THE EU CONSULTATION ON THE
INSURANCE BLOCK EXEMPTION
* * * * * * * **
Web-based seminar, Brussels, 18 June 2008
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2209395
WELCOME
• Where do we come from?
• Objectives of this seminar
PANEL OF SPEAKERS
•
Eithne McCarthy, Project Leader, DG COMP. Ms. McCarthy is an Irish citizen and dual qualified as
a lawyer in both the Republic of Ireland and the UK. She has specialised, for the past nine years in EC and
UK competition law and worked across a wide range of sectors. Prior to joining the Legal Division of the
Office of Fair Trading in London in 2003, she spent four years as an associate at an international law
firm. She joined DG Competition in October last year where she specialises in financial services and is
involved in several other cases in addition to her work on the Review of the Insurance Block Exemption
Regulation. She holds degrees in economics and law and speaks several European languages.
•
Dieter Pscheidl, VVO. Mr Pscheidl holds degrees in Insurance Law and Economics at Vienna University
of Economics and Business Administration. Since 2004, he is Legal and International Affairs Manager and
Representative to the European Union of the Austrian Insurance Association (VVO). Prior to that, Mr.
Pscheidl held various positions at Allianz, AVUS Group, UNIQA and Generali in Austria and France. Since
2005, he is a lecturer on international insurance markets at Vienna University of Economics and Business
Administration.
•
Philippe Bourguignon, Assurpol. Mr Bourguignon joined AGF in 1977 where he held various positions
in the Commercial Lines Insurance Business. He started in the Engineering Insurance sector, then joined the
Liability Division which he headed in 1985. He took over the Direction of the “P&C Large Accounts AGF
business" Unit in 1996. He is also member of several working groups in the F.F.S.A. (French Insurance
Federation), and has been Vice-Chairman of the C.E.A. Liability Committee. He is currently Chairman of
Assurpol.
MODERATORS
Guy Soussan, Partner, Steptoe & Johnson, Brussels
gsoussan@steptoe.com
Tel: +32 (0)2 626 0559
Mobile: + 32 (0)477 29 51 13
Avenue Louise 240, Box 5, B-1050 Brussels
Philip Woolfson, Partner, Steptoe & Johnson, Brussels
pwoolfson@steptoe.com
Tel: +32 (0)2 626 0519
Mobile: +32 (0)475 68 12 16
Avenue Louise 240, Box 5, B-1050 Brussels
Yves Botteman, Senior associate, Steptoe & Johnson, Brussels
ybotteman@steptoe.com
Tel: +32 (0)2 626 0528
Mobile: +32 (0)476 98 04 05
Avenue Louise 240, Box 5, B-1050 Brussels
Background materials on the inquiry, and biographies of the moderators, are available online at www.steptoe.com
THIS AFTERNOON’S AGENDA
• Introduction and background on the consultation
• Cooperation on premiums and standard terms
• Treatment of insurance pools
• Legal certainty and the necessity of a Block Exemption
THE CONSULTATION VIEWED BY THE
EUROPEAN COMMISSION
• Value of the Insurance BER
– Objective was to facilitate the Commission’s task in view of the
large number of individual notifications being received by the
Commission prior to modernisation (Regulation 1/2003) which
abolished that system
– This reason no longer exists since self-assessment is required
– Commissioner said:
"We need to investigate how the insurance block exemption is working in practice
and whether there are sufficient grounds to renew it. Sector specific competition
regulations are exceptional legal instruments. If there are to be special rules for a
particular sector, I need to be convinced that they are justified in terms of bringing
real benefits to competition and to consumers."
THE CONSULTATION VIEWED BY THE
EUROPEAN COMMISSION
• Consultation
– Implementing Regulation (1534/91) requires the Commission to
report to Parliament and Council by March 2009
– BER will expire automatically on 31 March 2010
– Commission will conclude on basis of evidence gathered during this
Consultation
– Conclusion not yet reached but special rules need to be justified
THE CONSULTATION VIEWED BY THE
EUROPEAN COMMISSION
• To renew or not to renew
– Replies to sector inquiry failed to make a distinction between
necessity of the forms of cooperation covered by the BER and the
necessity of the BER itself
– Is the legal instrument necessary?
– Is the insurance sector different from other sectors in that it requires
special rules?
– Areas of specific interest:
• Whether the BER is being used, where and why
• Whether the BER gives rise to any anti-competitive effects which harm
consumers
• Whether non-renewal of the BER would lead to a heavier burden on
supervisory authorities
PREMIUMS AND STANDARD TERMS: THE
ISSUE AT STAKE
• Information exchange mostly in the context of national insurer
associations
• Value of information exchange for the insurance industry
• Removal of BER could discourage market access and
expansion of small insurers and reduce dissemination of nonbinding standard policies
PREMIUMS AND STANDARD TERMS:
VIEWS OF THE AUSTRIAN INSURANCE ASSOCIATION
• VVO hosts cooperation mainly in the fields of exchange of
risk data and standard policy conditions
• Cooperation is vital to the market:
– Austria’s EU accession 1995: negative market scenarios for SMEs;
– Austrian insurance market 2008: Austrian and third country SMEs
cover 30% of the market, some even increased their market share in
1995-2007 by up to 27%;
– The case of renewing/reforming the BER is strongly linked to the
preference for a higher number of market players.
PREMIUMS AND STANDARD TERMS:
VIEWS OF THE AUSTRIAN INSURANCE ASSOCIATION
• BER requires an update, especially in the field of exchange
of risk data
• Impact of non renewal on cooperation: Reluctance of
insurers to cooperate because of precaution, cutting market
infrastructure for SME falling into the general regime
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
Information Exchange on pure premiums
• BER exempts (subject to conditions):
– agreements which relate to the joint calculation of the average cost
of risk cover for a specified risk (pure premiums), (Article 1)
– provided that the calculations:
•
•
•
•
do not identify insurance undertakings or parties
are on the basis of historical data
are non-binding
are made available on reasonable and non-discriminatory terms
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
• Collaboration on calculation of average cost of a specified
risk in the past makes possible the improvement of
knowledge and facilitates rating of risks by companies which
in turn:
– facilitates market entry
– benefits consumers
• Agreements not allowed specified in Article 4
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
• Agreements related to the joint calculation of pure
premiums/average cost of covering a specified risk in the
past:
– Nuovo Cegam decision (1984)
– Complaint against ANIA and Italy (2007)
• Agreements on commercial premiums:
– The German Fire Insurance case (1987)
– Ex-officio procedure against The Italian Association of Insurers
(ANIA) (1997)
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
• A closer look at example question:
– Q3 – issue is how was entry affected, if at all by co-operation on
pure premiums. What are the facts? Commission will do the
analysis of facts from across EU
• Improvements?
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
Information Exchange on Standard Policy Conditions for
Direct Insurance
• BER exempts (subject to conditions):
– joint establishment of standard policy conditions (SPCs) for direct
insurance subject to certain conditions (Article 1)
– All SPCs must be non-binding and accessible (Article 5)
– “Black clauses" in Article 6
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
• Standard policy conditions (SPCs) can produce benefits:
–
–
–
–
Efficiency gains for insurers
Facilitate market entry by small or inexperienced insurers
Help insurers to meet legal obligations
Can be used by consumer organisations as a benchmark to compare
insurance policies offered by different insurers
• However they must not lead to:
– The standardisation of products or
– The creation of a significant imbalance between the rights and
obligations arising from the contract
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
• Non-binding character:
– The Concordato Incendio Decision (1990)
• Greater transparency and customer involvement:
– The Aviation investigation (aviation war and terrorism insurance)
(2005)
PREMIUMS AND STANDARD TERMS: VIEWS OF
DGCOMP
• A closer look at example questions:
– Q4 e.g. areas of interest: what role as an insurer do you have in
terms of agreeing SPCs now? How would that be affected without
the BER? Substantiate
– Q5 what variety of insurance policies is available now. In case of
non-renewal why and how would that be affected. Substantiate
(e.g. examples from past, surveys, reports etc)
• Evidence is a matter for stakeholders – what is your
experience?
• Improvements?
INSURANCE POOLS: THE ISSUE AT STAKE
• Pools : A market reality
• Need for BER
• Is there scope for improvement?
• Is there enough experience with pools?
INSURANCE POOLS: VIEWS OF DGCOMP
•
BER (subject to conditions):
–
exempts the setting up and operation of insurance pools (groups
of insurance undertakings or groups of insurance undertakings
and reinsurance undertaking) for the common coverage of new
risks for three years from the date of creation (with no market
share restriction)
–
may exempt co-insurance or reinsurance pools that have been in
existence for three years or that were not created in order to
cover new risk, and provide common coverage of a specific
category of risks subject to certain conditions, in particular
market share thresholds
INSURANCE POOLS: VIEWS OF DGCOMP
• For new risks (which did not exist before):
– It is not possible to know what subscription capacity is necessary
to cover the risk nor whether two or more such groups could coexist to provide this type of insurance
– Therefore new risks are exempt for a limited period (3 yrs)
– 3yrs was considered an adequate period for the constitution of
sufficient historical information on claims to assess the necessity
of one single pool
INSURANCE POOLS: VIEWS OF DGCOMP
• Risks which are not new:
– And involve a restriction of competition, can (in certain limited circumstances)
involve benefits to justify an exemption under Article 81(3) even if they could
be replaced by two or more competing insurance companies
– For example they may allow:
• their members to gain the necessary experience of the sector of insurance
involved
• cost savings
• reduction of premiums through joint reinsurance on advantageous terms
– However, any exemption for such groups/pools is not justified if the group
benefits from a significant level of market power (25% for co-reinsurance pools
and 20% for co-insurance pools)
• Since the restriction would otherwise outweigh any advantages
INSURANCE POOLS: VIEWS OF DGCOMP
Cases
• Pools de minimis:
– The Aviation Pool cases (1998)
• No restriction of competition:
– The P&I Clubs decision (1999)
• The co-insurance and co-reinsurance procedure:
– The Business Insurance Sector Inquiry (2007): co-insurance
referred to in the final report on the Sector Inquiry - which might
come under art. 81(1) - is ad-hoc co-insurance and is not blockexempted by the BER as it is not set-up ex ante to cover a specific
category of risk
INSURANCE POOLS: VIEWS OF DGCOMP
• A closer look at example questions:
– Again looking for experience, and evidence to substantiate
– E.g. Q4 where you consider pools could be defined more fully
please indicate the problem (what experience you have to show
the problem) and why you consider your suggestion would be
improvement
– Q6 – evidence may indicate how the BER affects competition
between Member States
• Evidence is a matter for stakeholders
• Improvements?
VIEWS AND EXPERIENCE OF ASSURPOL
Questions to Mr. Philippe Bourguignon
LEGAL CERTAINTY: THE NEED FOR SAFE
HARBOURS
• Striking the balance between two potentially conflicting
policy objectives:
– Legislative simplification; and
– Legal certainty
• What non-renewal of BER would mean in practice:
– For practitioners;
– For insurers;
– For national competition authorities.
LEGAL CERTAINTY: VIEWS OF DGCOMP
• Original objective was to facilitate the Commission’s task in view of
the large number of individual notifications being received by the
Commission prior to modernisation (Regulation 1/2003) which
abolished that system
• Self-assessment for most sectors under Regulation 1/2003
• Other sectors for which BER was not renewed e.g. IATA (airline
tarriff conferences)
• Commission to determine whether the business risks or other issues
make it different such that it justifies special rules (BER)
LEGAL CERTAINTY: VIEWS OF DGCOMP
• Effect of non-renewal
– One of the key aspects of the BER was that it was limited to:
“those agreements for which is can be assumed with sufficient certainty that
they satisfy the conditions of Article 81(3)” (Recital 9)
– Although that was situation in 2003, Commission will consider
exemptions under the BER now and how things may have changed
– In principle we expect that non-renewal would have little, if any
effect on the antitrust status of the forms of co-operation it covers
– In principle we expect that the review will confirm our substantive
analysis of the kinds of agreements dealt with in the BER
– However we cannot rule out the possibility that the review will
show that a certain type of agreement should not be exempted or
not exempted under the same conditions as are set out in the BER
LEGAL CERTAINTY: VIEWS OF DGCOMP
• Legal assessment required now under BER – assessment without
BER still required under Article 81 (1) and (3)
– Article 81(1) and (3)
– 81(3) Guidelines (2004)
– De Minimis Notice (1997)
– Current BER (in particular conditions and black clauses) subject
to results of review
– Cases
• If not renewed, Communication will give reasons for non-renewal
• Consistent application would be supported by the European
Competition Network
LEGAL CERTAINTY: VIEWS AND EXPERIENCE
OF THE INDUSTRY
Views of Mr. Dieter Pscheidl and
Mr. Philippe Bourguignon
CONCLUDING REMARKS
• Replies to Consultation
– Where possible, substantiate replies with evidence
– Commission will weigh evidence
– More weight attached to comments supported by evidence (e.g. internal business
documents, independent data etc.)
– Respondents may reply to some or all questions, provide any other comments
• Replies should be provided in writing, preferably by email
(alternatively by letter) to
COMP-GREFFE-ANTITRUST@ec.europa.eu
E-mail subject: Review of Insurance BER - COMP/D1 HT 1221
CONCLUDING REMARKS
• Deadline for responses 17 July 2008
• Following receipt of replies, Commission will analyse and produce
report for Parliament
– If renewal, new BER will be published in advance of expiry of
current BER, Commission will consult on draft
– If non-renewal, Commission will publish Communication to that
effect in 2009
• Consultation Paper on the BER available at:
http://ec.europa.eu/comm/competition/sectors/financial_services/insur
ance.html
This presentation reflects only the views of its authors. It may, in particular, not be taken to
represent any view, express or implied, on the part of the European Commission.
***
Steptoe & Johnson LLP
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tel.: + 32 (0)2 626 0500
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