Stricter competition rules for the insurance sector?

On 17 March 2016, the European Commission announced its plans for the current Insurance Block Exemption Regulation (IBER). The IBER, which covers certain agreements in the insurance sector allowing insurers to rely on a safe harbour from EU competition law, is due to expire on 31 March 2017. Now the Commission has to decide the fate of the IBER – renewal, modification or expiry?

Why is the IBER important for insurers? 

Block exemption regulations provide a safe harbour, stipulating that certain types of agreements restricting competition are permitted under EU competition law without the need for the parties to show (or prove) efficiencies benefitting consumers. In particular, the IBER governs:

• cooperation among insurers, for example for joint preparation of analysis, insurance tables or statistics; and
• agreements setting-up and operating pools of (re-)insurance undertakings for the common coverage of risks. 

In its report, the Commission acknowledges that whist these the two forms of cooperation are specific to the insurance sector it no longer sees a need for sector-specific regulation. Insurers should be able to assess the compatibility of these forms of cooperation agreements with competition law under the Commission’s (non-sector-specific) guidelines on horizontal cooperation (the Horizontal Guidelines). 

With regard to the co-(re)insurance pools, the Commission’s view is that renewal of the IBER is not justified. In practice, these collaborations tend to involve (generally pro-competitive) cooperation set up by intermediaries and brokers, rather than the institutionalised pools targeted by the IBER – demonstrating, according to the Commission, that sector-specific regulation is not justified. 

Impact on the insurance sector 

Discontinuation of the exemption for pools would not mean that they are prohibited, but that they would be assessed under the same competition rules as agreements in other sectors. Insurers would need to self-assess whether a given cooperation agreement produces efficiencies for consumers – and prove these efficiencies in case of an investigation. 

In its report, the Commission considers updating the Horizontal Guidelines to reflect the change. Whether these amendments will allow insurers a proper self-assessment will largely depend on the level of detail. The Horizontal Guidelines are not binding on courts and competition authorities, and non-renewal of the IBER would create legal uncertainty as to the compatibility of these cooperation agreements with competition law. 

The Commission’s proposals fit with previous moves to phase out existing sector-specific regulations. The insurance sector is one of three sectors that still benefit from a sector-specific block exemption regulation. Similar regulations still apply to maritime liner shipping and to the motor vehicle aftermarket. 

The Commission will discuss its findings with stakeholders in a meeting on 26 April 2016. Stakeholders fear that the loss of the IBER will disadvantage smaller insurers or lead to big players ceasing to share statistical data. What is certain is that the expiry of the IBER will cause higher compliance costs for insurers, who will need to examine cooperation more carefully.