The European Commission (the Commission) is consulting on the future of the Insurance Block Exemption Regulation(IBER), which is due to expire in March 2017. Submissions can be made until 4 November 2014.
The IBER currently exempts two types of agreement between companies in the insurance sector from EU antitrust rules:
- agreements with respect to joint compilations, joint tables and studies; and
- common coverage of certain types of risk (co-insurance or co-reinsurance pools).
These agreements are exempted on the basis that they help improve the knowledge of risks, facilitate the rating of risks for individual companies and help provide insurance products that the market would not otherwise be able to provide.
As regards (1) and the collaboration and sharing of information between insurance providers, the IBER covers collaboration between insurance companies or within trade associations in the compilation of information to be used for the calculation of the average cost of covering a specified risk in the past or, for life insurance, tables of mortality rates or of the frequency of illness, accident and invalidity. It also covers joint studies on the probable impact of extraneous circumstances that may influence the frequency or scale of claims, or the yield of different types of investment. However, this is only exempt within certain limits deemed to be necessary to attain these objectives. So, for example, agreements on commercial premiums are not exempted and would constitute a clear breach of competition law. Equally, to ensure transparency and to encourage market entry the joint compilations, tables or studies must be accessible both to insurance providers active on the relevant market and to those considering entering that market. The narrower the categories into which statistics on the cost of covering a specified risk in the past are grouped, the more leeway insurance providers have to differentiate their premiums. For that reason, joint compilations of the past cost of risks is permitted on condition that the available statistics are provided with as much detail and differentiation as is actuarially adequate.
As regards (2), the IBER recognises that co-insurance or co-reinsurance pools can, in certain limited circumstances, be necessary to allow the providers jointly to provide insurance or reinsurance for risks for which they might only offer insufficient cover in the absence of the pool. Co-insurance or co-reinsurance pools can allow insurers and reinsurers to provide insurance or reinsurance for risks even if pooling goes beyond what is necessary to ensure that such a risk is covered. However, such pools can involve restrictions of competition, such as the standardisation of policy conditions and even of amounts of cover and premiums. The IBER therefore lays down the circumstances in which such pools can benefit from exemption.
Background to the IBER
In 1991, the European Commission was given broad powers to regulate certain categories of agreements, decisions and practices in the insurance sector. As part of this, it was given the power to provide block exemptions in respect of:
- the establishment of common risk premium tariffs based on collectively ascertained statistics or the number of claims;
- the establishment of common standard policy conditions;
- the common coverage of certain types of risk;
- the settlement of claims;
- the testing and acceptance of security devices; and
- registers of, and information on, aggravated risks, provided that the keeping of these registers and the handling of this information is carried out subject to the proper protection of confidentiality.
Since then, the Commission has enacted three block exemption regulations for the insurance sector. The current IBER was adopted in March 2010 and will expire on 31 March 2017.
In 2010, the Commission decided not to renew the exemption for two types of cooperation that had been covered by the previous block exemption regulations, namely agreements on standard policy conditions and agreements on security devices. In 2011, the Commission commissioned an in-depth study on co(re)-insurance pools and ad-hoc co(re)-insurance agreements on the EU subscription markets. The study was carried out in 2012 and 2013 and the final report was published on the Commission's website in February 2013. The study was followed up by a workshop in March 2013 where the study's findings were discussed with insurers, insurance pools, practitioners, academics and other stakeholders.
The current IBER will expire on 31 March 2017. The Commission is considering the following options as part of its review:
- non-renewal and simply providing any appropriate guidance in an amended set of Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union (TFEU) to horizontal cooperation agreements;
- partial renewal;
- full renewal.
The Commission will also consider making changes to its Communication on the application of Article 101(3) of the TFEU to include guidance on its application to agreements, decisions and concerted practices in the insurance sector.
If the Commission decides not to renew the IBER but instead provide new guidance for the insurance sector, insurers would in future need to self-assess their compliance with such guidance (as they would no longer be able to rely on the block exemption). This could lead to an increased burden on insurers and greater legal uncertainty for businesses.