The news of the FCA's first competition dawn raids at the offices of major aviation insurance brokers provides a clear signal that the FCA takes its competition function seriously.
Since April 2015, the FCA has had concurrent competition law enforcement powers, but, until recently, the FCA has utilised these powers in a relatively low key manner. However, this has all changed with the news that, for the first time, the FCA has recently conducted on-site, or dawn raid, investigations at the offices of five major aviation insurance brokers.
In addition to these dawn raids, the FCA has announced, in its recently published Business Plan (18 April 2017), that it is proposing to conduct a market study into wholesale insurance, along with a market study into investment platforms.
The Recent Dawn Raids in the Aviation Insurance Sector
The news that the FCA has been flexing its competition muscles more dramatically by conducting dawn raids at the offices of five major aviation insurance brokers sends a strong signal to the insurance sector, and more widely, about the FCA's approach to competition matters.
Following press comment at the end of last week, Aon, JLT, Marsh, Willis Towers Watson and UIB have issued statements confirming that they are assisting the FCA with an investigation in relation to aviation insurance.
Although further details of the FCA's investigation are unlikely to be forthcoming for some time (more details are usually only made public when a Statement of Objections is issued to the parties), there are indications that these raids have taken place as part of a civil competition law investigation by the FCA into suspected sharing of competitively sensitive information.
Information exchanges are not de facto anti-competitive – in fact competition authorities, including the UK's Competition and Markets Authority (the "CMA") and the European Commission, have acknowledged that, in certain instances, co-operation and information exchange are necessary to enable the insurance sector to operate effectively. However, care needs to be taken to ensure that any information exchange does not potentially infringe competition law. Thus, industry participants always need to be cautious when considering providing to third parties, or indeed receiving from them, any information which could be deemed to be commercially sensitive. Even a one-off exchange of competitively sensitive information could constitute a competition law infringement.
The Proposed Market Study into Wholesale Insurance
The FCA can launch market studies under its powers under FSMA 2000 or under its concurrent competition law powers under the Enterprise Act 2002. The FCA has previously acknowledged that market studies "are the most visible aspect of the work we carry out to promote competition" and are the principal way in which it investigates markets "to see how well they are working for consumers".
In its 2017/18 Business Plan, the FCA has identified the wholesale insurance market, i.e. insurance for the largest and most complex businesses, including multinationals, as the subject for a future market study to assess how effectively competition is working. As part of this study the FCA will be looking at "how firms ensure practices do not create market integrity and conduct risks". The FCA has said that: "We want to ensure that the wholesale insurance market is working well and fosters innovation and competition in the interests of a diverse range of consumers."
This follows the CMA's recent (and on-going) market study into digital comparison tools, which is of relevance to retail insurers, with private motor and home insurance being two of the sectors of particular focus.
The recent dawn raids on the five aviation insurance brokers' London offices provide a clear signal to all those regulated by the FCA that the FCA takes its competition function seriously and that it is increasingly prepared to make use of its wide-ranging competition law enforcement powers.