The European Commission has opened a formal investigation of its own initiative into whether certain provisions accompanying claim-sharing and joint-reinsurance agreements in the marine insurance sector infringe the competition rules.
P&I Clubs are mutual non-profit making associations that provide protection and indemnity insurance to their ship owner members. The International Group of P&I Clubs (IG) is a co-insurance association of 13 P&I Clubs which operates a claim-sharing agreement known as the Pooling Agreement. Qualifying claims in excess of $8 million are shared between the clubs in accordance with the terms of the Pooling Agreement by which the clubs reinsure each other for claims in excess of that amount.
The Pooling Agreement is underpinned by the International Group Agreement which regulates the contractual relationship between the P&I Clubs and their members. The Commission's investigation will examine whether certain provisions of these agreements may be lessening competition between the P&I Clubs and restricting the access of commercial insurers or other mutual P&I insurers to the relevant markets.
The new insurance block exemption came into force on 1 April 2010. The Commission renewed the block exemption for co-insurance and co-reinsurance pools. However it remains the case that for the block exemption to apply the combined market shares of the members must not exceed 20% for co-insurance pools and 25% for co-reinsurance pools. Under the new rules market share thresholds are applied not only on the turnover of the pool but the Commission will now take into account the income earned on the same relevant market outside the pool.
The Commission noted that the block exemption did not apply here since these market shares thresholds were exceeded by members of the IG who provide P&I insurance to an estimated 93% of the world's ocean-going tonnage.
The Commission has previously investigated and cleared the terms of the IG's agreements. However, it reserved the right to re-examine the agreements should market conditions change.
The timing of this investigation is interesting and may well signify that more enforcement actions are to come. In its sectoral inquiry into business insurance the Commission found that many insurers had been incorrectly using the pools exemption as a "blanket exemption" without assessing whether all conditions for exemption were met. The Commission expressed its intention to monitor the operation of pools closely to make sure they were compliant with the new rules.
Click here for the Commission's press release.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 27/08/2010.
