Insurance competition law exemption may not be renewed

Out-Law News | 21 Mar 2016 | 10:48 am | 2 min. read

Insurance companies should review certain agreements and practices they have with other businesses in their market to ensure compliance with EU competition rules in light of an announcement that an exemption from those rules might be lifted, an expert has said.

The European Commission has said that it has provisionally decided not to renew the existing Insurance Block Exemption Regulation (IBER) (13-page / 334KB PDF) when it expires on 31 March 2017. The Commission said it is expected to outline its final decision on the future of the IBER early next year.

The IBER exempts certain types of information exchanges and 'pooling' agreements between insurers from the EU competition law prohibition on anti-competitive agreements.

However, in a new report, the Commission said it does not believe that "the strict conditions for the creation of a sector-specific BER" continue to be met. This is despite the fact there are "indications of an enhanced need for cooperation in the insurance sector in relation to the compilation and distribution of joint calculations, tables and studies, and the co-(re)insurance of specific types of risk", it said.

The Commission has commissioned two studies – on supply-side substitutability in insurance and the different forms of co-(re)insurance available on the market and their impact on competition. The results of those studies and the feedback it receives to its report on the IBER will inform its final decision on the future of the block exemption, it said.

The Commission also said that appropriate guidance already exists in the Commission’s horizontal guidelines on the benefits of information exchange and that therefore the need for the continued existence of a block exemption is questionable. If the IBER is not renewed then the Commission said it could issue specific guidelines on competition issues relevant to the insurance market instead.

Competition law expert Robert Eriksson of Pinsent Masons, the law firm behind Out-Law.com, said: "Such guidance would be welcome, given that the existing guidelines on, for example, information sharing are not so industry specific to necessarily be very useful. The need for more sector-specific guidelines is perhaps amplified by the fact the Commission’s doubts over the suitability and justification for an exemption renewal are partly due to the definition of ‘pools’ being seen as ambiguous and that stakeholders have experienced difficulties in defining relevant markets in insurance." 

"The mixed awareness and understanding of the IBER that the Commission has noted and the fact that one EU member state’s competition authority thought that its national insurance industry’s understanding of ‘pools’ differed from what was regarded as being a ‘pool’ under IBER also suggests that it may be particularly prudent for undertakings to review their existing agreements and practices that have been considered to benefit from IBER, if it is not renewed," he said.

The Commission said there is a market trend away from institutionalised pools formed on insurers’ own initiatives and towards more pro-competitive forms of cooperation between (re)insurers, often set-up by intermediaries/brokers. Because the new arrangements could arguably be more competitive and more likely produce shared efficiencies it is doubtful that the current block exemption sufficiently protects effective competition in this field while providing benefits to consumers, it said.