The insurance sector is one of three sectors that until recently still benefited from a block exemption regulation (BER). BERs automatically exempt certain categories of agreements from the prohibition of Article 101(1) TFEU, ie if an agreement falls within the scope of the BER, it is automatically deemed to be exempted under Article 101(3) TFEU.
The insurance sector has benefitted from a BER since 1993. With each review, the Commission has questioned its need and relevance and has further limited its scope. After a review of the functioning of the current BER, the Commission concluded that a separate BER for the insurance sector is no longer justified. Consequently, the Insurance Block Exemption Regulation (Regulation No 267/2010 - IBER) was not renewed at its expiry on 31 March 2017.
Scope of the IBER
Since 2010, the IBER still exempted two types of cooperation between (re)insurers.
Firstly, the IBER exempted the joint creation and distribution by insurers of compilations, tables and studies. In particular, the IBER covered:
- the joint compilation and distribution of information necessary for the calculation of the average cost of covering a specified risk in the past and the construction of mortality tables and tables showing the frequency of illness, accident and invalidity in connection with insurance involving an element of capitalisation and
- the joint carrying-out of studies on the probable impact of general circumstances external to the interested undertakings, either on the frequency or scale of future claims for a given risk or risk category or on the profitability of different types of investment and the distribution of the results of such studies.
The exemption of joint compilations, tables and studies applied if the data used represented a sufficient amount of information which could be handled statistically and was aggregated. Further, they had to be made available on reasonable, affordable and non-discriminatory terms, include a statement that they were non-binding and not contain any indication on the level of commercial premiums.
Second, the IBER exempted the setting-up and operation of pools of insurers for the common coverage of a specific category of risks in the form of co-(re)insurance. If it was created in order to exclusively cover new risks, the co-(re)insurance pool was exempted for a period of three years from the date of first establishment of the pool, regardless of the market share of the pool. Other types of co-(re)insurance pools were exempted provided the combined market shares of their members did not exceed 20% for co-insurance pools and 25% for co-reinsurance pools.
In addition, in order to benefit from the IBER all co-(re)insurance pools had to allow their members to withdraw from the pool without any sanctions. Further, the rules of the pool should not restrict the members of the pool from insuring and reinsuring outside the pool.
New legal framework
The expiry of the IBER does not mean that the forms of cooperation between insurers, which it previously covered, are now unlawful under Article 101 TFEU. These agreements are subject to self-assessment.
This was already the case for other forms of cooperation between insurers, such as the joint establishment and distribution of non-binding standard policy conditions for direct insurance and the joint setting of technical specifications, rules or codes of practice for security devices which were excluded from the scope of the IBER in 2010.
Guidance in this exercise can be found in the Horizontal BER for specialization agreements (Regulation No 1218/2010), the Horizontal Guidelines and the Guidelines on the application of Article 101(3) TFEU.
- Joint compilations, tables and studies
The Horizontal Guidelines include a specific chapter on information exchange between competitors, which sets out principles that are fully applicable to the insurance sector and provide a good basis for carrying out a self-assessment on the admissibility of the joint creation and distribution of compilations, tables and studies.
Although joint compilations, tables and studies can have anti-competitive effects in the form of collusion and foreclosure, the Horizontal Guidelines recognise that they can allow to achieve efficiency gains (such as limitation of risk exposure and reduction of information asymmetry for new entrants). Whether the information exchange could raise competition concerns ultimately depends on the type and the nature of the information exchange as well as on the market context in which it takes place. This requires a case-by-case assessment.
The principles set out in the Horizontal Guidelines mirror those in the IBER. Therefore, the discontinuance of the IBER should not bring about a significant change in the competition compliance assessment for federations and intermediaries involved in the collection and dissemination of risk data in the form of compilations, studies and tables.
With regard to co-(re)insurance pools, the Horizontal Guidelines also offer guidance for the assessment under Article 101 TFEU, more in particular the chapters on joint production and joint commercialisation agreements. In addition, there is the BER for specialisation agreements, which exempts joint production agreements between competitors with a combined market share of up to 20%.
The possible restrictive effects of co-(re)insurance pools may be counterbalanced by the efficiencies they allow to achieve. Such efficiencies could include the possibility for insurers to offer lower commercial premiums because of the spreading of risks through the pool, the entry of new players through participation in the pool and the possibility for consumers to spread their insurance coverage. However, as the functioning of pools is heterogeneous, each pool needs to be assessed on its individual merits on case-by-case basis.
In the framework of its review of the functioning of the IBER, the Commission has questioned whether the institutionalised co-(re)insurance pools exempted by the IBER still fulfilled the conditions for exemption under Article 101(3) TFEU. It found that the insurance market currently provides less restrictive alternatives to pools for the purpose of co-(re)insuring risks, whereby intermediaries or brokers build certain insurance lines or insurance packages on their own initiative or at the request of a customer or insurer, often by means of tendering and based on specific needs.
Therefore, attention should be paid to any existing and future co-(re)insurance pools. Given the fact that the Commission has raised concerns regarding the compatibility of this form of cooperation with EU antitrust law, it is advisable – now that the IBER has expired – to (re)assess such pooling agreements under Article 101 TFEU.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.