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MEMO/09/128

Brussels, 24th March 2009

Antitrust: review of Insurance Block Exemption Regulation – frequently asked questions

(see also IP/09/470)

What did the Review involve and how was it conducted?

The Commission's review of the functioning of Commission Regulation 358/03, the Insurance Block Exemption Regulation (BER) began with a consultation of national competition authorities (NCAs) and a review of the Commission's experience in the sector. Comments from NCAs and the Commission's experience (from cases and its Sector Inquiry into Business Insurance) were then summarised in an extensive Consultation Paper which was published in April 2008.

The consultation closed in July 2008 and the Commission started analysing the comments received. To complete its information in a follow-up to the consultation, the Commission held several meetings with stakeholders and sent them targeted questionnaires. The methodology for the analysis of the evidence gathered was published in 2008 on the Commission's website, see

http://ec.europa.eu/competition/sectors/financial_services/insurance.html.

In order to cover all possible types of market participants, a first round of questionnaires was also sent out to all national consumers associations and to several associations of undertakings representing customers (large customers and SMEs). Targeted questionnaires were also sent to Insurance Supervisory Authorities in all Member States.

Following the closure of the consultation, the Commission analysed the replies and sent out further detailed questionnaires to certain categories of stakeholders, namely smaller insurers, pools producer federations/associations of security devices and banking federations/associations. These questionnaires were specifically targeted at how and in which instances the BER was being used.

Finally, a public event is planned for 2nd June 2009 in order to allow stakeholders and industry an opportunity to make further representations, before the Commission takes a final decision on the future of the BER.

Did the Commission receive good feedback from the consultation?

The Commission received 60 replies to its consultation; non-confidential versions of the replies are published on the Commission's website (see http://ec.europa.eu/competition/consultations/2008_insurance_ber/index.html). However, some respondents failed to answer a majority of the questions in the Consultation Paper or provided no evidence to support statements made.

What were the Commission's preliminary findings in relation to each of the four categories of agreements currently exempted by the BER?

The Commission has come to the preliminary conclusion that there are good reasons to protect or facilitate the agreements on cooperation in the area of joint calculations, tables and studies (for example insurers sharing information in order to calculate the average cost of covering a specified risk), that the current BER is doing this effectively and should therefore be renewed. The Commission has not yet decided on the form of a renewed BER. However, a range of options for improvement are considered, including amendments concerning the scope and structure of the current exemption.

The Commission's view at this stage is that insurance pools are also specific to the insurance sector and that there are several arguments in favour of a BER in order to protect or facilitate such agreements. The Commission therefore proposes to renew the BER in relation to pools. However, the chapter in question is likely to be redrafted significantly, in light of comments received during the review and to ensure consistency with other general and sector-specific legislation.

Furthermore the Commission considers at this stage of the review that even if the risk of non-cooperation in these two areas may be low, the possibility that such pro-competitive cooperation may diminish, should be avoided.

Cooperation on standard policy conditions (SPCs) does not appear to be specific to the insurance sector and as such does not necessarily require a sector specific BER. Nor does there appear to be a significant risk of less or no cooperation on SPCs should the BER not be renewed. The Commission therefore proposes not to renew the BER for SPCs. Further guidance on SPCs may be envisaged by the Commission if non-renewal is the final decision.

Agreements in relation to security devices appear to give rise to concerns in relation to both competition and the development of the EU's Single Market. Moreover, they do not appear specific to the insurance sector.

The Commission therefore proposes not to renew the BER for this category of agreements. However, the general standardisation chapter in the Commission's Guidelines on Horizontal Agreements (see Official Journal C3 of 6 January 2001), which are currently under review, offer guidance on the relation between Article 81 of the EC Treaty and agreements on security devices.

How did the Commission arrive at its provisional proposals?

The Commission asked a number of key questions:

  1. Do business risks or other issues in the insurance sector make it "special" and different to other sectors and lead to an enhanced need for cooperation amongst insurers;
  2. If the answer to the first question is yes, does this enhanced need for cooperation require a legal instrument such as the BER, or Guidance to protect or facilitate it (in comparison to other sectors for example, where there is a high level of cooperation without such a legal instrument); and
  3. If the answer to the above two questions is yes, what would be the most appropriate legal instrument (i.e. the current BER, a partially renewed BER, an amended renewed BER, Guidance, other?).

In order to answer these questions the Commission considered the following issues:

  1. If the BER was not renewed, would there be a significant and real risk of less cooperation (i.e. that a category of agreements would not be entered into) to the disadvantage of competition and consumers or of other negative consequences?
  2. Is the BER currently being used and, if so, in which Member States, for which insurance lines and which forms of cooperation are used most intensively?
  3. Could alternative, reasonable and practicable arrangements not create greater benefits for consumers; and
  4. Pro-competitive and consumer aspects of each category of agreement under the BER.

Would a non-renewal of the BER lead to increased legal uncertainty and increased costs in terms of legal assessment? Would such increased costs be passed on to clients?

A non-renewal does not necessarily mean that agreements previously falling under the BER become illegal. A legal assessment under Article 81(1) of the EC Treaty and, if applicable, under Article 81(3) rather than under the BER would be required. Currently, insurers also have to carry out a legal assessment, to evaluate whether their cooperation agreements fulfil the conditions imposed by the BER. An assessment under Article 81 would be similar and there is no evidence that it would cost more.

Given the financial crisis, is it the wrong time to consider non-renewal of any exemptions under the BER?

The Commission's contact with industry has not revealed any particular problems in terms of the links between the BER and the financial crisis. In fact, insurers have said in public and in the course of meetings with the Commission that they are in good shape to withstand the financial crisis because of a robust start capital position, effective risk management, recognition of vulnerability to higher claims and effective credit control.

Several insurers mentioned that they would be cautious about cooperation in areas not covered by a BER. What does the Commission think of this argument?

The vast majority of replies emphasise the need of the insurance sector to cooperate in the areas currently covered by the BER. If cooperation in these areas is so necessary to the insurance sector, then the Commission would expect that the costs related to a lack of legal certainty would take lower priority over the need to cooperate. This is what happens, in practice, in relation to claims settlement agreements and registers of aggravated risks, where insurers do cooperate, even though these two areas are not block exempted. Moreover, ad-hoc co(re)insurance or the subscription market are not block exempted, but this has not been an obstacle to this form of cooperation. Finally, if there is less cooperation on the market in the event of a non-renewal, it is unlikely that this would be a direct consequence of not having a BER.

What happens next?

The Commission will hold a public event on 2 June 2009 in order to hear further representations from the insurance industry and stakeholders on the Commission's report and accompanying working document. Registration will be open shortly via the DG COMP website

http://ec.europa.eu/competition/sectors/financial_services/insurance.html

Panels are envisaged for each of the four categories of agreement exempted by the BER with a key note speech from Commissioner Kroes.

Following this event the Commission will then make a decision on whether to renew or partially renew the BER. In the event it is decided to renew any parts of the BER the Commission will consult on a draft regulation. If the Commission decides not to renew any parts of the BER, it will publish a Communication to that effect in 2009.


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