EU cuts two Block Exemptions

The European Commission has allowed only two Block Exemption Regulation (BER) for insurers to continue beyond 1 April. These cover risk pooling and sharing of claims data.

The previous exemptions on insurers sharing standard policy terms and joint working on security devices will be dropped. Insurers working together on these issues will be breaking competition rules.

Joaquín Almunia, Commission vice-president in charge of competition policy, said: "The block exemption continues to be justified for pools and certain types of information exchange necessary for the industry to be able to carry out its business.

Interest of consumers

“This is in the interest of consumers and of the economy as a whole. The Commission together with the national competition authorities will see to it that the industry does not use the exemption as a blanket protection and will enforce competition rules where and whenever necessary", said.

This new regulation will be valid until 31 March 2017 and include changes, such as a new right of access to the results of the information exchange for customer and consumer organisations, except for public security reasons.

The New BER on pools also includes a change to the approach to market share calculation in order to bring it into line with other general and sector-specific competition rules so that not only gross premium income earned within the pool by the participating undertakings, but also outside the pool will be taken into account.

“There will also be a broadening of the definition of "new risks" to cover risks the nature of which has changed so materially that it is not possible to know in advance what subscription capacity is necessary in order to cover such a risk,” the EU said.

Two dropped

But two exemptions are dropped. “The review of the previous BER showed that neither agreements on standard policy conditions nor agreements on security devices are specific to the insurance sector,” the EU said.

“They are therefore excluded from the new BER. The Commission, however, plans to address both of these types of agreements under the EU Guidelines on horizontal cooperation agreements, which are currently being reviewed.

Reduced cooperation

The European insurance and reinsurance federation (CEA) said it feared dropping the other two BERs would “reduce cooperation between insurers, to the detriment of consumers”.

“In contrast to the BER, the guidelines that will be issued for standard policy conditions (SPCs) and for security devices are not legally binding”, said Michaela Koller, CEA director general.

“They will therefore not ensure legal certainty and the CEA is concerned that it could lead to a significant drop in cooperation.”

Market-share calculation

The CEA welcomed the clarification of the definition of new risks for pools, which now covers agricultural risks and natural disasters. It also includes risks arising from new technologies or new legal provisions.

However, the CEA points out that the new market-share calculation for pools leaves larger insurers outside the scope of the BER. Consequently, smaller insurers will not have the opportunity to cooperate with larger companies and benefit from their experience.

“Ultimately this may result in a lack of available cover for certain risks and less capacity in the market,” the CEA warned.

Operators now have six months to obtain legal advice on the amended BER and adapt their cooperation as necessary.