The Competition Directorate General of the European Commission (the 'Commission') has issued a tender for a third party contractor to undertake a wide-ranging study into co-reinsurance pools and ad hoc co-reinsurance agreements on the subscriptions market within the EU. This marks a concrete step forward in the Commission's scrutiny of the reinsurance sector, following on from its 2007 Business Insurance sector inquiry report (which raised concerns over the potential for alignment of the premiums of followers on the subscription market with the tariff of the lead insurer) and adoption of the new Insurance Block Exemption Regulation (IBER) in 2010 (which narrowed the scope of the safe harbour for pools - see our previous blog here).According to the tender document (available here), the Commission requires a third party report on:
- the operation of co(re)insurance pools across the EU, including identification of all co(re)insurance pools operating in each EU Member State, an analysis of such pools' compliance with competition law, the amount of work undertaken by pools to assess their compliance with competition law, any observed differences between practices in different Member States and the extent to which practices may have changed after adoption of the new IBER; and
- the functioning of ad hoc co(re)insurance agreements on the EU subscription market, including identification of representative examples from each EU Member State, identification of the extent of premium alignment on the leader's price, an analysis of such agreements' compliance with competition law, observed differences between practices in different Member States, the extent to which practices may have changed after the Business Insurance Sector Inquiry report and the extent to which BIPAR principles (available here) are being followed.
The successful contractor will have seven months to report on the issues listed above. According to the Commission, it will use the report as a "solid starting point" for a monitoring exercise, as well as potentially providing the basis for ex officio enforcement action, where the report uncovers evidence of anticompetitive behaviour. The report will also feed into the Commission's future review of the IBER, which expires at the end of March 2017.
It is hard to see how any contractor will be able to provide all of the information requested by the Commission, given that it will lack the formal information gathering powers that may be required to identify all relevant agreements. The contractor is also unlikely to have access to sufficient facts to enable it to undertake a proper legal and economic assessment of those agreements that it does identify. Given these shortcomings, it is unclear what any report will achieve, other than helping to update the Commission's knowledge on the sector. The tender does make it clear, however, that this sector remains on the Commission's radar.