On August 5 2014 the European Commission launched a public consultation(1) on the EU Insurance Block Exemption Regulation (IBER),(2) which provides a competition law safe harbour for certain types of cooperation among insurers and reinsurers. Non-renewal of the IBER – which seems a real possibility – would remove the safe harbour and force insurers and reinsurers to conduct individualised assessments of the types of cooperation at issue.
The IBER was most recently renewed in 2010. However, there was much discussion at the time as to the continued necessity for an insurance industry-specific exemption from the European Union's competition laws. That discussion led to the scope of the IBER being narrowed significantly, 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 harbour for pool arrangements of ad hoc co(re)insurance arrangements (eg, 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.
However, 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 2013 and 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 recently launched consultation, the European Commission is again looking for feedback on the competition law assessment of pools and appears to be questioning the necessity for the safe harbour set out in the 2010 IBER.
The only other safe harbour 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 consultation. However, if 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 Directorate General for Competition and help them to achieve what would appear to be their aim – that is,not renewing the IBER.
Martin Membery and Patrick Harrison
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