Anti-trust cover for insurance agreements ‘denied’

After an extended period of consultation, lasting two years, a significantly revised “block exemption” for insurance industry activities came in to effect on 1 April 2010. This measure, in essence, tells the EU’s insurance industry what forms of inter-insurance company cooperation are considered to be acceptable from a competition perspective and establishes, what are often referred to as, “safe havens.” Not many now remain. The predecessor, Regulation 358/2003, provided for four types of insurance company collaboration safe havens. That has now been whittled down to two: (i) so-called joint compilations, tables and studies; and (ii) common coverage of certain types of risks (i.e. co-insurance pools). Eliminated from the new block exemption are: (i) the joint establishment of non-binding standard policy conditions; and (ii) the joint testing and acceptance of security devices.

This does not mean, however, that henceforward agreement between insurance companies on, say, language for a new form of exclusion clause will always infringe the prohibition against anti-competitive agreement as set out in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), but it does mean that participating insurance undertakings cannot assume that it does not. From now on, insurance companies are going to have to undertake the same balancing of anticompetitive effects versus benefits for consumers, innovation, etc., in accordance with the terms of Article 101(3) TFEU that competitors in most other sectors are currently required to undertake. The two remaining exempted areas are themselves not open-ended. For example, for pools to be exempt, participant companies must not command more than 20 percent of the relevant market in coinsurance situations and a maximum of 25 percent of any co-reinsurance scheme. Several other pre-requisites apply to both categories and insurance companies must ensure that they satisfy them all before they proceed under the assumption that they are exempted.

This is the latest chapter in the European Commission’s programme aimed at ending “special” sectoral arrangements and tidying up the rule book. The shipping markets were the last to go through this process and now, latterly, the insurance world. Although resisted by some, the revisions will make little practical difference. As pointed out by the Commission during the consultation process the insurance industry was already labouring under the misapprehension that all, or at least most, insurance pools were exempted. Frequently, said the Commission, participant carriers made little effort to check the finer detail. Given the Commission’s renewed interest in the sector, particularly since the Commission’s market investigation conducted in 2007, this is perhaps not a mistake they should make again. So, whether exempted or not, insurers are going to have to take care, using either the new Regulation or Article 101(3) of the TFEU, that their arrangements do not infringe.