MEASURING FINANCIAL SOUNDNESS OF INSURANCE COMPANIES BY USING CARAMELS MODEL - CASE OF CROATIA

Insurance companies are institutions that mobilize risk from individuals and companies through insurance contract making exposure to risk to the whole economy lower. Their financial soundness is a key to their success and stability of this part of financial sector and therefore regulators have developed different kinds of models to evaluate their work. The main purpose of this research is to explain one of the recent models used for analyzing financial soundness of insurance companies, CARAMELS model, and to understand the level of soundness of Croatian insurance companies. Methodology used to control and regulate insurance sector in Croatia is different from presented model, so this work gives a different view of the sector's soundness. Some conclusions regarding given categories of financial soundness of the sector will be made based on data from global database of insurance companies (ISIS database). At the end of the paper recommendations for further research are made.