German Competition Authority Imposes Cartel Fines In Insurance Sector

The German competition authority (Bundeskartellamt) has found that seven insurance companies participated in a price-fixing cartel and imposed fines totaling more than 20 million against the companies and their directors¹. The findings relate to the German industrial property insurance sector (in particular fire, fire consequential loss, EC and All-Risk insurance, and technical insurance), the buildings monopoly insurance sector and property insurance in the hospital sector.

This is the second round of penalties arising from the same investigation. In March 2005 the Bundeskartellamt imposed fines totaling some 130 million against ten other insurance companies and their directors².

In this latest decision the Bundeskartellamt found that the insurance companies had, since mid-1999, jointly set insurance premiums and conditions through the Special Committee for Industrial Property Insurance (FIS) of the German Insurance Association (GDV). Certain allegedly agreed "FIS principles" envisaged, among other things:

• a freeze on premium reductions during current contract periods;
• a ban on retrospective premium adjustments;
• an agreement that new contracts with customers would contain certain favorable opt-out and adjustment clauses;
• an agreement on premium increases and on increases to deductibles.

The Bundeskartellamt found that the companies monitored the implementation by exchanging information at several work and discussion groups at director and department head level; they also allegedly agreed not to undermine each others' implementation efforts by making competitive offers to customers.

Compared to many other EU Member States, the courts in Germany are relatively open to damages claims.The insurance companies identified in the Bundeskartellamt's two decisions may now have to defend against damages actions taken by business insurance clients who can show that they have paid inflated premiums.

This article has been prepared by Sidley Austin Brown & Wood LLP for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.