On 24 March 2010, the European Commission announced that it has adopted a new insurance sector block exemption regulation (BER). The new insurance BER came into force on 1 April 2010 and will last until 31 March 2017. The insurance BER exempts certain aspects of the insurance industry from the EU prohibition on restrictive agreements.
The headline points of the new insurance BER are that it:
- renews exemption for joint compilations, tables and studies;
- renews exemption for co-(re)insurance pools, subject to some amendments;
- no longer exempts standard policy conditions; and
- no longer exempts agreements on security devices.
This should not come as a surprise as it is effectively what the European Commission set out in its consultation draft of the insurance BER in October 2009, although there were some slight amendments.
The Commission observed that standard policy conditions are used in other sectors, such as banking, without the need for a specific block exemption. It reasoned that to give the insurance industry special treatment could result in unjustified discrimination against other sectors which do not benefit from a sector-specific BER. Security devices and their installation were found to fall into the general domain of standard setting.
Standard policy conditions
The exclusion of standard policy conditions and provisions on security devices from the BER does not mean that they are necessarily illegal - rather a regular competition analysis is required. This will consider whether the particular arrangements do actually comprise a restriction of competition, whether any other block exemption could apply (e.g. the vertical agreements block exemption) and/or whether the particular arrangement merits an individual exemption.
Associations and their members will need to carry out a self-assessment in relation to proposed standard policy conditions and their terms of use as for any other association activity.
The Commission plans to offer more guidance on standard policy conditions for all sectors (not just insurance) in its guidelines on horizontal agreements which it is currently reviewing and on which it plans to consult "in the first half of 2010".
Joint studies
Key changes to the exemption regarding joint compilations, tables and studies are:
- a new right of access to the results for customer and consumer organizations, subject to an exception on the grounds of public security (e.g. where information is related to the security systems of nuclear plants or the weakness of flood prevention systems); and
- clarifications to the scope of the exchange of information covered by the BER.
Pools
Key changes to the pools exemption are:
- market share calculation now covers gross premium income earned within and outside the pool by participating undertakings – bringing this area into line with other general and sector-specific competition rules; and
- a broadening of the definition of "new risks" to cover risks the nature of which has changed so materially that it is not possible to know in advance what subscription capacity is necessary in order to cover such a risk.
The Commission emphasized that the pools exemption is not a "blanket" exemption and that careful legal assessment is required of whether a pool complies with the conditions of the BER. It intends to monitor their operation closely.
Subscription market co-(re)insurance agreements
The Commission has also underlined that ad-hoc co-(re)insurance agreements on the subscription market have never been covered by the insurance BER and remain outside the scope of the new regulation.
Transitional provisions
It is useful to note that there is a 6 month grace period until 30 September 2010 for agreements which comply with the expiring insurance BER but not the new insurance BER. This gives industry a little more time to adapt their agreements to bring them into line with the new rules.
