Insurance: P&I clubs under scrutiny

United Kingdom
The Commission has sent an official statement of objections to the International Group of P&I Clubs, claiming that some of their arrangements unlawfully restrict competition and deny ship owners a choice of liability cover.

P&I clubs offer their members protection and indemnity marine cover against liability for contractual or third party damages, such as oil pollution, crew or passenger injury and collision with other vessels. P&I club arrangements include provisions to share claims exceeding certain amounts. The International Group of P&I Clubs holds approximately 90% of the world-wide market.

The International Group was granted a formal exemption in 1985 from EC competition rules prohibiting arrangements which restrict or distort competition (Article 85). The exemption expired in 1995 and the Group requested a renewal. Following an investigation, the Commission has concluded that, although the arrangements provide benefits for the maritime industry, some aspects are unduly restrictive of competition. It is particularly unhappy about the 12-month rule. If a shipowner decides to move to a new club within the Group, the rate charged by his previous club lasts for one year.

The Group argues that the mutual system is efficient and offers ship owners insurance cover independent of the primary commercial market, which lowers their insurance costs. It also denies that its activities are anti-competitive, mainly because the agreements operate for only one year.

If the Group were to be disbanded, it says that insurance costs would rise significantly and there would be large reductions in cover.