UK: Antitrust Alert: European Commission adopts new and streamlined Insurance Block Exemption

The European Commission has today adopted a new Insurance Block Exemption ("New IBER"), exempting certain categories of cooperation in the insurance sector from the prohibition against anticompetitive cooperation contained in Article 101(1) of the Treaty on the Functioning of the EU ("TFEU"). It comes into force on 1 April 2010 and renews, with certain modifications, two of the four cooperation types exempted in the current block exemption (Commission Regulation (EC) No 358/2003) ("Old IBER"), which expires on 31 March.

The adoption of the New IBER follows the Commission's two-year review of, and consultation on, the Old IBER, during which time it considered three key questions in relation to each of the four categories of agreements exempted by the Old IBER, namely:

  • Whether the business risks or other issues in the insurance sector make it "special" and different to other sectors such that this leads to an enhanced need for cooperation amongst insurers.
  • If so, whether this enhanced need for cooperation requires a legal instrument such as the Old IBER to protect or facilitate it.
  • If so, what is the most appropriate legal instrument, i.e. is it the Old IBER, a partial renewal, an amended renewal, or guidance?


The result is the New IBER – a partial and amended renewal – which will be in force for seven years until 31 March 2017.

Renewed exemptions

The New IBER renews the block exemptions for joint compilations, tables and studies (Article 2); and insurance pools, i.e. common coverage of certain types of risks (Article 5). These exemptions remain subject to conditions which are set out in Article 3 and Articles 6 to 7 respectively.

Joint Compilations, Tables and Studies

The previous exemption applied to agreements for the:

  • joint establishment and distribution of calculations of the average cost of covering a specified risk in the past;
  • joint establishment and distribution of mortality tables and tables showing the frequency of illness, accident and invalidity, in connection with insurance involving an element of capitalisation; and
  • 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 Commission, during its review of this exemption, found that calculation of risk is a key issue in pricing insurance products because the costs of such products are unknown at the time the price is agreed and the risk covered. Access to past statistical data in order to technically price risks is therefore crucial and is specific to the insurance sector alone. Joint cooperation in this respect may therefore be pro-competitive and justified.

However, the new exemption is subject to certain key amendments, designed to ensure pro-competitive effects, as follows:

  • the term "joint calculations" is changed to "joint compilations" (which may also include some calculations);
  • exchange of information is only allowed where it is necessary; and
  • access to data shared is now also allowed for consumer organisations and customer organisations, unless contrary to public security.


Insurance pools – common coverage of certain types of risks

The previous exemption applied to the setting up and operation of co-(re)insurance pools for the common coverage of new risks as well as co-(re)insurance pools covering risks which are not new, subject to certain conditions, in particular to market share thresholds.

The Commission, during its review of this exemption, found that risk sharing for certain types of risks – e.g. nuclear, terrorism, and environmental – was crucial to ensure coverage of these because individual insurance companies are reluctant or unable to insure the entire risk alone. This is another differentiating aspect of the insurance sector and it triggers an enhanced need for cooperation.

However, this new exemption is also subject to certain key amendments, as follows:

  • the approach to market share calculation is changed to bring it into line with other general and sector-specific competition rules so that gross premium income earned by the participating undertakings outside of the pool, as well as within it, will be taken into account; and
  • the definition of "new risks" has been amended and expanded to include risks that did not previously exist and that require the development of an entirely new insurance product for coverage and, in exceptional cases, risks that have changed so materially that it is not possible to know in advance what subscription capacity is necessary to cover such a risk.



Furthermore, the Commission criticised the way the insurance sector has used the pools' block exemption in the past. Its review revealed many insurers were incorrectly using the pool exemption as a "blanket" exemption, without carrying out the required careful legal assessment of a pool's compliance with the conditions for exemption. As a result, the Commission, together with the national authorities, will closely monitor the operation of pools to ensure that blanket applications do not occur.

The Commission has also clearly stated that ad hoc co-(re)insurance agreements on the subscription market – whereby a certain part of a risk is covered by a lead insurer and the remaining part by follow insurers who are invited to cover the remainder – are not, and have never been, covered by block exemption. Any practices involving an alignment of premium between co-(re)insurers through such ad-hoc co-(re)insurance agreements may fall within the scope of Article 101(1) TFEU and will be exemptible only if the conditions for individual exemption pursuant to Article 101(3) TFEU are satisfied.

Non-renewed exemptions

The Commission decided not to renew the block exemptions for agreements on standard policy conditions ("SPCs"); and security devices.

This is primarily because they are not specific to the insurance sector and therefore to include them could result in unjustified discrimination against other sectors not benefiting from a block exemption.

Where such agreements give rise to competition concerns they may still be eligible for exemption, but pursuant to the conditions for individual exemption under Article 101(3) TFEU alone. Guidance applicable to all sectors already exists for security devices, specifically relative to the compliance of technical standards, at Point 6 of the Commission's Horizontal Guidelines (OJ C003, 06/01/2001, pp2-30). Furthermore, the Commission is planning to address both forms of cooperation in its new Horizontal Guidelines, the current version of which is currently under review with a draft version due for publication and consultation in the first half of 2010. This will hopefully provide further guidance and certainty on such forms of cooperation for all industry sectors.

What happens to agreements exempted under the previous block exemption?

The New IBER provides that the prohibition against anticompetitive cooperation in Article 101(1) TFEU will not apply from 1 April to 30 September 2010 to agreements, already in force on 31 March 2010, which do not satisfy the conditions for exemption under the New IBER, but which satisfy the conditions for exemption under the Old IBER.

This gives insurance companies a period of six months to review those existing agreements, which they have previously judged fall within the scope of the Old IBER, in order to assess whether they satisfy the conditions for block exemption under the New IBER or individual exemption pursuant to Article 101(3) TFEU. Any agreements found not to qualify for either type of exemption must be either amended to be brought into line or terminated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.