European Commission’s new draft insurance block exemption
The European Commission last week published its new draft revised
block exemption regulation for agreements in the insurance sector.
The existing block exemption regulation expires
next year. It was adopted in 1992 in order to deal with the
commonly occurring agreements in the insurance sector that the
Commission felt were capable of exemption. At the time, the
Commission was swamped by over 300 notifications which had been
made following the European Court’s confirmation in 1987 that
the EC competition rules applied to the insurance sector.
The Commission’s new draft regulation is in
many respects similar to the existing regulation. It is being made
under the enabling Council Regulation of 1991 (the same regulation
which enabled the adoption of the 1992 regulation) and it continues
to cover the same four types of agreement as are covered by the
existing regulation with, however, the following main changes:
Indicative risk premiums. The new draft
regulation makes two additions to the existing conditions for
exemption of joint activity in this area. First, one condition for
exemption of joint calculation of indicative risk premiums which is
implicit in the existing regulation has been made explicit: as
regards pure premiums, statistics must be broken down into as much
detail as possible, while leaving a statistically useful sample.
Second, the statistics on risk premiums should be available on
reasonable and non-discriminatory terms to any insurance
undertaking which requests access to them.
Comment: As regards the first condition,
the Commission states it is merely making explicit a condition that
was implicit in the earlier regulation. But is the Commission being
disingenuous? It appears to be introducing a new condition, which
in addition, appears to be rather vague. It is unclear what
“broken down in as much detail as possible will mean in
practice. Under the second condition, the results of a study by a
trade association would have to be made available to non members.
The Commission indicates that fees charged for access to studies to
insurance firms which have not contributed to the studies cannot be
so high as to constitute a barrier to entry onto the market.
Standard policy conditions. The new draft
regulation changes the existing conditions for exemption of
standard insurance policy wordings (for direct insurance) eg those
produced by associations of insurance undertakings or
intermediaries. These will now only be exempted under the new draft
block exemption if they are developed in conjunction with the joint
calculation of pure premiums and joint studies related to risk
premiums, and only in so far as they are both necessary and
exclusively used for such calculations or studies.
Comment: This is a very important change
which restricts the scope of the current exemption dramatically.
Many standard wordings are in use and rely upon the present
exemption without any link to risk premium calculations. The
industry needs to lobby the Commission on this issue explaining why
voluntary standard wordings can benefit consumers even where they
are not directly linked to risk premium calculation. There are
particular issues in the context of subscription markets where
standard wordings play an important role.
Common coverage of certain types of risks
(pools). The existing regulation subjects the exemption of
pools to thresholds for the parties’ market shares. The new
draft regulation increases these market shares: pools will be
authorised on condition that the combined market shares of their
members do not exceed 20% for co-insurance pools and 25% for
co-reinsurance pools. In addition, the new draft regulation
introduces a new exemption with no market share threshold for
insurance pools which are newly created in order to cover a new
risk, for the first three years of their existence.
Comment: These appear to be helpful
changes. The Commission indicates the areas for which pools are
most often created as being aviation, nuclear and environmental. It
confirms that pools will generally not infringe Article 81(1) if,
in the absence of the group/pool in question, none or only one of
the members of the group would be able to offer the category of
insurance concerned (even if other companies or pools do supply
that category of insurance). However, where the subscription
capacity of the group is such that it could be replaced by at least
two competing groups, the group may restrict competition with the
meaning of Article 81(1) depending on the level of its market
power; hence the need for market share thresholds.
Joint determination of approved safety
equipment. The new draft regulation introduces a new condition
for exemption of agreements between insurers on approved security
equipment. In order to be exempted, such agreements must explicitly
recognise as equally valid: (i) any similar agreements adopted in
any other Member State and (ii) any approval of a security device
or installing and maintenance undertaking issued by a national
association in another Member State.
Comment: It is questionable whether the
Commission’s proposed change in this regard is perhaps a
little premature. Is this in fact mandatory mutual recognition in a
case where perhaps standards throughout the Member States (for
instance, as regards the qualifications of installers and
maintainers of equipment) might not yet be comparable?
The new draft regulation takes account of the
Commission’s experience of applying the existing regulation
over the last 9 years encapsulated in its recent report and also
reflects developments in the insurance sector.
Now is a good time for businesses to consider the
issues raised by the draft regulation, to review their compliance
with the proposed rules which should apply from 1 April 2003 (with
a transitional period to bring existing agreements into line by 30
September 2003). These changes will also be important in the
context of the Competition Act 1998 as compliance with an EC block
exemption provides a “parallel exemption under the 1998 Act.
Agreements or practices falling outside the scope of the new block
exemption may therefore infringe the prohibition in Chapter I of
the 1998 Act irrespective of any effect on inter-state trade which
is necessary for an infringement of EC competition law. Compliance
with competition rules is of ever-increasing importance to UK
businesses especially in light of the OFT’s increased use of
its enforcement powers under the 1998 Act and its proposed
disqualification powers for directors under the Enterprise
The Commission has published its new draft
regulation in the Official Journal. To access the new draft
regulation on the europa website please click
If you would like further information on the new
draft block exemption regulation, please contact Nick Paul on + 44
(0)20 7367 2806 or by email email@example.com
There will be a Financial Services & Competition
Law Breakfast Briefing on 17 September 2002 at which this topic
will be discussed. Full details will be available soon via