that the competent supervisory authority of the Member State can meet its obligations in accordance with the provisions of this Article." Article 42 The title above Article 79 is amended to read: "Supervision of financial operations of insurance undertakings or reinsurance undertakings and of branches of insurance undertakings or reinsurance undertakings in a Member State". Article 79 is amended to read: "(1) The supervisory authority shall supervise financial operations of insurance undertakings or reinsurance undertakings and of branches of insurance undertakings or reinsurance undertakings in a Member State. (2) The supervisory authority may request from the competent supervisory authority of the Member State in which an insurance undertaking or a reinsurance undertaking carries on insurance or reinsurance business to inspect financial operations of the branch of the insurance undertaking or reinsurance undertaking in that Member State if that is in the interest of efficiency, simplicity, speed or reduced costs of the procedure. Under the same conditions the supervisory authority may carry out inspection of financial operations, which is normally carried out by the competent supervisory authority of the Member State. (3) If an insurance undertaking or a reinsurance undertaking continues to carry on insurance or reinsurance business in a Member State after it has been warned by the competent supervisory authority of the Member State that it is violating the regulations of that Member State, the supervisory authority shall take supervisory measures pursuant to this Act. (4) The supervisory authority shall without delay notify the competent supervisory authority of the Member State concerned of the measures it is implementing. (5) If the supervisory authority withdraws authorisation to carry on insurance or reinsurance business from the insurance undertaking or reinsurance undertaking, it shall without delay notify the competent supervisory authorities of the Member States in which the insurance undertaking or reinsurance undertaking carries on insurance or reinsurance business." Article 43 In Article 81, after paragraph 3, a new paragraph 4 is added, which reads: "(4) The provisions of this Article shall not apply to reinsurance undertakings." Article 44 The titles above Article 82 are amended to read: "III.7 FREE CONDUCT OF INSURANCE OPERATIONS BY INSURANCE UNDERTAKINGS OR REINSURANCE UNDERTAKINGS FROM A MEMBER STATE Insurance undertakings and reinsurance undertakings from a Member State". Article 82 is amended to read: "(1) An insurance undertaking that has the right to carry on insurance business in specific lines of insurance in a Member State may also carry on insurance business in these lines of insurance in the territory of the Republic of Croatia either directly or through a branch.

(2) The insurance undertaking referred to in paragraph 1 of this Article or its branch in the territory of the Republic of Croatia shall be governed by the provisions of Article 3, Articles 89 to 91 and the provisions of Article 258 of this Act. (3) A reinsurance undertaking may start reinsurance operations subject to a prior approval of the competent supervisory authority. The reinsurance undertaking that has received approval from the competent supervisory authority and thereafter intends to extend its activity to other reinsurance operations for which it has not previously received approval, shall also require prior approval of the competent supervisory authority. (4) An insurance undertaking which is to establish a head office in the territory of a Member State shall also obtain approval of the supervisory authority. (5) The head office of a reinsurance undertaking from a Member State must be situated n the same state where its registered office is situated." Article 45 The title above Article 83 is amended to read: "Commencement of insurance and/or reinsurance business". Article 83 is amended to read: "(1) An insurance undertaking and a reinsurance undertaking from a Member State may start to carry on direct insurance and reinsurance business respectively in the territory of the Republic of Croatia on the date when the competent supervisory authority of the Member State from which the insurance undertaking or reinsurance undertaking comes notifies the latter that it has forwarded the information referred to in Article 78, paragraph 2 of this Act to the supervisory authority, or may start the operations in question under the conditions referred to in Article 78, paragraphs 5 and 6 of this Act. (2) A branch of an insurance undertaking or a reinsurance undertaking from a Member State may start insurance or reinsurance business in the Republic of Croatia within three months of the date when the supervisory authority receives the notification from the competent supervisory authority of the Member State referred to in Article 77, paragraphs 2 and 4 of this Act, or under the conditions referred to in Article 77, paragraphs 7 and 9 of this Act. (3) By way of derogation from paragraph 2 of this Article, if there are reasons for safeguarding the public interest, it is necessary to lay down additional requirements for the conduct of insurance or reinsurance business through a branch, and the supervisory authority shall notify thereof the competent supervisory authority of the Member State within two months and shall at the same time notify the concerned insurance undertaking or reinsurance undertaking. (4) Upon receipt of the notification from the competent supervisory authority referred to in paragraph 3 of this Article or in the case that such notification is not received even after expiry of the time limit referred to in paragraph 3 of this Article, the branch may be established and its operations may commence. (5) Paragraphs 2 to 4 of this Article shall apply accordingly to any change in the lines of insurance in which a branch from a Member State wishes to carry on insurance or reinsurance activities. (6) An insurance undertaking or a reinsurance undertaking from a Member State shall cease to carry on insurance or reinsurance business in the Republic of Croatia if any of the following situations arises: 1. the competent supervisory authority of the Member State in question has reached the conclusion that the insurance undertaking or reinsurance undertaking from the Member State concerned does not possess the prescribed capital to continue to carry on insurance or reinsurance activities; 2. the authorisation to conduct insurance or reinsurance business has lapsed; 3. the branch of the insurance undertaking or reinsurance undertaking from the Member State concerned does not satisfy the requirements referred to in paragraphs 2 to 4 of this Article. (7) By way of derogation from paragraph 1 of this Article, an insurance undertaking from a Member State may start to carry on compulsory insurance business within the transport sector only provided that the information about general and special terms and conditions of the insurance has previously been sent to the supervisory authority.

(8) Where the supervisory authority establishes that the terms and conditions of insurance referred to in paragraph 9 of this Article are not in accordance with the legislation, it shall impose a measure on the insurance undertaking from the Member State to modify the terms and conditions in line with the legislation. (9) If the insurance undertaking from the Member State does not comply with the measure referred to in paragraph 8 of this Article within the period stipulated by that measure, the supervisory authority shall inform thereof the supervisory authority which has competence over that insurance undertaking. (10) If any of the submitted particulars referred to in paragraphs 1 and 2 of this Article is changed, the concerned insurance undertaking or reinsurance undertaking shall notify thereof the supervisory authority and the competent supervisory authority of the Member State no later than one month prior to occurrence of such change, so that the competent supervisory authority of the Member State can meet its obligations in accordance with the provisions of this Article. (11) The supervisory authority is authorised to request submission of information in the Croatian language." Article 46 The title above Article 84 is amended to read: "Supervision of insurance and/or reinsurance operations carried out by insurance undertakings and/or reinsurance undertakings from a Member State". In Article 84, paragraphs 3 and 5, the words "Articles 183 to 189" are replaced by the words "Articles 158b to 158h". After paragraph 5, a new paragraph 6 is added, which reads: "(6) The competent supervisory authority of the Member State in which an insurance undertaking has a head office may itself or via the persons appointed for this purpose as agents, inspect financial operations of the branch situated in another Member State after it has first notified in writing the competent supervisory authority of the Member State in which such branch is situated." In Article 84, paragraphs 1, 2, 3, 4 and 5, after the words "insurance undertaking", the words "and/or reinsurance undertaking" in the appropriate grammatical case are added, and after the words "insurance business", the words "and/or reinsurance business" are added. Article 47 The title above Article 85 is amended to read: "Supervisory measures in respect of an insurance undertaking and/or reinsurance undertaking from a Member State". In Article 85, paragraphs 1, 2, 3, 4 and 5, after the words "insurance undertaking", the words "and/or reinsurance undertaking" in the appropriate grammatical case are added, and after the words "insurance contracts", the words "and/or reinsurance contracts" are added. Article 48 In Article 89, paragraph 1, point 8, the word "policyholders" is replaced by the words "contractual parties". After paragraph 3, a new paragraph 4 is added, which reads: "(4) In the case of insurance of legal expenses, where a lawyer is engaged or another person who has adequate qualifications in accordance with the legislation in force for the purpose of defence, representation or acting in the interest of the person insured during an investigation or legal proceedings, the person insured will be free to choose a lawyer or such other person. The person insured may choose a lawyer or, if he/she wishes so and provided it is permitted under the legislation in force, another person who has adequate qualifications to act in his/her interest whenever there is a conflict of interest." Article 49

In Article 92, a new paragraph 4 is added, which reads: "(4) The insurance undertaking shall, in the course of the following year, offset the uncovered loss from the previous year." Article 50 In Article 95, paragraph 3, at the end of the sentence, the full stop is replaced by a comma and the words "nor for the provisions for annuities under other insurance classes referred to in Article 3, paragraph 2 of this Act" are added." Article 51 In Article 96, paragraph 2, at the end of the sentence, the full stop is replaced by a comma and the words "or which, considering maturity and other features, are suitable for coverage of any losses resulting from the risks to which an insurance undertaking is exposed in the normal course of business." In paragraph 3, point 1, before the words "acquisition cost" in various grammatical cases, the word "actual" in the appropriate grammatical case is added. After paragraph 3, a new paragraph 4 is added, which reads: "(4) An insurance undertaking may include the items specified in points 1 and 2 of paragraph 3 of this Article in calculation of supplementary capital as the items by which the amount of supplementary capital is increased only subject to approval of the supervisory authority based on the relevant documents previously submitted to the supervisory authority." Article 52 In Article 98, paragraph 4, points 1 and 2, before the word "provision", the word "special" is added. Article 53 In Article 99, paragraph 3, point 2, a new sentence is added, which reads: "If the result obtained is less than 0.5, it shall be multiplied by 0.5." In paragraph 6, at the beginning of points (a), (b) and (e), missing Croatian words with no relevance to the English translation are added. After paragraph 8, a new paragraph 9 is added, which reads: "(9) On an exceptional basis, a Member State may ensure that the required solvency margin for a reinsurance undertaking, which reinsures the classes of insurance referred to in Article 3, paragraph 3, point 5 and for the classes referred to in Article 3, paragraph 3, point 2 and Article 3, paragraph 4, point 2, be determined in accordance with Article 98 of this Act." Article 54 In Article 100, after paragraph 3, new paragraphs 4 and 5 are added, which read: "(4) The amounts of the guarantee fund referred to in paragraph 3 of this Article shall be controlled on an annual basis as from the date of accession to the European Union in order to take into account changes in the European index of consumer prices which covers all Member States as published by Eurostat. The amounts shall be adjusted automatically in such manner that the basic amount of guarantee fund is increased by a percentage of the change in the previously quoted index of consumer prices which occurred in the course of the period from the date of entry into force of this provision and the date of control or once per annum and shall be rounded to the nearest multiple of HRK 750 000. If the change in the percentage since the last adjustment is less than 5%, it is not necessary to make adjustment.

(5) The Commission shall once per annum notify the European parliament and the Council about the control and adjusted amounts as set out in paragraph 4 of this Article." Article 55 In Article 105, paragraph 1, after the words "without delay", the Croatian word translated as "take" is replaced by another Croatian word, with no relevance to the English translation, and the words "that are necessary for securing" after the word "measures" are replaced by the words "in order to reach the required level of". Article 56 Article 106 is amended to read: "(1) In the case that the policyholders’ rights are threatened, the supervisory authority may require the insurance undertaking to adopt a financial plan along with proposed reorganisation measures for at least next three financial years, which must contain: 1. estimate of administration expenses, or management expenses and a comparison with the current general expenses and commissions; 2. detailed estimate of income and expenditure arising from direct insurance business and/or a detailed estimate of income and expenditure in respect of reinsurance acceptances and reinsurance cessions; 3. a draft balance sheet and draft profit and loss account; 4. the calculation of the capital amount referred to in Article 93 and the guarantee fund referred to in Article 100 of this Act; 5. calculation of the solvency margins (capital adequacy) referred to in Articles 98 and 99 of this Act; 6. estimate of the required financial resources in order to achieve the capital balance and cover all liabilities of the insurance undertaking and/or estimate of the required financial resources to achieve the capital balance and cover reinsurance liabilities; 7. reinsurance policy and/or retrocession policy. (2) The supervisory authority may require a higher level of the capital compared to that prescribed by this Act if, in its opinion, the policyholders’ rights are threatened because of the deteriorated financial position of the insurance undertaking. It shall determine the level of the capital on the basis of the financial plan including proposed measures for at least next three financial years. (3) The supervisory authority may require reduction in the value of assets of an insurance undertaking which are included in the calculation of the capital of the insurance undertaking if there has been a change in the market value of such assets. (4) The supervisory authority may require adjustment to the calculation of the solvency margin of an insurance undertaking by the amount of reinsurance and/or retrocession where the nature or quality of reinsurance and/or retrocession treaties has changed significantly compared with the previous financial year or the reinsurance and/or retrocession treaties do not enable a balanced transfer of risks. (5) Within the meaning of this Act, reorganisation measures are the measures taken with a view to maintaining or recovering the financial situation of the insurance undertaking. (6) The supervisory authority may not issue to an insurance undertaking the approval referred to in Article 70, paragraph 2 and paragraph 5 of this Act and the statement referred to in Article 77, paragraph 5 of this Act if it has required the proposal for the measures referred to in paragraph 1 of this Article. (7) If an insurance undertaking does not form assets covering technical provisions pursuant to the provisions of this Act, the supervisory authority may prohibit free sale of the assets of the insurance undertaking after the latter has submitted to the competent supervisory authority its intention to that effect." Article 57 The titles above Article 114 are amended to read: "IV.6 ASSETS COVERING TECHNICAL PROVISIONS OR MATHEMATICAL PROVISION

General provisions Assets covering technical provisions and the required coverage of technical provisions other than mathematical provision". Article 114 is amended to read: "(1) The assets covering technical provisions other than mathematical provision are those assets of an insurance undertaking intended to cover future liabilities under insurance policies written by the insurance undertaking and any losses due to the risks arising from the insurance business carried on by the insurance undertaking in respect of which the insurance undertaking is obliged to set up technical provisions other than mathematical provision. (2) An insurance undertaking shall set aside assets covering technical provisions other than mathematical provision in such manner as to ensure that the value of the assets covering technical provisions equals at least the level of the required coverage at any time. (3) In selecting the type of investment of the assets covering technical provisions other than mathematical provision, an insurance undertaking shall take account of the type of insurance business carried on in such a way as to guarantee the safety, profitability and marketability of the investment, and shall ensure that the investments are adequately diversified and spread. (4) The required coverage of technical provisions other than mathematical provision shall include provisions for unearned premiums, provisions for bonuses and rebates, provisions for claims, equalisation provisions and other technical provisions. (5) In selecting the type of investment of the assets covering technical provisions on the conditions set out in paragraph 3 of this Article, a reinsurance undertaking shall adequately respond to changeable economic circumstances, in particular to movements on financial markets and real property markets or massive disasters." Article 58 In the title above Article 115, after the word "provisions", the words "other than mathematical provision" are added. In Article 115, paragraph 1, point 15 is amended to read: "15. ownership of real property and other rights in rem in respect of real property (construction right, right of servitude): - if the ownership or other right in rem in respect of real property is registered in a land register in the Republic of Croatia in favour of the insurance undertaking; - if they are yielding a return; - if the purchase price was determined by an expert court appraiser’s appraisal, and - if they are free of any encumbrance,". Article 59 In the title above Article 116, after the word "provisions", the words "other than mathematical provision" are added. In Article 116, paragraph 2, points 1 to 11 and in paragraph 3, before the words "technical provisions", the words "the required coverage of" are added. Article 60 In Article 117, after the words "assets covering", the missing Croatian words translated as "technical provisions" are added, with no relevance to the English translation.

Article 61 In Article 118, paragraph 1 is amended to read: "(1) In the investment of assets covering technical provisions, an insurance undertaking can use forward agreements, options and other derivative financial instruments if they enable reduction in the risks referred to in Article 117, paragraph 1 of this Act or if they enable a more efficient insurance portfolio management. Valuation of such forward agreements, options and other derivative financial instruments shall be done according to the principle of prudence taking into account the assets underlying derivative financial instruments." Article 62 In Article 119, paragraph 2, the Croatian word translated as "claims" is replaced by another Croatian word, with no relevance to the English translation. Article 63 In Article 120, paragraph 1 is amended to read: "(1) The required coverage of mathematical provision shall include, in addition to mathematical provision, the provisions for unearned premiums, the provisions for claims and the provisions for bonuses and rebates." Article 64 In Article 122, paragraph 1, point 12 is amended to read: "1. ownership of real property and other rights in rem in respect of real property (construction right, right of servitude): - if the ownership or other right in rem in respect of real property is registered in a land register in the Republic of Croatia in favour of the insurance undertaking; - if they are yielding a return; - if the purchase price was determined by an expert court appraiser’s appraisal, and - if they are free of any encumbrance,". Article 65 In Article 123, paragraph 2, points 1 to 9 and in paragraph 3, before the words "mathematical provisions", the words "the required coverage of" are added. Article 66 In the title above Article 124, after the word "where", the Croatian word translated as "policyholder" is replaced by another Croatian word, with no relevance to the English translation. Article 124 is amended to read: "(1) If the rights of the policyholders under the insurance contracts are directly linked to the value of a unit of assets of a mutual or investment fund, then the investments of the assets covering the special provision formed by the insurance undertaking in respect of such assurance contracts must to the maximum extent possible comprise investments in securities which represent the units of the assets of that mutual or investment fund. (2) If the rights of the policyholders under the insurance contracts are directly linked to the change in the index of securities or other reference value, then the investments of the assets covering the special provision formed by the insurance undertaking in respect of such assurance contracts must to the maximum extent possible comprise investments in appropriate securities whose characteristics and marketability correspond to those constituting the basis for determining the index or other reference value. (3) The supervisory authority shall specify in detail the types of and restrictions on the investments of the assets covering the special provision under the lines of life assurance where the policyholder bears the investment risk

and where the rights conferred on the policyholder under the assurance contract are directly linked to the value of a unit of the assets covering the special provision. (4) In the case that an assurance contract guarantees certain payments in respect of life assurances where the policyholder bears the investment risk, it is also necessary to form a separate mathematical provision covering guaranteed benefits (e.g., coverage of the risk of death, management expenses or other risks such as guaranteed payments on maturity or guaranteed surrender values). The assets covering the aforementioned mathematical provision shall be invested pursuant to Articles 122 and 123 of this Act." Article 67 In Article 125, paragraphs 2 and 3, the Croatian word translated as "claims" in the appropriate grammatical case is replaced by another Croatian word in the appropriate grammatical case, with no relevance to the English translation. Article 68 Article 129 is amended to read: "In the case of general (obligatory) reinsurance contracts, an insurance undertaking must cover only that portion of the risks accepted which, according to the tables of maximum covers, exceed the shares in risk compensation, whereas in the case of individual (facultative) reinsurance contracts, the retention may be lower than that specified in the tables of maximum covers." Article 69 In Article 131, paragraph 3, after the words "European Union", the words "and the European Economic Area" are added.

Article 70 In the title above Article 132, after the words "European Union", the words "and the European Economic Area" are added. In Article 132, paragraph 1, after the words "European Union", the words "and the European Economic Area" are added. Paragraph 2 is amended to read: "(2) Co-insurance within the European Union and the European Economic Area shall be permitted in respect of insurance contracts and/or reinsurance contracts concerning the lines of business referred to in Article 3, paragraph 2, points 4, 5, 6, 7, 8, 9, 11, 12, 13 and 16 of this Act." Article 71 In Article 134, paragraph 1, before the word "tasks", the word "supervisory" is deleted and after the word "responsibilities", the words "of the supervisory authority" are added. In paragraph 2, point 11, after the words "Article 159", the words "and Article 106" are added. In paragraph 3, point 1, after the word "undertakings", the words "or in court or other proceedings in which the competent supervisory authority is one of the parties". Article 72 In Article 138, paragraph 1 is amended to read: "(1) Members of the insurance undertaking’s bodies, the shareholders of the insurance undertaking, the persons conducting the audit, employees of the insurance undertaking and other persons who, in the course of their duties at the insurance undertaking or provision of services for the insurance undertaking, have access in any way to the data referred to in Article 137 of this Act, are not permitted to disclose these data to third parties, use them against the interests of the insurance undertaking and its clients or enable third parties to use them." Article 73 In Article 142, paragraphs 3 and 4 are amended to read: "(3) An insurance undertaking shall submit to the supervisory authority an unaudited annual report no later than three months from the end of the calendar year in respect of which the report is drawn up. (4) A reinsurance undertaking shall submit to the supervisory authority an unaudited annual report no later than four months from the end of the calendar year in respect of which the report is drawn up."

Article 74 In the title above Article 143, after the words "Opinion of", the word "a" is deleted and the words "an appointed" are inserted. In Article 143, before the words "certified actuary", the word "appointed" is added. Article 75 In Article 147, paragraph 1, after the word "employ", the words "on full time basis" are added. In paragraph 5, after the word "undertaking", the words "or a related company" are added. Article 76 In Article 151, paragraph 4, after the word "board", the word "unaudited" is added. Article 77 In the title above Article 153, after the word "obligation", the order of the Croatian words is changed, with no relevance to the English translation. Article 78 In Article 154, paragraph 1, point 6, after the word "covering", the missing Croatian words translated as "technical provisions" are added, with no relevance to the English translation. Article 79 In Article 156, paragraph 5 is amended to read: "(5) The provisions relating to supervision of insurance undertakings shall also apply accordingly to other subjects of supervision." After paragraph 5, a new paragraph 6 is added, which reads: "(6) Within the meaning of this Act, the subjects of supervision are: an insurance undertaking, a reinsurance undertaking, an insurance group, a branch of a foreign insurance undertaking, a branch of a foreign reinsurance undertaking, insurance and reinsurance brokerage company, insurance agency firm, insurance agency trade and other legal and natural persons whose operations under this Act are supervised by the authority referred to in Article 12 of this Act." Article 80 After Article 158, a new title under Title X, new Articles 158a, 158b, 158c, 158d, 158e, 158f, 158g, 158h and the titles above them are added, which read:

"X.2a EXAMINATION OF OPERATIONS OF AN INSURANCE UNDERTAKING Authorised persons Article 158a (1) An examination of the operations of an insurance undertaking shall be carried out by an authorised employee of the supervisory authority. (2) For the purpose of carrying out examination of the operations, the supervisory authority may also authorise a certified auditor or another person qualified for the task. (3) The authorised persons referred to in paragraph 2 of this Article shall, in carrying out the examination for which they are authorised, have the same powers as those conferred on the authorised employee of the supervisory authority. Scope of examination Article 158b (1) An insurance undertaking shall allow an authorised person to examine all business books, records and other documents. (2) An insurance undertaking shall, on request of the supervisory authority, deliver computer print-outs or copies of records or of other business books and documents. (3) The members of the board of directors and employees of an insurance undertaking shall provide the authorised person, on his/her request, with reports and information on all business matters relevant to the exercise of the supervision. (4) An authorised person may also examine operations of legal persons related to the insurance undertaking if it is necessary for the purpose of a more detailed examination of the operations of the insurance undertaking. Reports and information Article 158c (1) The supervisory authority may require the subject of supervision to provide information on all business matters that are of importance, with regard to the object of a specific supervisory task, for its assessment as to whether the subject of supervision complies with the provisions of this Act or regulations adopted on the basis thereof. (2) The supervisory authority may also request the reports and information referred to in paragraph 1 of this Article from the members of the board of directors of the subject of supervision, as well as from the persons employed with the subject of supervision. (3) The supervisory authority may invite the persons referred to in paragraph 2 of this Article to draw up, within a minimum period of three days, a written report on the business matters referred to in paragraph 1 of this Article or invite them to make an oral statement about these matters. Examination of business activities Article 158d (1) The subject of supervision shall enable the authorised employee of the supervisory authority, on the latter’s request, to examine the operations at the head office of the subject of supervision, as well as at other premises at which the subject of supervision or another person authorised by it carries on the business and activities in respect of which the supervisory authority exercises the supervision. (2) The subject of supervision shall make it possible for the authorised employee of the supervisory authority, on the latter’s request, to examine business books, business documents and administrative or business records to the extent necessary to perform a specific supervisory task or to the extent stipulated by the law governing a specific supervision.

(3) The subject of supervision shall deliver to the supervisory authority, on the latter’s request, computer printouts or copies of business books, business documents and administrative or business records. (4) The supervisory authority shall make its examination of the operations in such manner as not to impede any more than is strictly necessary the normal course of business of the subject of supervision in accordance with the purpose of a specific supervisory task. Request for examination of business activities Article 158e (1) A request for examination of business activities shall be delivered to the subject of supervision at least eight days prior to the beginning of the examination of business activities. (2) By way of derogation from paragraph 1 of this Article, an authorised person may hand over the request for examination of business activities at the beginning of the examination of business activities if there was no other way to achieve the purpose of a particular supervisory task. (3) The request for examination of business activities must include the object of the supervision. (4) The request for examination of business activities must also include a legal information about legal consequences that can arise should the subject of supervision not act in accordance with the request for examination of business activities or should it not enable the supervisory authority to carry out examination of business activities in the manner provided by Article 158d of this Act. (5) The supervisory authority may, in the course of an examination of business activities, supplement the request for inspection of operations. The provisions of paragraphs 3 and 4 of this Article shall apply accordingly to the supplement to the request. Conditions for conduct of an examination Article 158f The subject of supervision shall place at the disposal of authorised employees of the supervisory authority adequate premises where they can carry out the examination of business activities without disturbance or presence of other persons. Conditions for examination of computerised business books and records Article 158g (1) The subject of supervision which processes or keeps business books and other records by means of a computer system shall, on request of an authorised employee of the supervisory authority, provide adequate technical aids for examination of business books and records and verification of certain automatically processed data. (2) The subject of supervision shall deliver to the supervisory authority the documents which show a complete description of the operation of the respective computer system. The documents must also show any sub-system and files of the computer system. The documents shall enable an insight into: 1. computer program; 2. the procedures within the scope of the computer solution; 3. the controls which ensure a correct and reliable data processing; 4. the controls which prevent an unauthorised addition, alteration or erasure of stored computer entries. (3) Any alteration to the computer programs referred to in paragraph 1 of this Article shall be documented in chronological order of the alterations, including the dates of alteration. The documents must also show any alteration to the form of files. Established non-compliances and irregularities Article 158h

If the supervisory authority establishes, in the course of its supervisory task, non-compliance with this Act or any regulation issued on the basis thereof or with any other legislative provision governing operations of the subject of supervision, it shall order, by virtue of a decision, that the non-compliances and irregularities be eliminated or impose another supervisory measure if all the requirements for imposition of such measure as provided for by this Act are satisfied." Article 81 In Article 159, paragraph 1, point 1, the Croatian word translated as "decision" shall be replaced by another Croatian word, with no relevance to the English translation. Article 82 In the title above Article 160, the Croatian word translated as "Decision" shall be replaced by another Croatian word, with no relevance to the English translation. In Article 160, paragraph 1, the Croatian word translated as "decision" shall be replaced by another Croatian word, with no relevance to the English translation. In paragraph 2, the Croatian word translated as "decision" shall be replaced by another Croatian word, with no relevance to the English translation. Article 83 After Article 160, new Articles 160a and 160b and the titles above them are added, which read: "Contents of the decision Article 160a The decision must contain: 1. an exact description of the situations of non-compliance with the Act whose elimination is required by the decision; 2. the time limit within which the subject of supervision must eliminate the irregularities and submit a report on the elimination of irregularities; 3. the manner of elimination of the irregularities in the case when the supervisory authority requires the subject of supervision to eliminate the irregularities in a specific way; 4. the documents or evidence showing that the irregularities have been eliminated in the case when the supervisory authority orders that the subject of supervision is obliged to produce specific documents or other evidence. Report by a certified auditor on elimination of irregularities Article 160b If the supervisory authority establishes irregularities in keeping of business books or administrative and other records which the insurance undertaking is obliged to keep, or establishes more serious irregularities in the operation of the insurance undertaking, it may issue a decision whereby the insurance undertaking is required to submit a report including a favourable opinion of a certified auditor showing that the established irregularities have been eliminated." Article 84 In Article 161, paragraph 1 is amended to read: "(1) An insurance undertaking shall, within the time limit referred to in Article 160, paragraph 2 of this Act, eliminate the non-compliances and irregularities that have been established and submit to the supervisory authority, within the same time limit, unless otherwise provided in the decision, a report describing the measures for elimination of non-compliances and irregularities. Any document and other evidence showing that the identified non-compliances and irregularities have been eliminated must be enclosed with the report. In the case

referred to in Article 160b of this Act, the subject of supervision must enclose with the report on elimination of non-compliances and irregularities the report by a certified auditor as well." In paragraph 2, the words "regulation in which" are replaced by the words "decision by which" and the word "186" is replaced by the word "158e". In paragraphs 3 and 4, the Croatian word translated as "decision" in the appropriate grammatical case is replaced by another Croatian word in the appropriate grammatical case, with no relevance to the English translation. In paragraph 5, the word "regulation" is replaced by the word "decision". Article 85 In Article 162, paragraph 1, in the first sentence, the Croatian word translated as "decision" is replaced by another Croatian word, with no relevance to the English translation, and in point 6, the fourth subparagraph, the word "receivables" is replaced by the word "claims". Paragraph 3 is amended to read: "(3) The supervisory authority shall, by virtue of a decision, instruct the supervisory board of the insurance undertaking to dismiss a member of the board of directors and appoint a new member or a new member of the board of directors: 1. if the insurance undertaking fails to act in accordance with the decision on elimination of non-compliances and irregularities, or 2. if the board of directors of the insurance undertaking fails to implement the additional measures referred to in paragraph 1 of this Article which have been imposed by it, or 3. if the insurance undertaking repeatedly breaches its obligation of timely and correct reporting or notification of the supervisory authority, or if it obstructs the supervision exercised by the supervisory authority." Article 86 In Article 169, paragraph 2 is amended to read: "(2) By way of derogation from the provisions of paragraph 1 of this Article, the supervisory authority shall be entitled to give to the extraordinary administrator binding instructions for reorganisation and management of the insurance undertaking. The supervisory authority shall relieve the extraordinary administrator of his/her duties if he/she does not act in accordance with the given instructions." In paragraph 4, after the words "Article 172", the words "and Article 173, paragraph 4" are added. Article 87 In Article 170, paragraphs 1 and 2, before the word "members", the word "former" is inserted. Article 88 In Article 173, paragraphs 3, 4 and 5 are amended to read: "(3) If the supervisory authority assesses that during the term of office of the extraordinary administration the financial situation of the insurance undertaking improved to such an extent that the insurance undertaking reached the solvency margin referred to in Article 98 or Article 99 of this Act and that it is capable of meeting its commitments on time, the supervisory authority shall issue a decision by virtue of which the extraordinary administration will be required to convene, within eight days of delivery of the decision, the general meeting of the insurance undertaking, which must be held within two months of delivery of that decision at the latest. (4) In the case referred to in paragraph 3 of this Article, the general meeting shall elect a supervisory board, whereby the powers of the supervisory authority referred to in Article 169, paragraph 1 of this Act shall cease. Upon receipt of the approval referred to in Article 28 of this Act the supervisory board shall appoint the board of

directors of the insurance undertaking. The powers of the extraordinary administration shall cease as of the date of appointment of the board of directors of the insurance undertaking. (5) If the supervisory authority assesses that during the term of office of the extraordinary administration the financial situation of the insurance undertaking did not improve to such an extent as to reach the solvency margin referred to in Article 98 or Article 99 of this Act or to be capable of meeting its commitments as they fall due, it may issue a decision on extension of the term of office of the extraordinary administration by a maximum period of six months if there are no conditions for submission of a proposal for opening of bankruptcy proceedings over the insurance undertaking and if the supervisory authority assesses that the insurance undertaking will reach, within the next six months, the solvency margin referred to in Article 98 or Article 99 of this Act. If the supervisory authority does not issue the aforementioned decision, it shall issue a decision on withdrawal of the authorisation to carry on insurance business, and if the reasons for opening of bankruptcy proceedings exist, it shall bring forward a proposal for opening of bankruptcy proceedings." Article 89 In Article 174, paragraph 1, before the word "supervision", the word "supplementary" is added. Paragraph 2 is amended to read: "(2) The supervisory authority shall exercise supplementary supervision of the operations of insurance groups, financial holding companies, insurance holding companies, mixed-activity insurance holding companies, mixed financial holding companies and the persons in which the insurance undertaking or reinsurance undertaking has a qualifying holding or the persons which have a qualifying holding in the insurance undertaking or reinsurance undertaking, and whose head office is in the Republic of Croatia, a Member State or a third country." After paragraph 2, a new paragraph 3 is added, which reads: "(3) The exercise of supplementary supervision of insurance undertakings or reinsurance undertakings which are owned by the same financial holding company, insurance holding company, mixed-activity insurance holding company, mixed financial holding company, insurance undertaking or reinsurance undertaking from a non-Member State, which carry on reinsurance or reinsurance business in two or more Member States, shall come within the competence of the supervisory authorities of Member States which may reach an agreement that one of the competent supervisory authorities, that is, the co-ordinator of supplementary supervision shall conduct the supplementary supervision and submit the findings thereof to other competent supervisory authorities."

Article 90 Article 175 is amended to read: "(1) Pursuant to this Act, an insurance group exists when an insurance undertaking or a reinsurance undertaking or an insurance holding company or a financial holding company or a mixed-activity insurance holding company or a mixed financial holding company with a head office in the Republic of Croatia is a parent undertaking which exercises a dominant influence over one or more insurance undertakings or reinsurance undertakings with respective head offices in the Republic of Croatia, a Member State or a third country. (2) An insurance undertaking or a reinsurance undertaking or an insurance holding company or a financial holding company or a mixed-activity insurance holding company or a mixed financial holding company shall be deemed to be a parent undertaking of an insurance undertaking or of a reinsurance undertaking within the meaning of paragraph 1 of this Article if: 1. it holds a participation pursuant to Article 9, paragraph 1 of this Act, or 2. it has a majority of voting rights in another undertaking, or 3. it has a right to appoint or dismiss the majority of the members of the board of directors or supervisory board of another undertaking, or 4. it has a right to exercise a dominant influence over another undertaking on the basis of entrepreneurial contract or on another legal basis, or 5. the majority of the members of the board of directors or supervisory board of that undertaking, who performed that function in the previous financial year and still perform it for the purpose of preparing consolidated reports, were appointed exclusively for the purpose of exercising the voting rights of the parent undertaking, or 6. it is a shareholder or partner in another undertaking and if, based on the agreement with other shareholders or partners of that undertaking, it controls a majority of voting rights in that undertaking. (3) An insurance group shall also exist in the case when an insurance holding company or a financial holding company or a mixed-activity insurance holding company or a mixed financial holding company, whose head office is in a Member State, is a parent undertaking of at least one insurance undertaking or reinsurance undertaking having a head office in the Republic of Croatia in either of the ways described under paragraph 2 of this Article. (4) By way of derogation from paragraph 2 of this Article, an insurance undertaking or a reinsurance undertaking with a head office in the Republic of Croatia which is at the same time a subsidiary undertaking of another insurance undertaking or a reinsurance undertaking with a head office in the Republic of Croatia shall not be deemed to be a parent insurance or reinsurance undertaking in an insurance group." Article 91 Article 176 is amended to read: "(1) Financial holding company shall mean a legal person: 1. other than an insurance undertaking or a reinsurance undertaking; 2. which controls at least one insurance undertaking, or 3. a reinsurance undertaking; 4. whose principal activity is acquisition or ownership of qualifying holdings, or 5. provision of other financial services. (2) Insurance holding company shall mean a legal person: 1. other than an insurance undertaking or a reinsurance undertaking, and 2. which controls exclusively or predominantly insurance undertakings and/or reinsurance undertakings among its subsidiary undertakings, whereby the criterion for determining the predominance of subsidiary undertakings shall not be their number, but the volume of their capital, the book value of holdings and other economic criteria. (3) Related reinsurance undertaking shall mean a reinsurance undertaking owned by a financial institution, other than an insurance undertaking or a reinsurance undertaking, or by an insurance group or non-financial legal person. The purpose of a related reinsurance undertaking is to provide reinsurance cover for the risks of one or more legal persons that own it or of the members of the group to which it belongs.

(4) Insurance holding company shall mean a parent undertaking, the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or predominantly insurance undertakings or reinsurance undertakings, at least one of such subsidiary undertakings being an insurance undertaking or a reinsurance undertaking, and which is not a mixed financial holding company. (5) Mixed-activity insurance holding company shall mean a legal person which is a parent undertaking, other than an insurance undertaking, a reinsurance undertaking, an insurance holding company or a mixed financial holding company, which includes at least one insurance or reinsurance undertaking among its subsidiary undertakings. (6) Mixed financial holding company shall mean a legal person which is a parent undertaking, other than a regulated entity, which together with its subsidiaries, at least one of which is a regulated entity which has its head office in the Republic of Croatia, and other entities, constitutes a financial conglomerate. (7) Mixed financial holding company shall also mean a legal person which is a parent undertaking, other than a regulated entity, which together with its subsidiaries, at least one of which is a regulated entity which has its head office in the European Union and the European Economic Area, and other entities, constitutes a financial conglomerate." Article 92 The title above Article 177 is amended to read: "Obligations of an insurance undertaking or a reinsurance undertaking in an insurance group". Article 177 is amended to read: "(1) Insurance undertakings or reinsurance undertakings constituting an insurance group shall be obliged to submit to the parent insurance or reinsurance undertaking, or insurance holding company or financial holding company, or mixed-activity insurance holding company or mixed financial holding company all data and information which it requires in order to fulfil its obligations to the supervisory authority or to another competent supervisory authority in relation to the supervision of the insurance group. (2) The parent insurance or reinsurance undertaking in an insurance group shall be responsible for fulfilment of the obligations of the insurance group as a whole. (3) The supervisory authority may require the information needed for the purpose of supervision from related undertakings of the insurance undertaking or reinsurance undertaking, participating undertakings in the insurance undertaking or in the reinsurance undertaking and related undertakings of participating undertakings in the insurance undertaking or reinsurance undertaking if the supervisory authority had requested such information from the parent insurance undertaking or reinsurance undertaking and the latter failed to produce it. (4) Insurance undertakings or reinsurance undertakings constituting an insurance group shall make sure that appropriate control procedures are in place in order to verify accuracy of the data and information referred to in paragraph 1 of this Article." Article 93 Article 178 is amended to read: "(1) In order to ensure supervision as to whether business transactions within an insurance group are performed under normal market conditions, an insurance undertaking or a reinsurance undertaking in an insurance group shall report to the supervisory authority on all significant intra-group transactions agreed or made between an insurance or reinsurance undertaking and the following persons: 1. legal persons that are subsidiaries of the insurance undertaking or reinsurance undertaking; 2. legal persons that are parent undertakings of the insurance undertaking or reinsurance undertaking; 3. legal persons that are subsidiaries of the legal persons referred to in point 2 of this paragraph; 4. natural persons participating in:

- insurance undertakings or reinsurance undertakings or legal persons in which the insurance undertaking or reinsurance undertaking participates; - legal persons participating in the insurance undertaking or reinsurance undertaking; - legal persons participating in the legal persons referred to in the second subparagraph of this point. (2) The significant transactions as referred to in paragraph 1 of this Article shall in particular be deemed to be the following transactions: 1. loans and credits; 2. guarantees and other transactions resulting in off-balance-sheet liabilities; 3. legal transactions the object of which are investments in securities, other financial instruments or real property; 5. other legal transactions influencing significantly the calculation of the capital adequacy in an insurance group; 6. reinsurance and retrocession operations; 7. cost sharing agreements. (3) The supervisory authority may, in order to verify the accuracy of the data relating to the transactions within an insurance group, examine the transactions performed by the persons referred to in paragraph 1 of this Article. (4) Member States may decide, when exercising supplementary supervision, not to take into account the legal persons referred to in Article 174 of this Act having the registered office in a non-Member State if there are legal impediments for transmission of the required information. The competent supervisory authorities may decide, when exercising supplementary supervision of the persons referred to in Article 174 of this Act, not to take into account a legal person: - which is of minor significance in relation to the objects of the supplementary supervision of an insurance undertaking or reinsurance undertaking, or - if inclusion of its legal situation in the supplementary supervision would be inappropriate or misleading in relation to the objects of the supplementary supervision of an insurance undertaking or reinsurance undertaking." Article 94 The title above Article 179 is amended to read: "Capital adequacy in an insurance group". Article 179 is amended to read: "(1) A financial holding company, an insurance holding company, a mixed-activity insurance holding company, a mixed financial holding company or a parent insurance or reinsurance undertaking in an insurance group shall be obliged to calculate capital adequacy in the insurance group and draw up financial reports on capital adequacy in the insurance group. (2) A subsidiary insurance or reinsurance undertaking shall be obliged to submit to a financial holding company, an insurance holding company, a mixed-activity insurance holding company, a mixed-activity financial holding company or a parent insurance or reinsurance undertaking in an insurance group all data required for the calculation of capital adequacy in an insurance group. (3) A financial holding company, an insurance holding company, a mixed-activity insurance holding company, a mixed financial holding company or a parent insurance undertaking or parent reinsurance undertaking in an insurance group shall be obliged to report to the supervisory authority on the capital adequacy in the insurance group. (4) The provisions of Title IX of this Act relating to the auditing of financial statements of an insurance undertaking or a reinsurance undertaking shall apply accordingly to auditing of financial reports on capital adequacy of a financial holding company, an insurance holding company, a mixed-activity insurance holding company, a mixed financial holding company or a parent insurance or reinsurance undertaking in an insurance group." Article 95 In Article 180, paragraph 1 and paragraph 2, after the words "insurance undertaking", the words "and/or reinsurance undertaking" is added.

Article 96 In Article 181, point 2 is amended to read: "2. the method of calculating the capital adequacy in the insurance group referred to in Article 179, paragraph 1 of this Act and the detailed contents of the reports referred to in Article 179, paragraph 3 of this Act and Article 180, paragraph 1 of this Act, as well as time limits and the method of reporting." Article 97 Title XII and Articles 182, 183, 184, 185, 186, 187, 188, 189, 190, 191, 192, 193, 194, 195, 196 and 197 are deleted. Article 98 In the title above Article 200, after the words "Resolution of the", the missing Croatian word translated as "general" is inserted, with no relevance to the English translation. Article 200 is amended to read: "(1) The general meeting may be convened and a decision may be adopted at the meeting on dissolution of the undertaking or on change of the activity so that the undertaking no longer carries on insurance operations subject to prior approval of the supervisory authority only. (2) The board of directors and the supervisory board of the insurance undertaking shall, prior to convening of the general meeting, apply for approval of the supervisory authority. (3) The supervisory authority shall decide on the request referred to in paragraph 1 of this Article within 30 days of the date of receipt of the request. (4) If the supervisory authority refuses its approval within the time limit specified in paragraph 3, the decision on dissolution of the undertaking or on change of the activity so that the undertaking no longer carries on insurance operations may not be adopted at the general meeting. (5) If the supervisory authority does not decide on the request within the time limit specified in paragraph 3 of this Article, the approval shall be deemed to be granted. (6) If the general meeting adopts a decision contrary to paragraph 1 and paragraph 5 of this Article, such decision shall not take effect and shall not be entered in the court register." Article 99 In Article 201, after paragraph 1, a new paragraph 2 is added, which reads: "(2) An insurance undertaking must have at least two liquidators who represent it jointly."

Article 100 In Article 202, paragraph 1 is amended to read: "(1) The board of directors or liquidators of an insurance undertaking shall notify the supervisory authority of the resolution referred to in Article 200, paragraph 1 of this Act the next business day after the date the resolution is adopted." Paragraph 3 is amended to read: (3) After the winding-up proceedings have been opened, the insurance undertaking concerned may continue to conduct only the insurance activities specified in the decision referred to in paragraph 2 of this Article and the activities that are necessary for transfer of insurance contracts to another insurance undertaking." Article 101 After Article 202, new Articles 202a and 202b are added and the titles above them, which read: "Winding-up proceedings in respect of an insurance undertaking Article 202a The provisions of the Companies Act on winding-up of a joint-stock company shall apply accordingly to winding-up proceedings in respect of an insurance undertaking, except as otherwise regulated by this Act. Obligations of a liquidator of an insurance undertaking Article 202b If the liquidators establish that there are reasons for opening of bankruptcy proceedings, they shall without delay submit a proposal for opening of bankruptcy proceedings and forthwith notify the supervisory authority thereof." Article 102 In the title of Title XIV.2 above Article 204, the word "Voluntary" is deleted. In Article 204, paragraph 2 is deleted. The former paragraphs 3 to 5 become paragraphs 2 to 4. In the former paragraph 6, which becomes paragraph 5, the Croatian word in singular form, which is translated as "liquidators", is replaced by the word in plural form, with no relevance to the English translation. The former paragraph 7, which becomes paragraph 6, is amended to read: "(6) Unless otherwise provided in paragraphs 1 to 5 of this Article, the provisions of the Companies Act relating to winding-up of a limited-liability company shall apply accordingly to winding-up of a mutual insurance undertaking." Article 103 Article 205 is amended to read: "(1) In addition to the cases specified in Article 163 of this Act, the supervisory authority shall adopt a decision on withdrawal of authorisation to carry on insurance business from an insurance undertaking in the following cases: 1. if, on the basis of the report referred to in Article 171, paragraph 2 of this Act, it assesses that, during the term of office of the extraordinary administration, the financial situation did not improve to such an extent that the

insurance undertaking reaches the solvency margin as defined in Articles 98 and 99 of this Act and that there are no reasons for submission of a proposal for opening of bankruptcy proceedings; 2. if the general meeting of the insurance undertaking convened under Article 172 of this Act refuses to adopt a resolution on increase in the core capital of the insurance undertaking or adopts it, but the first sale of shares fails. (2) The supervisory authority shall adopt a decision on withdrawal of authorisation to carry on insurance business within eight days, such period running: 1. in the case referred to in paragraph 1, point 1 of this Article, from the date of expiry of the time limit for acceptance of the final report on the evaluation of the extraordinary administration’s results, as referred to in Article 173, paragraph 2 of this Act; 2. in the case referred to in paragraph 1, point 2 of this Article, from the day when the general meeting rejected the proposed resolution referred to in Article 172, paragraph 1 of this Act or from the date of expiry of the time limit for subscription and payment of shares on the basis of the unsuccessful first sale." Article 104 Article 206 is amended to read: "(1) The supervisory authority shall, prior to adoption of a decision on dissolution of a branch of an insurance undertaking from a third country, notify all competent authorities of the Member States in which the insurance undertaking, whose branch is subject to winding-up proceedings, has branches. (2) The notification referred to in paragraph 1 of this Article shall include the information about legal consequences and actual effects of such proceedings. (3) By way of derogation from the provisions of paragraph 1 of this Article, where, for the purpose of safeguarding the interests of the insured persons, it is not possible to delay the opening of the compulsory winding-up proceedings, the supervisory authority shall notify the competent supervisory authority immediately after the decision is adopted. (4) In the course of the compulsory winding-up proceedings referred to in paragraph 1 of this Article, the supervisory authority shall closely co-operate with competent supervisory authorities of other Member States. (5) In the course of the compulsory winding-up proceedings referred to in paragraph 1 of this Article, the liquidators shall coordinate their actions and shall provide each other with all legally permitted pieces of information which may be of relevance for the conduct of winding-up proceedings." Article 105 In Article 207, paragraph 2, the words "to open compulsory winding-up proceedings with regard to the insurance undertaking" are replaced by the words "on dissolution of the insurance undertaking". Article 106 The title above Article 208 is amended to read: "Effectiveness of a decision on dissolution of an insurance undertaking". In Article 208, the words "to open compulsory winding-up proceedings with regard to" are replaced by the words "on dissolution of". Article 107 In the title above Article 209, after the words "European Union", the words "and the European Economic Area" are added. Article 209 is amended to read:

"The supervisory authority shall publicly announce a decision on dissolution of an insurance undertaking which has a head office in the Republic of Croatia and a branch in another Member State, and shall publish a summary of the decision in the Official Journal of the European Union and the European Economic Area. The same procedure shall be followed by the competent supervisory authority of the Member State in the case of dissolution of an insurance undertaking having a head office in the Member State concerned and a branch in the Republic of Croatia." Article 108 In Article 210, paragraph 1 is amended to read: "(1) The liquidators shall inform all known creditors of an insurance undertaking, who have their head office or address in the territory of the Member States, of the beginning of the compulsory winding-up proceedings of the insurance undertaking which has a head office in the Republic of Croatia and a branch in a Member State." In paragraph 2, the first and second subparagraphs, the Croatian word translated as "claims" is replaced by another Croatian word, with no relevance to the English translation. In the third subparagraph, the Croatian words translated as "whose claims" are replaced by another Croatian words, with no relevance to the English translation. In paragraph 3, the words "shall prescribe" are replaced by the words "may prescribe". After paragraph 3, a new paragraph 4 is added, which reads: "(4) Liquidators of an insurance undertaking with a head office in a Member State, which has a branch in the Republic of Croatia, shall comply with the provisions of paragraphs 1 and 2 of this Article." Article 109 In the title above Article 211, the Croatian word translated as "claims" is replaced by another Croatian word, with no relevance to the English translation. Article 211 is amended to read: "A creditor shall notify his/her claims against the liquidation estate in the official language of the Member State in which he/she has his/her permanent place of residence or head office." Article 110 In Article 212, paragraph 1 is amended to read: "(1) In the case of opening of bankruptcy proceedings concerning an insurance undertaking which has a branch in a Member State, the provisions of Articles 207, 209, 210, 211 and 213 of this Act shall apply accordingly." In paragraph 2, after the words "European Union", the words "and the European Economic Area" are added. Article 111 Article 213 is amended to read: "(1) By virtue of a decision on withdrawal of authorisation to carry on insurance business from an insurance undertaking, the supervisory authority shall appoint two or more liquidators and define the type and scope of tasks to be performed by an individual liquidator. (2) Only a natural person who meets the requirements for appointment of a member of the board of directors of an insurance undertaking set out in Article 27 of this Act may be appointed as liquidator of an insurance undertaking.

(3) An insurance undertaking must have at least two liquidators who represent it jointly."

Article 112 Article 214 is amended to read: "(1) As of the date of issue of the decision on dissolution of an insurance undertaking, all competences and powers of the members of the board of directors and members of the supervisory board of the insurance undertaking, as well as the powers of the general meeting shall terminate, except for the authority to bring suit at the Administrative Court against the decision of the supervisory authority referred to in Article 205 of this Act. (2) In the course of compulsory winding-up proceedings, the competences of the supervisory board of the insurance undertaking and those of the general meeting, except for the competence referred to in paragraph 1 of this Article, shall be transferred to the supervisory authority." Article 113 In Article 215, after the words "Companies Act", the words "on winding-up of a joint-stock company" are added. Article 114 Article 217 is amended to read: "If the liquidators establish that there are reasons for bankruptcy, they shall without delay submit a proposal for opening of bankruptcy proceedings and shall immediately notify the supervisory authority thereof." Article 115 Article 118 is deleted. Article 116 In Article 219, the word "law" is replaced by "this Act". Article 117 Article 220 is amended to read: "The supervisory authority shall put forward a proposal for opening of bankruptcy proceedings in the following cases: 1. if, on the basis of the report referred to in Article 171, paragraph 2 of this Act, it assesses that the financial situation did not improve during the term of office of extraordinary administration, and that the insurance undertaking is not able to meet its current liabilities as they fall due; 2. if, in exercising supervision of the insurance undertaking, it establishes any of the reasons for bankruptcy as defined by law." Article 118 Articles 221, 222, 223 and the titles above them are deleted. Article 119 Article 224 is amended to read: "Insurance contracts concluded by an insurance undertaking shall terminate on opening of bankruptcy proceedings with regard to the insurance undertaking." Article 220 Article 225 is deleted.

Article 121 Article 226 is amended to read: "A decision on suspension of bankruptcy proceedings, as well as a decision on closure of bankruptcy proceedings with regard to an insurance undertaking shall be submitted to the supervisory authority." Article 122 The title above Article 227 is amended to read: "Higher-ranking claims". Article 227 is amended to read: "The top-ranking claims shall, in addition to those specified in the Bankruptcy Act, include: 1. the claims under life assurance contracts and other insurance contracts that are subject to similar probability tables and calculations as those applicable to life assurance, which could not be paid out of the assets covering mathematical provisions; 2. the claims under non-life insurance contracts and other insurance contracts in respect of which mathematical provisions are not formed relating to compensation for loss events occurred before opening of bankruptcy proceedings and to return of a portion of the insurance premium paid for the period after the termination of the concerned insurance contract; 3. claims by the Croatian Insurance Bureau arising from the payments made under the Guarantee Fund referred to in Article 44, paragraph 1, points 8 and 9 of the Act on Compulsory Insurance within the Transport Sector and relating to compensation of amounts paid for losses, which could not be collected by injured persons from an insurance undertaking because of opening of bankruptcy proceedings with regard to the insurance undertaking in question."

Article 123 The titles above Article 228 are amended to read: "XV.2.2 SPECIAL PROVISIONS FOR PAYMENT OF CLAIMS ARISING FROM THOSE LINES OF INSURANCE IN RESPECT OF WHICH MATHEMATICAL PROVISIONS MUST BE FORMED Applicable provisions". Article 228 is amended to read: "(1) The provisions of this section shall apply to settlement of claims of creditors under life assurance contracts and other contracts of insurance which are operated on similar probability tables and calculations to that of life assurance. (2) The creditors referred to in paragraph 1 of this Article shall be entitled to separate settlement against the assets covering mathematical provisions or against the funds raised from realization of assets covering mathematical provisions. (3) The assets covering mathematical provisions shall not constitute part of bankruptcy estate and are intended exclusively for settlement of claims of the creditors referred to in paragraph 1 of this Article. (4) The assets covering mathematical provisions represent the assets of an insurance undertaking which are segregated from other assets of the insurance undertaking and formed in accordance with the provisions of this Act relating to the obligation to form the assets covering mathematical provisions." Article 124 The title above Article 229 is amended to read: "Right to settlement against the assets covering mathematical provisions". Article 229 is amended to read: "(1) As of the date of opening of bankruptcy proceedings, the creditors who have claims under the insurance contracts referred to in Article 228 of this Act shall acquire the right to settlement of such claims against the assets covering mathematical provisions. (2) The creditors who have claims under life assurance contracts and other contracts of insurance which, as far as the liabilities of the insurance undertaking are concerned, are subject to life assurance rules, shall be entitled to payment against the assets covering mathematical provisions before payment of other claims under certain lines of life assurance which are paid against the assets covering mathematical provisions, at the level corresponding to the obligatory cover under the assurance from which the concerned claim arises. (3) If the assets covering mathematical provisions are not sufficient for full payment of the claims referred to in paragraph 2 of this Article, the claims shall be paid at the amount which is in equal proportion to the obligatory cover in respect of the class of insurance from which the claim arises as the total value of assets covering mathematical provisions bears to the obligatory cover for all insurances underwritten by the insurance undertaking in that class of insurance in respect of which assets covering mathematical provisions were formed. (4) Other claims of the creditors referred to in Article 228 of this Act shall be paid against the assets covering mathematical provisions which remain after payment of the claims referred to in paragraph 2 of this Article. (5) If the assets covering mathematical provisions are not sufficient for full payment of other claims referred to in paragraph 4 of this Article, the claims concerned shall be paid proportionally against the assets covering mathematical provisions. (6) The balance as at the date of opening of bankruptcy proceedings shall be relevant for determining the amount of the claims and the total amount of the obligatory cover." Article 125

The title above Article 230 is amended to read: "Segregated account of the assets covering mathematical provisions". In Article 230, paragraph 3 is deleted. Article 126 Article 231 is amended to read: "Subject to Articles 32 and 32a of the Bankruptcy Act, the creditors referred to in Article 228 of this Act may appoint, at the first general meeting of creditors, their representative to the Creditors’ Committee." Article 127 The title above Article 232 is amended to read: "Notification of claims". Article 232 is amended to read: "The claims under insurance contracts shall be notified to the receiver in accordance with the rules laid down in the Bankruptcy Act." Article 128 The title of Title XVI is amended to read: "INSURANCE AGENCY BUSINESS, INSURANCE BROKERAGE AND REINSURANCE BROKERAGE BUSINESS" Article 129 Article 233 is amended to read: "(1) Insurance agency business is the activity of introducing, proposing or carrying out work preparatory to the conclusion of insurance contracts on behalf and for the account of one or more insurance undertakings in the case of insurance products which are not in competition. (2) Insurance agency firms, banks, the Financial Agency and the Croatian Post Office (HP-Hrvatska pošta d.d.) may, in addition, perform agency activities for more than one insurance undertakings in the case of insurance products which are in competition subject to a written approval of the insurance undertaking for which they perform agency activities." Article 130 Article 234 is amended to read: "(1) An insurance agent is a natural person authorised by the supervisory authority to carry out insurance agency business. (2) The activities of an insurance agent are the activities of introducing, proposing, preparing and concluding insurance contracts on behalf and for the account of one or more insurance undertakings pursuant to Article 233 of this Act. (3) The insurance agent referred to in paragraph 1 of this Article may carry out the insurance agency activities only on the basis of employment or another legal relationship with an insurance undertaking, an insurance agency firm, an insurance agency trade, a bank, the Financial Agency and the Croatian Post Office (HP-Hrvatska pošta d.d.). (4) By way of derogation from paragraph 3 of this Article, the persons who perform insurance agency activities on the basis of employment with an insurance undertaking shall not be regarded as insurance agents.

(5) An insurance agent may not, in his/her name and for his/her account, collect insurance premiums or other amounts from a policyholder." Article 131 The titles above Article 240 are amended to read: "XVI.2 INSURANCE AND REINSURANCE BROKERAGE BUSINESS Insurance and reinsurance brokerage business". Article 240 is amended to read: "Insurance and reinsurance brokerage business is the activity of introducing, proposing or carrying out work preparatory to the conclusion of insurance and/or reinsurance contracts and providing assistance in exercising rights under insurance and/or reinsurance contracts, in particular in settlement of claims notified to an insurance undertaking and/or a reinsurance undertaking." Article 132 The title above Article 241 is amended to read: "Insurance and reinsurance broker". Article 241 is amended to read: "(1) An insurance and reinsurance broker is a natural person authorised by the supervisory authority to carry out insurance and reinsurance brokerage business. (2) The insurance and reinsurance brokerage activities are the activities involving negotiations with an insurance undertaking or a reinsurance undertaking in order to enable a prospective insurance or reinsurance policyholder, in accordance with his/her requirements or needs, to conclude an insurance or reinsurance contract. (3) In addition to the activities referred to in paragraph 2 of this Article, the insurance and reinsurance brokerage activities shall also be considered to be the activities relating to work preparatory to the conclusion of insurance or reinsurance contracts and assistance in exercising rights under insurance or reinsurance contracts, in particular in settlement of claims notified to an insurance undertaking or a reinsurance undertaking. (4) Assistance in exercising rights under insurance or reinsurance contracts, in particular in settlement of claims notified to an insurance undertaking or a reinsurance undertaking may be provided only by the persons referred to in paragraph 1 of this Article and the persons who are permitted to provide such services under other laws that regulate pursuit of their activity. (5) The insurance and reinsurance broker referred to in paragraph 1 of this Article may carry out insurance and reinsurance brokerage activities only on the basis of employment with an insurance and reinsurance brokerage company." Article 133 The title above Article 242 is amended to read: "Insurance and reinsurance brokerage company". Article 242 is amended to read: "(1) An insurance and reinsurance brokerage company shall mean a legal person with a head office in the Republic of Croatia providing, as a commercial activity, insurance and reinsurance brokerage services, which has received authorisation from the supervisory authority to carry on insurance and reinsurance brokerage activity. (2) An insurance and reinsurance brokerage company may not be entered in the court register before it receives the authorisation referred to in paragraph 1 of this Article. (3) An insurance and reinsurance brokerage company may be established under the Companies Act as a joint-stock company or a limited liability company.

(4) Only the company that has received the authorisation referred to in Article 254 of this Act may enter in the court register and use in legal transactions the words "insurance and reinsurance brokerage business" or a derivation thereof in a company name or abridged company name."

Article 134 The title above Article 243 is amended to read: "Professional indemnity insurance of an insurance and reinsurance brokerage company". Article 243 is amended to read: "An insurance and reinsurance brokerage company must hold professional indemnity insurance or some other comparable guarantee against liability arising from professional negligence for at least HRK 7,500,000 applying to each claim and in aggregate HRK 11,250,000 per year for all claims." Article 135 The title above Article 244 is amended to read: "Obligations of insurance and reinsurance brokers". Article 244 is amended to read: "(1) An insurance and reinsurance broker shall carry out the brokerage activities in such a manner as to safeguard the interests of the insurance policyholders, reinsurance policyholders or the persons insured. (2) In order to fulfil the obligation referred to in paragraph 1 of this Article, an insurance and reinsurance broker shall: 1. make an appropriate risk analysis and set out underlying principles of the required coverage; 2. provide a written explanation as to the reason for proposing the respective insurer or reinsurer and inform the policyholder of the level of the commission determined for conclusion of an insurance or reinsurance contract; 3. provide mediation services, on behalf of the policyholder under an insurance or reinsurance contract, in concluding the insurance or reinsurance contract, which is in compliance with the requirements of the insurance policyholder or reinsurance policyholder with regard to the insurance coverage, whereby this obligation may be limited only to specific insurance or reinsurance services, if the insurance broker has explicitly informed the person insured thereof; 4. inform the insurance or reinsurance undertaking that a prospective insurance or reinsurance policyholder is seeking an offer for the purpose of conclusion of an insurance or reinsurance contract; 5. deliver to the insurance policyholder and reinsurance policyholder the insurance policy and reinsurance contract respectively, and other documents related to the insurance and/or reinsurance contract; 6. check the contents of the insurance policy and/or reinsurance contract; 7. provide assistance to the insurance or reinsurance policyholder or to the person insured during the term of validity of the insurance or reinsurance contract, both prior to and after the occurrence of the insured event, and, in particular, make sure that legal actions which are of importance for retaining and exercising the rights arising from the insurance or reinsurance contract are taken by the policyholder under the insurance or reinsurance contract or the person insured within the time limits prescribed for taking such legal actions; 8. constantly check the insurance or reinsurance contracts concluded by the policyholder under the insurance or reinsurance contracts through his/her mediation, and prepare proposals for modifications to these insurance contracts for the purpose of providing a better protection." Article 136 Article 245 is amended to read: "(1) In carrying out insurance and reinsurance brokerage activities, an insurance and reinsurance broker shall safeguard the interests of insurance policyholders, reinsurance policyholders and the persons insured. (2) An insurance and reinsurance broker shall, in carrying out insurance and reinsurance brokerage activities, safeguard those interests of the insurance and/or reinsurance undertaking which are normally binding, before or after conclusion of the insurance and/or reinsurance contract, on the insurance and/or reinsurance policyholder. In carrying out work preparatory to the conclusion of insurance and reinsurance contracts, an insurance and reinsurance broker shall inform insurance and/or reinsurance undertakings of any risk of which he/she is aware or of which he/she must have been aware.

(3) An insurance and reinsurance broker shall explain to the insurance and/or reinsurance policyholder all legal and economic ties with a certain insurance and/or reinsurance undertaking which may have influence on preferences of the insurance and reinsurance broker in fulfilling the obligations to the insurance and/or reinsurance policyholder." Article 137 The title above Article 246 is amended to read: "Prohibition against insurance and reinsurance brokerage business". Article 246 is amended to read: "An insurance and reinsurance broker may not act as intermediary in conclusion of a contract with an insurance and/or reinsurance undertaking, if such conclusion of an insurance and/or reinsurance contract would be contrary to Article 3 or Article 3a of this Act." Article 138 The title above Article 247 is amended to read: "Exemptions applying in carrying on of insurance agency, insurance brokerage and reinsurance brokerage business". Article 247 is amended to read: "The provisions of this Title shall not apply to the persons who carry out insurance agency, insurance and reinsurance brokerage activities, provided that such activities are not carried out for insurance agency firms or insurance and reinsurance brokerage companies and that all of the following conditions are met: 1. the insurance contract only requires knowledge of the insurance class that is the subject-matter of the contract; 2. the insurance contract is not a life assurance contract; 3. the insurance contract does not cover any liability risks; 4. the principal professional activity of the person is not insurance agency or brokerage; 5. the insurance is complementary to the product or service, where such insurance covers: - the risk of breakdown, loss of or damage to products or goods; - the risk of damage to or loss of luggage and other risks linked to the travel booked with a travel agency, and the insurance contains provisions on life assurance or liability insurance, provided that such insurance is ancillary or supplementary to the main cover for the risks linked to that travel; 6. the amount of the annual insurance premium does not exceed HRK 3 750 and the total duration of the insurance contract, including any renewals, does not exceed five years." Article 139 The title above Article 249 is amended to read: "Authorisation to provide services of insurance and reinsurance brokers". Article 249 is amended to read: "(1) Only natural persons who have obtained authorisation to carry out the insurance and reinsurance brokerage activities may provide such services in the capacity of an insurance and reinsurance broker. (2) The supervisory authority shall grant the authorisation to carry out insurance and reinsurance brokerage activities to the person who meets the following requirements: 1. he/she has successfully passed the examination of professional knowledge necessary for carrying out insurance and reinsurance brokerage activities;

2. he/she has a good command of the Croatian language; 3. he/she has at least university degree; 4. he/she has a minimum of one-year experience in the field of insurance and/or reinsurance; 5. he/she has never been sentenced or investigated for criminal offences in the field of white-collar crime. (3) The supervisory authority shall withdraw from an insurance and reinsurance broker the authorisation to carry out the insurance and reinsurance brokerage activities if: 1. the authorisation was obtained on the basis of a statement of false data; 2. a final non-suspended prison sentence of more than three months was imposed on an insurance and reinsurance broker for a criminal offence in the field of white-collar crime; 3. an insurance and reinsurance broker violates the provisions of this Act; 4. an insurance and reinsurance broker seriously violates the code of good business practice and rules of the profession." Article 140 In Article 250, paragraph 4 is amended to read: "(4) By way of derogation from paragraph 1 of this Article, the insurance agency activity may also be conducted by banks, provided that they have obtained authorisation for provision of such services from the Croatian National Bank subject to a prior approval of the supervisory authority, and by the Financial Agency and the Croatian Post Office (HP-Hrvatska pošta d.d.), provided that they have been authorised for provision of such services by the supervisory authority pursuant to the provisions of Article 252 of this Act." Paragraph 6 is amended to read: (6) The insurance agency activities at a bank, the Financial Agency and the Croatian Post Office (HP-Hrvatska pošta d.d.), which have received the authorisation referred to in paragraph 4 of this Article, may only be conducted by their business units where at least one person is employed who has the authorisation to carry out insurance agency business issued by the supervisory authority pursuant to Article 248 of this Act." Article 141 After Article 250, a new Article 250a and the title above is added, which read: "XVI.4 INSURANCE AGENCY BUSINESS AND INSURANCE AND REINSURANCE BROKERAGE BUSINESS Article 250a An insurance agency firm and an insurance and reinsurance brokerage company is not permitted to have, as part of its company name, the name or part of the name of any insurance or reinsurance undertaking." Article 142 The titles above Article 251 are amended to read: "XVI.4.A VEHICLE ROADWORTHINESS TEST GARAGES Carrying on of insurance agency activities at vehicle roadworthiness test garages". Article 251 is amended to read: "(1) A vehicle roadworthiness test garage is a place where an activity of public interest is carried out as provided by the Road Safety Act. (2) Only an insurance agency firm which has been authorised by the supervisory authority to conduct insurance agency business at vehicle roadworthiness test garages may carry out the work preparatory to the conclusion of insurance contracts and conclude such contracts at vehicle roadworthiness test garages.

(3) Insurance undertakings may carry out the work preparatory to the conclusion of insurance contracts and conclude such contracts at vehicle roadworthiness test garages only through the insurance agency firm referred to in paragraph 2 of this Article. (4) The provisions of Article 252 shall apply to the issue of the authorisation referred to in paragraph 2 of this Article. (5) A vehicle roadworthiness test garage, within the meaning of this Act, means a real property or several real properties which are adjacent to each other and all linked together so that they form a unity in which an authorised person carries out vehicle roadworthiness test and registration. (6) A natural or legal person, who is the owner or who enjoys other rights in rem in respect of the vehicle roadworthiness test garage referred to in paragraph 5 of this Article, shall ensure that the insurance agency firm referred to in paragraph 2 of this Article has adequate space at the garage to carry on insurance agency activities. (7) If the person referred to in paragraph 6 of this Article does not ensure the space for the conduct of insurance agency activities referred to in paragraph 6 of this Article, the insurance agency activities shall not be carried on at the vehicle roadworthiness test garage referred to in paragraph 5 of this Article. (8) An insurance agency firm shall carry on the insurance agency business referred to in paragraph 2 of this Article under the conditions that are the same for all interested insurance undertakings. (9) The prohibition against preparation and conclusion of insurance contracts in the case of insurance products which are in competition as referred in Article 233 and Article 234, paragraph 2 of this Act shall not apply to the insurance agency business and the activities of insurance agents referred to in paragraph 2 of this Article. (10) An insurance agency firm may carry on the insurance agency business referred to in paragraph 2 of this Article only in the lines of insurance referred to in Article 3, paragraph 2, points 1 and 10 of this Act. (11) The supervisory authority shall prescribe technical and organisational conditions for the conduct of the insurance agency activities referred to in paragraphs 2 and 6 of this Article. (12) In the case that the work preparatory to the conclusion of insurance contracts, that is, insurance agency business, is carried out by persons who are not authorised for that, the responsibility lies with the insurance undertaking whose insurance contracts are being concluded and with the insurance agency firm on behalf of which and for the account of which the insurance agency business is conducted at a vehicle roadworthiness test garage."

Article 143 The titles above Article 252 are amended to read: "XVI.4.B CARRYING ON OF INSURANCE AGENCY BUSINESS AND INSURANCE AND REINSURANCE BROKERAGE BUSINESS Authorisation to carry on insurance agency business". Article 252 is amended to read: "(1) An insurance agency firm shall, prior to its registration in the court register obtain authorisation from the supervisory authority to carry on insurance agency business. (2) The supervisory authority shall issue authorisation to carry on insurance agency business at the request of the founder. (3) The applicant shall enclose with his application for issue of the authorisation to carry on insurance agency business appropriate proofs that the following conditions are satisfied: 1. the core capital paid in cash amounts to a minimum of HRK 100 000; 2. at least one insurance agent will be employed full time on the basis of an employment contract, and he/she will be the responsible person at the firm; 3. the insurance agency firm concerned is not a related undertaking of an insurance undertaking, another insurance agency firm or an insurance and reinsurance brokerage company. (4) The supervisory authority shall withdraw the authorisation to carry on insurance agency business in the following cases: 1. if the authorisation was obtained on the basis of a statement of false data; 2. if the insurance agency firm or insurance agent employed with the insurance agency firm seriously violates the provisions of Article 256 of this Act; 3. if the insurance agency firm does not have professional indemnity insurance pursuant to Article 237 of this Act; 4. if the insurance agency firm permanently breaks its obligation of timely and complete reporting stipulated by this Act and the regulations issued on the basis of this Act; 5. if the insurance agency firm does not comply with the decisions of the supervisory authority on elimination of non-compliances and irregularities within the specified time limit; 6. if the insurance agency firm acts contrary to Article 233 of this Act; 7. if the conditions set out in paragraph 3 of this Article no longer apply. (5) The authorisation to carry on insurance agency activities shall lapse: 1. if the insurance agency firm does not start its operations within six months following the issue of the authorisation; 2. if the insurance agency firm does not carry on insurance agency business for more than six months; 3. on opening of bankruptcy proceedings or compulsory winding-up proceedings; 4. upon completion of voluntary winding-up proceedings. (6) If any of the reasons referred to in paragraph 5 of this Article occurs, the supervisory authority shall take a decision to the effect that the authorisation has lapsed." Article 144 The title above Article 253 is amended to read: "Carrying on of insurance and reinsurance brokerage activities". Article 253 is amended to read: "(1) The insurance and reinsurance brokerage activities may be carried on by:

1. an insurance and reinsurance brokerage company with a head office in the Republic of Croatia in possession of an authorisation to conduct insurance and reinsurance brokerage business issued by the supervisory authority; 2. an insurance and reinsurance brokerage company from a Member State which, pursuant to this Act, has the right to carry on insurance and reinsurance brokerage business in the territory of the Republic of Croatia either directly or through a branch. (2) An insurance and reinsurance brokerage company shall carry on insurance and reinsurance brokerage business as an exclusive activity. (3) The insurance and reinsurance brokerage company referred to in paragraph 1 of this Article is not permitted to carry on insurance agency business." Article 145 The title above Article 254 is amended to read: "Authorisation to carry on insurance and reinsurance brokerage business". Article 254 is amended to read: "(1) An insurance and reinsurance brokerage company shall, prior to its entry in the court register obtain authorisation from the supervisory authority to carry on insurance and reinsurance brokerage business. (2) The supervisory authority shall issue an authorisation to carry on insurance and reinsurance brokerage business at the request of the founder. (3) The applicant shall enclose with its application for issue of the authorisation to carry on insurance and reinsurance brokerage business appropriate proofs that the following conditions are satisfied: 1. the core capital paid in cash amounts to a minimum of HRK 200 000; 2. at least two insurance brokers will be employed full time on the basis of an employment contract, and at least one of them will be the responsible person at the company; 3. the insurance and reinsurance brokerage company concerned is not a related undertaking of an insurance undertaking, another insurance and reinsurance brokerage company or an insurance agency firm. (4) The supervisory authority shall withdraw the authorisation to carry on insurance and reinsurance brokerage business in the following cases: 1. if the authorisation was obtained on the basis of a statement of false data; 2. if the insurance and reinsurance brokerage company or an insurance and reinsurance broker, working for the company, seriously violates the provisions of Articles 244 and 256 of this Act; 3. if the insurance and reinsurance brokerage company does not hold professional indemnity policy pursuant to Article 245 of this Act; 4. if the insurance and reinsurance brokerage company repeatedly violates its obligation of timely and complete reporting stipulated by this Act and the regulations issued on the basis of this Act; 5. if the insurance and reinsurance brokerage company does not comply with the decisions of the supervisory authority on elimination of non-compliances and irregularities within the specified time limit; 6. if the insurance and reinsurance brokerage company acts contrary to Article 240 of this Act; 7. if the conditions set out in paragraph 3 of this Article no longer apply. (5) The authorisation to carry on insurance and reinsurance brokerage business shall lapse: 1. if the insurance and reinsurance brokerage company does not start its operations within six months following the issue of the authorisation, 2. if the insurance and reinsurance brokerage company does not carry on insurance brokerage business for more than six months; 3. on opening of bankruptcy proceedings or compulsory winding-up proceedings, 4. upon completion of voluntary winding-up proceedings. (6) If any of the reasons referred to in paragraph 5 of this Article occurs, the supervisory authority shall take a decision to the effect that the authorisation has lapsed."

Article 146 Article 255 is amended to read: "(1) An insurance agency firm or an insurance and reinsurance brokerage company which takes over another insurance agency firm or an insurance and reinsurance brokerage company shall, prior to entry in the court register of the decision on the takeover obtain approval for the takeover from the supervisory authority. (2) Insurance agency firms or insurance and reinsurance brokerage companies that are to be merged shall, prior to entry in the court register of the decision on the merger obtain from the supervisory authority approval for the merger and authorisation to conduct insurance agency or insurance and reinsurance brokerage business for a newly established insurance agency firm or an insurance and reinsurance brokerage company. (3) With effect from the date of entry of a newly established insurance agency firm or an insurance brokerage company in the court registry, the insurance agency firms or insurance and reinsurance brokerage companies that are merged shall be dissolved and their respective authorisations to conduct insurance agency or insurance and reinsurance brokerage business shall lapse." Article 147 The title above Article 256 is amended to read: "Obligation on the part of insurance and reinsurance brokers and insurance agents to provide information". Article 256 is amended to read: "(1) Prior to the conclusion of any insurance or reinsurance contract and at the time of amendment thereto or renewal thereof, an insurance agent or an insurance and reinsurance broker shall provide the insurance and/or reinsurance policyholder with the following information: 1. his/her name, surname and address; 2. the register in which he/she has been included and the means for verifying that he/she has been registered; 3. the insurance agency firm or insurance and reinsurance brokerage company with which he/she is employed; 4. the company names of insurance and/or reinsurance undertakings with which he/she has entered into a contract; 5. the information about out-of-court settlement of disputes between the persons insured or insurance policyholders or reinsurance policyholders or customers and insurance undertakings or reinsurance undertakings or insurance service providers or reinsurance service providers, and the internal procedures for settlement of complaints of customers referred to in Article 273 of this Act; (2) An insurance and reinsurance broker is obliged to make the analysis referred to in Article 244, paragraph 2, point 1 of this Act on the basis of a sufficiently large number of insurance and/or reinsurance contracts available on the market, to enable him/her to make recommendations, in accordance with professional criteria, as to which contract would be adequate to meet the needs and requirements of insurance and/or reinsurance policyholders. (3) Prior to the conclusion of any contract, an insurance and reinsurance broker shall define, on the basis of information provided by the insurance policyholder, reinsurance policyholder or the insured, the needs and wishes of that insurance and/or reinsurance policyholder or insured, as well as the underlying reasons for any advice given to that policyholder or insured concerning the given insurance and/or reinsurance contract." Article 148 The title above Article 257 is amended to read: "Form of information provided by insurance and reinsurance brokers and insurance agents". Article 257 is amended to read: "(1) The information referred to in Article 256 of this Act shall be communicated to the insurance or reinsurance policyholder:

1. in writing or on any other durable medium available and accessible to the insurance or reinsurance policyholder; 2. in a manner comprehensible to the insurance or reinsurance policyholder; 3. in the Croatian language, unless otherwise agreed; (2) By way of derogation from paragraph 1 of this Article, the information may be provided orally where the insurance or reinsurance policyholder requests it, or where immediate cover is necessary. (3) In the cases referred to in paragraph 2 of this Article, the information shall be provided in accordance with paragraph 1 of this Article immediately after the conclusion of the insurance or reinsurance contract." Article 149 Article 258 is amended to read: "(1) An insurance undertaking shall not enable that the insurance agency or insurance and reinsurance brokerage business is carried on by the persons other than the persons referred to in Articles 250 and 253 of this Act." Article 150 After Article 258, a new Article 258a is added and the title above it, which read: "Obligation of an insurance agency firm and of an insurance and reinsurance brokerage company Article 258a (1) An insurance agency firm shall not enable that the activities of insurance agents for that firm be carried out by the persons other than the persons referred to in Article 234 of this Act. (2) An insurance and reinsurance brokerage company shall not enable that the activities of insurance and reinsurance brokers for that company be carried out by the persons other than the persons referred to in Article 241 of this Act." Article 151 Article 259 is amended to read: "(1) An insurance agency firm or an insurance agent shall not have the right to request payment of commission or any other payment from a policyholder or from the insured. (2) An insurance and reinsurance brokerage company or an insurance and reinsurance broker shall not have the right to request payment of commission or any other payment from an insurance policyholder, reinsurance policyholder or from the insured, unless otherwise explicitly agreed in writing with the insurance or reinsurance policyholder by virtue of a contract. (3) An insurance and reinsurance brokerage company or an insurance and reinsurance broker shall be entitled to commission as from the date on which the insurance contract takes effect. (4) If it is in the contract with the insurance or reinsurance policyholder referred in paragraph 2 of this Article explicitly agreed in writing that the insurance and reinsurance brokerage company or insurance and reinsurance broker is entitled to commission or any other payment, the insurance and reinsurance brokerage company or insurance and reinsurance broker does not have the right to require the commission or any other payment under the insurance or reinsurance contracts concluded as a result of his/her brokerage activities. (5) An insurance and reinsurance brokerage company or insurance and reinsurance broker may not subsequently agree on modifications to the method of calculation and the level of commission for the concluded insurance or reinsurance contracts in which it or he/she has mediated." Article 152 After Article 259, a new Article 259a and the title above it are added, which read:

"Business books and business reports" Article 259a"

(1) Insurance agency firms and insurance and reinsurance brokerage companies shall keep business books, draw up bookkeeping documents, value assets and liabilities and prepare financial statements pursuant to the Companies Act, Accounting Act and other regulations, and shall adhere to the accounting and financial standards and principles, and general accounting assumptions, unless otherwise specifically provided by this Act.

(2) Insurance agency firms and insurance and reinsurance brokerage companies shall prepare semi-annual and annual financial statements, as well as statistical reports. (3) Insurance agency firms and insurance and reinsurance brokerage companies shall submit to the supervisory authority annual financial statements not later than three months following the end of the calendar year, and semi-annual financial statements not later than 30 days following the end of the six-month period to which the statements relate. (4) Insurance agency trades, insurance agency firms and insurance and reinsurance brokerage companies shall submit to the supervisory authority a statistical report not later than 30 days following the end of the three-month period to which the report relates. An annual statistical report shall be submitted within three months of the end of the calendar year at the latest. (5) The supervisory authority may specify the form and contents of the statements and reports referred to in paragraph 2 and paragraph 4 of this Article respectively." Article 153 Article 260 is amended to read: "(1) Insurance agency firms and insurance and reinsurance brokerage companies shall also report to the supervisory authority on: 1. any modifications to data entered in the court register; 2. structure and volume of insurance agency business or insurance and reinsurance brokerage business provided in a particular year, broken down by insurance and/or reinsurance undertaking; 3. compliance with the obligations referred to in Article 237 or Article 243 of this Act." Article 154 The title above Article 261 is amended to read: "Register of insurance agents and insurance and reinsurance brokers". Article 261 is amended to read: "(1) The supervisory authority shall keep the register of: 1. insurance agency firms authorised, pursuant to this Act, to carry on insurance agency business in the territory of the Republic of Croatia; 2. insurance and reinsurance brokerage companies authorised, pursuant to this Act, to carry on insurance and reinsurance brokerage business in the territory of the Republic of Croatia; 3. insurance agents; 4. insurance and reinsurance brokers. (2) The registers referred to in paragraph 1 of this Article shall be public. (3) The registers of insurance agency firms and insurance and reinsurance brokerage companies shall contain the information about the persons authorised for insurance agency business and/or insurance and reinsurance brokerage business." Article 155

The title above Article 262 is amended to read: "Supervision". Article 262 is amended to read: "(1) Supervision of insurance agents and insurance and reinsurance brokers, as well as insurance agency firms and insurance and reinsurance brokerage companies shall be exercised by the supervisory authority. (2) The provisions of this Act relating to supervision of insurance undertakings, except for Articles 162 to 173 of this Act, shall apply accordingly to the supervision referred to in paragraph 1 of this Article." Article 156 The title above Article 263 is amended to read: "Regulation on insurance agents and insurance and reinsurance brokers". Article 263 is amended to read: "(1) The supervisory authority shall prescribe in more detail: 1. the conditions for obtaining and examining the professional knowledge required for the obtaining of the authorisation to carry on the insurance agency business referred to in Article 248 or the insurance and reinsurance brokerage business referred to in Article 249 of this Act; 2. the form and contents of and rules for the method of keeping the register referred to in Article 261 of this Act, as well as the time limits and method of reporting; 3. the form and contents of the reports referred to in Article 260 of this Act, as well as the time limits and method of reporting." Article 157 The title above Article 264 is amended to read: "Insurance agency firms and insurance and reinsurance brokerage companies from the Member States". Article 264 is amended to read: "(1) An insurance agency firm and an insurance and reinsurance brokerage company from a Member State shall mean a legal person with its head office in the Member State, which has obtained authorisation from the competent supervisory authority to carry on insurance agency business and insurance and reinsurance brokerage business respectively. (2) An insurance agency firm and an insurance and reinsurance brokerage company from a Member State may carry on the insurance agency business and insurance and reinsurance brokerage business respectively in the territory of the Republic of Croatia either directly or through a branch. (3) The insurance agency firms and insurance and reinsurance brokerage companies referred to in paragraph 1 of this Act shall be governed by the provisions of Articles 233 to 250, Article 256 and Article 260 of this Act regarding the activities conducted by such insurance agency firms and insurance and reinsurance brokerage companies in the territory of the Republic of Croatia." Article 158 The title above Article 265 is amended to read: "Carrying out of insurance agency business and insurance and reinsurance brokerage business in a Member State". Article 265 is amended to read: "(1) Insurance agency firms and insurance and reinsurance brokerage companies may carry out in the territory of a Member State, directly or through a branch, those insurance agency activities and insurance and reinsurance brokerage activities, respectively, for which they have received authorisation from the supervisory authority, if they meet the requirements laid down by the national provisions of that Member State.

(2) An insurance agency firm or an insurance and reinsurance brokerage company intending to take up and pursue insurance agency or insurance and reinsurance brokerage business in a Member State for the first time shall notify the supervisory authority thereof. (3) Within one month of the notification referred to in paragraph 2 of this Article, the supervisory authority shall inform the competent supervisory authority of the Member State wishing to be notified and shall inform the concerned insurance agency firm or insurance and reinsurance brokerage company. (4) The insurance agency firm and insurance and reinsurance brokerage company may start the insurance agency and the insurance and reinsurance brokerage business, respectively, in another Member State upon expiry of one month following the date on which it was informed by the supervisory authority of the notification referred to in paragraph 3 of this Article. The insurance agency firm and the insurance and reinsurance brokerage company may start the insurance agency and insurance and reinsurance brokerage business respectively immediately if the competent supervisory authority of the Member State does not request the information referred to in paragraph 2 of this Article. (5) The provisions of this Article shall apply to the activities of insurance agents and those of insurance and reinsurance brokers in a Member State accordingly." Article 159 The title above Article 266 is amended to read: "Commencement of insurance agency business and/or insurance and reinsurance brokerage business". Article 266 is amended to read: "(1) The insurance agency firm and insurance and reinsurance brokerage company referred to in Article 262, paragraph 1 of this Act, which intends to carry out insurance agency and insurance and reinsurance brokerage activities, respectively, in the Republic of Croatia shall inform thereof the competent supervisory authority of the Member State in which it has its head office. (2) The supervisory authority referred to in paragraph 1 of this Article shall forward the information referred to in paragraph 1 of this Article to the supervisory authority of the Republic of Croatia within a period of one month. (3) The insurance agency firm and insurance and reinsurance brokerage company referred to in paragraph 1 of Article 264 of this Act may start the insurance agency and insurance and reinsurance brokerage business, respectively, in the Republic of Croatia upon expiry of one month following the date of receipt of the information from the supervisory authority as referred to in paragraph 2 of this Article. (4) The provisions of this Article shall apply to the activities of insurance agents and insurance and reinsurance brokers in the Republic of Croatia accordingly. (5) The competent supervisory authorities of the Member States shall exchange information on insurance agents, insurance and reinsurance brokers, insurance agency firms and insurance and reinsurance brokerage companies, in particular if they have been subject to a sanction or a measure due to non-compliance with national provisions of the country in which they carry out the insurance agency or insurance and reinsurance brokerage activities." Article 160 In Article 267, paragraph 1, after the word "Article 3", the words "and Article 3a" are added. After paragraph 1, a new paragraph 2 is added, which reads: "(2) The supervisory authority shall prescribe a better way of safeguarding the rights of the persons insured." Article 161 In the title of Title XVIII above Article 270, the word "and" after the word "insurance" is replaced by "or".

In Article 270, paragraph 1, after the words "insurance undertakings", the words "or reinsurance undertakings" are added. Article 162 In Article 272, paragraph 3, the words "insurance activities" are replaced by the words "the activities of the members of the Croatian Insurance Bureau". Article 163 The title above Article 283 is amended to read: "Violations by insurance or reinsurance undertakings". Article 283 is amended to read: "(1) In case of minor offence, an insurance undertaking or a reinsurance undertaking shall be fined between HRK 750 000 and HRK 1 500 000 if: 1. the insurance undertaking carries on other activities in addition to insurance business, contrary to Article 16, paragraph 9 of this Act; 2. it fails to send a prior written notification to the supervisory authority of its intention to acquire a qualifying holding in another insurance undertaking or reinsurance undertaking or another financial institution with a head office outside the territory of the Republic of Croatia and outside the territory of a Member State pursuant to the provisions of Article 23 of this Act; 3. it carries on insurance business in the lines of insurance in respect of which it has not obtained authorisation from the supervisory authority to carry on insurance business pursuant to Article 60, paragraph 1 of this Act; 4. it carries out promotional activities contrary to the provisions of Articles 65a to 65d of this Act; 5. it fails to appoint a certified actuary pursuant to the provisions of Article 67 of this Act; 6. it starts insurance business or establishes a branch in a third country without having obtained the authorisation from the supervisory authority referred to in Article 81, paragraph 2 of this Act; 7. it fails to cover, in the course of the next financial year, the loss from the previous year pursuant to Article 92, paragraph 4 of this Act; 8. it does not invest assets covering technical provisions pursuant to Articles 114 to 117 of this Act or pursuant to regulations adopted hereunder; 9. it fails to form or manage the assets covering mathematical provisions pursuant to Articles 119 to 123 of this Act or pursuant to regulations adopted hereunder; 10. it reinsures, contrary to Article 129 of this Act, that portion of accepted risks which, according to the tables of maximum coverage, does not exceed its risk compensation share; 11. it neither keeps business books nor values bookkeeping items nor draws up bookkeeping documents and accounting statements pursuant to Articles 140 to 143 of this Act or regulations adopted under Article 144 of this Act; 12. it fails to set up an internal audit function in accordance with Articles 145 to 150 of this Act; 13. it fails to submit all the data and information to a financial holding company or insurance holding company or parent insurance undertaking in the insurance group pursuant to Article 177, paragraph 1 of this Act; 14. it fails to report to the supervisory authority on operations in the insurance group in accordance with Article 178 of this Act or regulations adopted hereunder. (2) The responsible person of the insurance undertaking or reinsurance undertaking shall also be fined between HRK 20 000 and HRK 80 000 for the minor offence referred to in paragraph 1 of this Article." Article 164 After Article 283, a new Article 283a is added, which reads: "Article 283a (1) An insurance undertaking which concludes an insurance contract at a vehicle roadworthiness test garage contrary to the provisions of Article 251 of this Act shall be fined between HRK 750 000 and HRK 1 500 000 for the concerned minor offence.

(2) The responsible person of the insurance undertaking shall also be fined between HRK 20 000 and HRK 80 000 for the minor offence referred to in paragraph 1 of this Article." Article 165 Article 284 is amended to read: "(1) In case of minor offence, an insurance undertaking or a reinsurance undertaking shall be fined between HRK 75 000 and HRK 150 000 if: 1. it fails to notify the supervisory authority of dismissal of the certified actuary pursuant to Article 69, paragraph 4 of this Act; 2. it fails to submit to the supervisory authority an unaudited annual report within the time limit set out in Article 142, paragraph 3 of this Act; 3. it fails to submit to the supervisory authority audited financial statements pursuant to Article 151, paragraph 4 of this Act; 4. it fails to enable an authorised person to conduct supervision and examine the operations pursuant to Article 157 and Articles 158a to 158g of this Act; 5. it fails to report to the supervisory authority pursuant to Article 158 of this Act or regulations adopted hereunder; 6. it fails to inform the supervisory authority of important activities within the insurance group pursuant to Article 178 of this Act; 7. it fails to inform the supervisory authority of all facts and circumstances relevant to the assessment as to whether the insurance group in question corresponds to the insurance group as defined in Article 180 of this Act; 8. if it enables the persons other than those referred to in Articles 250 and 253 of this Act to carry out insurance agency or brokerage activities. (2) The responsible person of the insurance undertaking or reinsurance undertaking shall also be fined between HRK 5 000 and HRK 10 000 for the minor offence referred to in paragraph 1 of this Article." Article 166 The title above Article 285 is amended to read: "Violations by a member of the board of directors or an executive director, a member of the supervisory or management board of an insurance undertaking or a reinsurance undertaking". Article 285 is amended to read: "(1) In case of minor offence, a member of the board of directors or an executive director of an insurance undertaking or a reinsurance undertaking shall be fined between HRK 5 000 and HRK 25 000 if: 1. he/she fails to fulfil the obligations of a member of the board of directors or of an executive director of an insurance undertaking or a reinsurance undertaking pursuant to Article 29 of this Act; 2. he/she fails to immediately notify the supervisory authority pursuant to Article 158, paragraph 3 of this Act. (2) A member of the supervisory or management board of an insurance or a reinsurance undertaking shall be fined between HRK 20 000 and HRK 80 000 for the minor offence if he/she fails to immediately notify the supervisory authority pursuant to Article 35, paragraph 3 of this Act." Article 167 The title above Article 286 is amended to read: "Violations by insurance agency firms, insurance agency tradesmen or insurance agents". Article 286 is amended to read: "(1) In case of minor offence, an insurance agency firm shall be fined between HRK 150 000 and HRK 250 000 if: 1. it does not hold a professional indemnity policy pursuant to Article 237 of this Act;

2. it does not carry on the insurance agency business as an exclusive activity pursuant to Article 250, paragraph 2 of this Act; 3. it takes over or merges with another insurance agency firm contrary to Article 255, paragraph 1 or 2 of this Act; 4. it requests or collects payment of commission or any other charge from the policyholder or the person insured contrary to Article 259, paragraph 1 of this Act; 5. it fails to submit the annual or semi-annual financial statements to the supervisory authority within the time limit specified in Article 259a, paragraph 3 of this Act; 6. it fails to submit the statistical report to the supervisory authority within the time limit specified in Article 259a, paragraph 4 of this Act; 7. it fails to report to the supervisory authority pursuant to Article 260 of this Act, within time limits and in the manner determined by the regulation adopted on the basis of Article 263, point 2 of this Act. 8. it fails to notify the supervisory authority prior to commencement of insurance agency business in a Member State pursuant to Article 265, paragraph 2 of this Act. (2) The responsible person of the insurance agency firm shall also be fined between HRK 15 000 and HRK 50 000 for the minor offence referred to in paragraph 1 of this Article. (3) In case of minor offence, an insurance agency tradesman shall be fined between HRK 25 000 and HRK 100 000 if: 1. he/she does not hold a professional indemnity policy pursuant to Article 237 of this Act; 2. he/she does not carry on the insurance agency business as an exclusive activity pursuant to Article 250, paragraph 2 of this Act; 3. he/she requests or collects payment of commission or any other charge from the policyholder or the person insured contrary to Article 259, paragraph 1 of this Act; 4. he/she fails to submit the statistical report to the supervisory authority within the time limit specified in Article 259a, paragraph 4 of this Act; 5. he/she fails to report to the supervisory authority pursuant to Article 260 of this Act, within time limits and in the manner determined by the regulation adopted on the basis of Article 263, point 2 of this Act. 6. he/she fails to notify the supervisory authority prior to commencement of insurance agency business in a Member State pursuant to Article 265, paragraph 2 of this Act. (4) An insurance agency firm or an insurance agency tradesman shall be fined between HRK 20 000 and HRK 80 000 for the minor offence if it or he/she does not enable an authorised person to exercise supervision and examine the operations pursuant to Article 157 and Articles 158a to 158g of this Act, whereas the responsible person of the insurance agency firm shall be fined between HRK 3 000 and HRK 10 000 for the concerned minor offence. (5) An insurance agency firm or an insurance agency tradesman shall be fined between HRK 75 000 and HRK 150 000 for the minor offence if it or he/she, contrary to Article 258a, paragraph 1 of this Act, enables the persons other than those referred to in Article 234 of this Act to perform the activities of insurance agents, whereas the responsible person of the insurance agency firm shall be fined between HRK 5 000 and HRK 10 000 for the concerned minor offence. (6) In case of minor offence, an insurance agent shall be fined between HRK 5 000 and HRK 25 000 if: 1. he/she carries out the activities contrary to Article 238, paragraph 2 of this Act; 2. he/she does not present or misrepresents to the policyholder the information referred to in Article 256, paragraph 1 of this Act or presents the concerned information in a form contrary to Article 257 of this Act; 3. he/she requests or collects payment of commission or any other charge from the policyholder or the person insured contrary to Article 259, paragraph 1 of this Act." Article 168 After Article 286, new Articles 286a and 286b are added, which read: "Article 286a

(1) An insurance agency firm shall be fined between HRK 150 000 and HRK 250 000 for the minor offence if it carries on insurance agency business at a vehicle roadworthiness test garage contrary to the provisions of Article 251 of this Act. (2) The responsible person of the insurance agency firm shall also be fined between HRK 20 000 and HRK 80 000 for the minor offence referred to in paragraph 1 of this Article. Article 286b An insurance agency tradesman shall be fined between HRK 25 000 and HRK 100 000 for the minor offence if it carries on insurance agency business at a vehicle roadworthiness test garage contrary to the provisions of Article 251 of this Act." Article 169 The title above Article 287 is amended to read: "Violations by insurance and reinsurance brokerage companies and insurance and reinsurance brokers". Article 287 is amended to read: "(1) In case of minor offence, an insurance and reinsurance brokerage company shall be fined between HRK 150 000 and HRK 250 000 if it: 1. does not hold a professional indemnity policy pursuant to Article 243 of this Act; 2. does not carry on insurance and reinsurance brokerage business as the exclusive activity in accordance with Article 253, paragraph 2 of this Act; 3. takes over or merges with another insurance and reinsurance brokerage company contrary to Article 255, paragraph 1 or 2 of this Act; 4. requests or collects payment of commission or any other charge from the insurance policyholder, reinsurance policyholder or person insured contrary to Article 259, paragraph 2 of this Act; 5. subsequently agrees, contrary to Article 259, paragraph 4 of this Act, upon change in the method of calculation or in the level of commission under insurance or reinsurance contracts that have been concluded through its mediation; 6. fails to submit the annual or semi-annual financial statements to the supervisory authority within the time limit specified in Article 259a, paragraph 3 of this Act; 7. fails to submit the statistical report to the supervisory authority within the time limit specified in Article 259a, paragraph 4 of this Act; 8. does not report to the supervisory authority in accordance with Article 260 of this Act, within time limits and in the manner specified by law or regulation adopted under Article 263, point 2 of this Act; 9. does not notify the supervisory authority prior to commencement of insurance and reinsurance brokerage business in a Member State pursuant to Article 265, paragraph 2 of this Act. (2) The responsible person of an insurance and reinsurance brokerage company shall also be fined between HRK 15 000 and HRK 50 000 for the minor offence referred to in paragraph 1 of this Article. (3) An insurance and reinsurance brokerage company shall be fined between HRK 20 000 and HRK 80 000 for the minor offence if it does not enable an authorised person to exercise supervision and examine the operations pursuant to Article 157 and Articles 158a to 158g of this Act, whereas the responsible person of the insurance and reinsurance brokerage company shall be fined between HRK 3 000 and HRK 10 000 for the concerned minor offence. (4) An insurance and reinsurance brokerage company shall be fined between HRK 75 000 and HRK 150 000 for the minor offence if, contrary to Article 258a, paragraph 2 of this Act, enables the persons other than those referred to in Article 241 of this Act to perform the activities of insurance and reinsurance brokers, whereas the responsible person of the insurance and reinsurance brokerage company shall be fined between HRK 5 000 and HRK 10 000 for the concerned minor offence. (5) In case of minor offence, an insurance and reinsurance broker shall be fined between HRK 5 000 and HRK 25 000 if:

1. he/she does not fulfil his/her obligations in accordance with Article 244 of this Act; 2. in carrying out insurance and reinsurance brokerage activities, he/she acts contrary to Article 245, paragraph 1 of this Act; 3. in carrying out work preparatory to the conclusion of insurance or reinsurance contracts, he/she fails to notify the insurance or reinsurance undertaking of all the risks involved in accordance with Article 245, paragraph 2 of this Act; 4. he/she mediates in conclusion of insurance or reinsurance contracts contrary to Article 269 of this Act; 5. he/she does not have authorisation issued by the supervisory authority to carry on insurance and reinsurance brokerage business pursuant to Article 249, paragraph 1 of this Act; 6. he/she fails to submit to an insurance or reinsurance policyholder or submits to the latter false information referred to in Article 256, paragraph 1 of this Act or submits the said information in a form contrary to Article 257 of this Act; 7. he/she fails to make analysis in accordance with Article 256, paragraph 2 of this Act; 8. he/she requests or collects payment of commission or any other charge from the insurance policyholder, reinsurance policyholder or person insured contrary to Article 259, paragraph 2 of this Act; 9. he/she subsequently agrees, contrary to Article 259, paragraph 4 of this Act, upon change in the method of calculation or in the level of commission under insurance or reinsurance contracts that have been concluded through his/her mediation."

Article 170 Article 288 is amended to read: "(1) A financial holding company, insurance holding company or the parent insurance or reinsurance undertaking in an insurance group shall be fined between HRK 750 000 and HRK 1 500 000 for the minor offence if it fails to prepare the reports on capital adequacy in the insurance group or does not report to the supervisory authority on capital adequacy in the insurance group pursuant to the provisions of Article 179 of this Act or pursuant to the provisions of the regulations adopted under Article 181 of this Act. (2) The responsible person of the financial holding company, insurance holding company or the parent insurance or reinsurance undertaking in an insurance group shall also be fined between HRK 20 000 and HRK 80 000 for the minor offence referred to in paragraph 1 of this Article. Article 171 Article 289 is amended to read: "(1) A fine from HRK 75 000 to HRK 750 000 shall be imposed, in case of minor offence, on a legal person which: 1. carries on insurance business contrary to Article 7 of this Act; 2. carries on reinsurance business contrary to Article 16, paragraph 8 of this Act; 3. carries out insurance agency business or insurance and reinsurance brokerage business contrary to Articles 250, 251 and 253 of this Act. (2) A fine from HRK 10 000 to HRK 50 000 shall also be imposed, in case of the minor offence referred to in paragraph 1 of this Article, on the responsible person of the legal person. (3) A fine from HRK 5 000 to HRK 25 000 shall be imposed, in case of minor offence, on a natural person who: 1. carries out insurance agency or insurance and reinsurance brokerage activities contrary to the provisions of Articles 248 and 249 of this Act; 4. carries out insurance agency activities on the basis of employment with a bank, contrary to Article 250, paragraph 6 of this Act; 3. carries out insurance agency activities contrary to Article 251 of this Act." Article 172 The title above Article 291 is amended to read: "Violations by an appointed certified actuary". Article 291 is amended to read: "A fine from HRK 20 000 to HRK 80 000 shall be imposed, in case of minor offence, on an appointed certified actuary who: 1. fails to notify without delay the board of directors of an insurance undertaking or a reinsurance undertaking pursuant to Article 68, paragraph 4 of this Act; 2. fails to notify the supervisory authority pursuant to Article 68, paragraphs 6 and 7 of this Act." Article 173 In Article 293, paragraph 1 and paragraph 2, after the words "insurance undertaking", the words "or reinsurance undertaking" are added. Article 174 After Article 293, new Articles 293a and 293b and the titles above them are added, which read: "Limitation period for prosecution of a minor offence

Article 293a (1) Minor offence proceedings shall not be instigated upon expiry of a period of three years from the date of commitment of the minor offence. (2) Limitation period shall be interrupted by any procedural action of the competent authority, which is taken for the purpose of prosecution against a person who committed a minor offence. (3) After each suspension, the limitation period shall start to run from the beginning. (4) Limitation for a prosecution of a minor offence shall come into operation in any case on expiry of twice the period determined by law as limitation for prosecution of a minor offence. Minor offence warrant by the supervisory authority Article 293b (1) The supervisory authority referred to in Article 12, paragraph 1 of this Act may issue a minor offence warrant to the subject of supervision if it establishes a minor offence: 1. by direct observation or upon completion of a supervisory task performed by its authorised persons while carrying out inspectional or other type of supervision that comes within their competence and who have drawn up an official note or report thereon, or 2. on the basis of authentic documentation, including an investigation report drawn up by the competent authorities, or 3. through use of prescribed technical devices or performance of appropriate prescribed laboratory analyses and surveys. (2) The supervisory authority may issue the minor offence warrant referred to in paragraph 1 of this Article only for the committed minor offences specified by the provisions of this Act. (3) The provisions of the Misdemeanours Act dealing with the minor offence warrant issued by a public administration authority as an authorised plaintiff shall apply to the contents of, the procedure for issue of and objection against a minor offence warrant." Article 175 The title above Article 299 is amended to read: "Insurance agents and insurance and reinsurance brokers". Article 299 is amended to read: "(1) The persons who on the date of entry into force of this Act possess authorisation to carry on insurance agency or insurance and reinsurance brokerage business issued by the Finance Minister shall, within six months of the date of entry into force of this Act, submit application to the supervisory authority for issue of authorisation to carry on insurance agency or insurance and reinsurance brokerage business. The applicant shall enclose with the application a proof of no previous criminal record in relation to white-collar crime, or a proof that he/she is not under investigation. (2) The supervisory authority shall, on the basis of the authorisation to carry on insurance agency or insurance and reinsurance brokerage business issued by the Finance Minister, issue to the person referred to in paragraph 1 of this Article the authorisation to carry on insurance agency business referred to in Article 248 of this Act or the authorisation to carry on insurance and reinsurance brokerage business referred to in Article 249 of this Act." Article 176 In Article 301, paragraph 4 is deleted. TRANSITIONAL AND FINAL PROVISIONS Article 177

(1) The subjects of supervision referred to in Article 299, paragraph 1 of the Insurance Act (Official Gazette 151/05) which have not submitted, within the time limit specified in Article 299, paragraph 1 of the said Act, application to the supervisory authority for issue of authorisation to carry on insurance agency or insurance brokerage business shall, within six months of the date of entry into force of this Act, submit to the supervisory authority application for issue of authorisation to carry on insurance agency or insurance brokerage business. The application must be accompanied by a proof of no previous criminal record in relation to white-collar crime, or a proof that he/she is not under investigation. (2) The supervisory authority shall, on the basis of the authorisation to carry on insurance agency or insurance brokerage business issued by the Finance Minister, issue to the person referred to in paragraph 1 of this Article the authorisation to carry on insurance agency business referred to in Article 248 of the Insurance Act or the authorisation to carry on the insurance brokerage business referred to in Article 249 of the Insurance Act. Harmonisation of subjects of supervision Article 178 The subjects of supervision shall, within one year of the date of entry into force of this Act bring their operations into line with the provisions of Article 18, Article 24, Article 57, Article 75 and Articles 128 to 136 of this Act. Adoption of regulations Article 179 The supervisory authority shall adopt the regulations by virtue of the powers conferred upon it under this Act within six months of the date of entry into force of this Act. Article 180 Article 305 is amended to read: "(1) With effect from the day of accession of the Republic of Croatia to the European Union, the provisions of Article 3, paragraph 4, point 5, Article 6, paragraph 1, point 3, Article 21, paragraphs 4, 5 and 8, Article 70, paragraph 5, points 3 and 5, Article 72, paragraphs 3 to 10, Articles 76 to 80, Articles 82 to 85, Article 99, paragraph 9, Article 100, paragraphs 4 and 5, Article 131, paragraph 3, Article 132, Article 135, Article 136, Article 174, paragraph 3, Article 175, paragraph 3, Article 176, paragraph 7, Article 178, paragraph 4, Article 202, paragraphs 4 to 6, Articles 206 to 212, Article 250, paragraph 1, point 3, Article 253, paragraph 1, point 2, Articles 264 to 266 and Articles 276 to 282 of this Act shall become applicable. (2) With effect from the day of accession of the Republic of Croatia to the European Union, the provisions of Article 61, point 8 and Article 123, paragraph 2, point 1 of this Act shall be repealed. (3) Pending accession of the Republic of Croatia to the European Union: 1. the provisions of Article 81 of this Act shall apply to carrying on of insurance business by insurance undertakings in the Member States; 2. the provisions of Articles 86 and 87 of this Act shall apply to carrying on of insurance business in the Republic of Croatia by insurance undertakings from the Member States; 3. the provisions of Article 134, paragraph 3, point 2 of this Act shall apply to submission of information to supervisory authorities of the Member States; 4. the carrying on of insurance agency business and insurance and reinsurance business by insurance agency firms and insurance and reinsurance brokerage companies from the Member States shall be governed by the provisions of Article 252 and Article 254 of this Act respectively." Entry into force Article 181 This Act will be published in the Official Gazette and shall enter into force on 1 January 2009, except for the provisions of Article 3, paragraph 4, point 5, Article 6, paragraph 1, point 3, Article 21, paragraphs 4, 5 and 8, Article 70, paragraph 5, points 3 and 5, Article 72, paragraphs 3 to 10, Articles 76 to 80, Articles 82 to 85, Article 99, paragraph 9, Article 100, paragraphs 4 and 5, Article 131, paragraph 3, Article 132, Articles 135, 136, Article 174, paragraph 3, Article 175, paragraph 3, Article 176, paragraph 7, Article 178, paragraph 4, Article

202, paragraphs 4 to 6, Articles 206 to 212, Article 250, paragraph 1, point 3, Article 253, paragraph 1, point 2, Articles 264 to 266 and Articles 276 to 282 of the Insurance Act (Official Gazette 151/05) along with the amendments thereto as laid down in this Act, which shall enter into force on the date of accession of the Republic of Croatia to the European Union. Class: 453-02/08-01/01 Zagreb, 15 July 2008

THE CROATIAN PARLIAMENT The President of the Croatian Parliament

Luka Bebić, m. p.