9 Competition: the insurance sector
| (30526)
8291/09
+ ADD 1
COM(09) 138
| Commission Report on the functioning of Commission Regulation (EC) No. 358/2003 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices in the insurance sector
|
| Legal base | — |
| Document originated | 24 March 2009
|
| Deposited in Parliament | 3 April 2009
|
| Department | HM Treasury |
| Basis of consideration | EM of 6 May 2009
|
| Previous Committee Report | None
|
| To be discussed in Council | None planned
|
| Committee's assessment | Politically important
|
| Committee's decision | Clear
|
Background
9.1 A Block Exemption may exempt a sector from the provisions
of Article 81 EC prohibiting, "as incompatible with the common
market: agreements between undertakings, decisions by associations
of undertakings and concerted practices, which may affect trade
between Member States and which have as their objective or effect
the prevention, restriction or distortion of competition within
the common market." Commission Regulation (EC) No 358/2003
governs a Block Exemption for certain categories of agreements,
decisions and concerted practices in the insurance sector. This
Block Exemption is due to expire on 31 March 2010.
The document
9.2 In this document the Commission summarises the preliminary
results of its consultation on the functioning of the insurance
sector Block Exemption and sets out a tentative policy on renewing
it in 2010. In doing so the Commission considers three key questions:
- whether the business risks or other issues in the insurance
sector make it special in a way that leads to an enhanced need
for cooperation among insurers;
- if so, whether this cooperation requires a legal instrument
to protect or facilitate it; and
- if so whether the present Block Exemption, partial renewal,
amended renewal or guidance would be more appropriate.
The Commission has examined these questions in respect of four
categories of agreement:
- joint calculations, tables and studies, for example, calculations
of the average cost of covering a specific risk in the past or
mortality tables;
- Standard Policy Conditions, that is, joint establishment and
distribution of non-binding standard policy conditions;
- pooling operations for the co-insurance and co-reinsurance
of certain risks, for example, nuclear, terrorism and environmental
risks; and
- technical specifications and rules for security devices, for
example, burglar alarms or sprinkler systems.
9.3 The Commission's preliminary view is that the two forms
of cooperation specific to the insurance sector, joint calculations,
tables and studies and pools, should continue to be facilitated
by a Block Exemption. For the two other forms of cooperation the
possibility of non-renewal is raised, on the grounds that the
benefits of cooperation can be achieved by industry participants
without the need for a sector-specific protection under a Block
Exemption.
9.4 The industry and stakeholders will make final representations
to the Commission at a public event on 2 June 2009, after which
the Commission will make a decision on whether or not to renew
any parts of the Block Exemption for the insurance sector.
The Government's view
9.5 The Economic Secretary to the Treasury (Ian Pearson) says
that:
- on balance the Government welcomes the Commission's report,
which seeks to protect forms of agreement between insurers that
foster beneficial consumer outcomes and promote competition;
- it supports renewal of the Block Exemption in respect of joint
calculations, tables and studies and pools; and;
- it favours, subject to the results of further analysis by
the Commission, total renewal of the Block Exemption in these
cases in order to minimise uncertainty and legal costs for the
industry that would be associated with change in the rules.
9.6 The Minister continues that similar considerations arise
in respect of changing the regulatory basis for Standard Policy
Conditions and security devices. He says that in the case of the
former:
- the Government agrees that there are many benefits associated
with Standard Policy Conditions and, indeed, as the Commission
points out, the UK regulator has sought to promote increased contract
certainty based on Standard Policy Conditions in some market sectors;
- Standard Policy Conditions are particularly important to the
functioning of subscription insurance, where a single large risk
is underwritten by a number of insurers on a wholesale basis;
- Standard Policy Conditions promote competition by allowing
new entrants or smaller companies to take, as a starting point,
policy wordings that have been found appropriate to the conditions
of that market;
- although the Government accepts that some cooperation would
be likely to remain even if the Bock Exemption were not renewed,
it is concerned that there may be a significant risk of less or
non-cooperation on Standard Policy Conditions if the relevant
provision is not renewed; and
- the Government, therefore, would seek either the total renewal
of the Block Exemption in respect of Standard Policy Conditions
or equivalently clear guidelines or regulations permitting their
continued use.
9.7 The Minister tells us that the case in respect of security
devices is more nuanced, saying that:
- the Commission argues, first, that insurance sector agreements
about standards for security devices may lead to some manufacturers
and installers being excluded from the market, in particular impacting
the free movement of goods and services between Member States
— the Government believes there is insufficient evidence
to judge this issue, as yet, and awaits the results of further
study by the Commission;
- the Commission argues, secondly, that the need for agreements
on security devices is reduced because of the subsequent introduction
of Community harmonised standards concerning, for example, fire
detection and alarm systems — however, it is questionable
that these standards provide "exhaustive and adequate levels
of security" in respect to the preservation of property as
well as of life;
- the Commission argues, thirdly, that manufacturers and service
providers are insufficiently consulted in the setting of standards
— the Government's preliminary view is that this is not
the case in the UK, though again it would welcome further evidence
gathered by the Commission;
- in general, the Government supports the linking of technical
standards for security devices to the pricing of insurance, as
providing a financial incentive to take steps tending to reduce
harm to consumers; and
- it would tend, therefore, to support total or amended renewal
of the Block Exemption or equivalently clear guidelines or regulations
in this respect.
Conclusion
9.8 The changes which the Commission might introduce to
this Block Exemption will be important for the insurance sector.
So whilst we clear this document we should like the Government
to tell us in due course the Commission's final decisions on this
matter.
|
