On August 5, 2014, the European Commission launched a public consultation1 on the Insurance Block Exemption Regulation (IBER)2 that provides a competition law safe harbor for certain types of cooperation among insurers and reinsurers. Non-renewal of the Block Exemption Regulation – which seems a real possibility – would remove the safe harbor and force insurers and reinsurers to conduct individualized assessments of the types of cooperation at issue.
The IBER was most recently renewed in 2010.3 But there was much discussion at the time as to the continued necessity for an insurance industry-specific exemption from the EU’s competition laws.4 That discussion led to the scope of the IBER being narrowed significantly in 2010, with the exemption for pools being watered down. In addition, exemptions for agreements on standard policy conditions, and on the joint testing and approval of security devices, were removed in their entirety.
Pools and co(re)insurance
The European Commission has long been interested in the competition law assessment of pools and other types of co(re)insurance arrangements.
One of the ways in which the 2010 IBER was narrowed was the explicit exclusion from the safe harbor for pool arrangements of ad-hoc co(re)insurance arrangements (e.g. on the subscription market). The net result was that ad-hoc co(re)insurance arrangements would have to be assessed for compliance with competition law by the companies themselves on a case-by-case basis.
But the narrowing of the pools exemption in the 2010 IBER did not mean that the European Commission was finished with its consideration of pools and ad-hoc co(re)insurance arrangements: in November 2011, it asked Ernst & Young to prepare a detailed report on the subject. Ernst & Young’s report – published in February 20135 and then updated in July 2014 – appeared to question the necessity for some pools but observed that competition in the subscription market worked well, with "intense competition […] for the selection of the leader".
In the consultation launched earlier this week, the Commission is again looking for feedback on the competition law assessment of pools and appears to be questioning the necessity for the safe harbor set out in the 2010 IBER.
The only other safe harbor in the 2010 IBER – covering the joint compilation and sharing of data regarding historic risks – also appears set to come under scrutiny in the context of the consultation exercise. Information-sharing arrangements exist in multiple other industries that do not benefit from an industry-specific block exemption regulation and the European Commission may well suggest that (re)insurers participating in information-sharing arrangements should assess the legality of such arrangements by reference to the European Commission’s non-industry-specific guidelines on cooperation among competitors.
The European Commission’s starting point for its consultation (which is open until November 4, 2014) will likely be that there is no need to renew the IBER at all. If industry participants feel today – as they did in 2010 – that the IBER gives helpful clarity, detailed representations will need to be made to that effect in response to the European Commission’s consultation. If, however, industry participants consider that the advantages of the IBER are marginal (or even non-existent), the consultation might provide such participants with an opportunity to side with officials in the European Commission’s Directorate General for Competition and help them to achieve what would appear to be their aim, i.e. not renewing the IBER.