Exemption for certain agreements in the insurance sector

1) OBJECTIVE

To exempt, subject to certain conditions, certain categories of agreement, decision and concerted practice among insurers.

2) ACT

Commission Regulation (EC) No 358/2003 of 27 February 2003 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices in the insurance sector [Official Journal L 53, 28.02.2003].

3) SUMMARY

Background

In accordance with Regulation (EEC) No 1534/91, which authorises the Commission to exempt certain categories of agreement in the insurance sector, Regulation (EC) No 358/2003 sets out the conditions for their exemption. From 31 March 2003, it replaces Regulation (EEC) No 3932/92.

Scope

Regulation 358/2003 applies, subject to certain conditions, to categories of agreement relating to:

• The exchange of information for the purpose of calculating risks. Since the information available to insurers internally is not always sufficient, the exchange of certain statistical information and the joint implementation of studies in order to calculate current and future risks are authorised.
• The joint definition of standard conditions. Standard conditions, drawn up by national insurance federations, may in practice produce efficiency gains for insurers and at the same time benefit consumers and brokers, provided they merely serve as a guide.
• The formation of insurance pools to cover large or exceptional risks. The grouping of several insurers in insurance pools has proved to be the best way of covering large or exceptional risks that firms are reluctant to cover in full on their own.
• The preparation of technical specifications for the installation and maintenance of security devices. This exemption applies to the technical specifications, rules or codes of practice designed to establish classification, regulatory, procedural or code-of-practice systems for those sectors not yet covered by Community legislation.

Such agreements are not caught by Article 81(1) of the EC Treaty and do not need to be notified to the Commission before they come into effect.

Conditions for granting an exemption

To reduce the impact that this type of agreement could have on the market and to ensure improved efficiency and benefits to consumers, Regulation No 358/2003 lays down the conditions for exemption and the ceilings on firms' market shares.

The conditions and ceilings on market share are specific to each of the four categories of agreement and reflect the characteristics of each, in particular with regard to:

• exchanges of information for the purpose of calculating risks. Provided that the inclusion of information exchanges in the statistical data and studies of information from all insurers on a market promotes competition by helping smaller insurers and facilitates market entry, the exemption is not subject to market share ceilings.
• The joint definition of standard conditions. While standard policy conditions and standard individual clauses may stimulate market efficiency by facilitating entry for smaller insurers, they may also result in product standardisation. Accordingly, the exemption applies only if the standard conditions:- are not binding on insurers;- do not contain any systematic exclusion of specific types of risk;- do not require the contract with the insured to be prolonged beyond its lawful term.In addition, since standard clauses serve as a reference for consumer organisations when comparing insurance policies, transparency must be guaranteed when information is made generally available.
• The creation of insurance pools. Since insurance pools can restrict competition and lead to the standardisation of policy conditions, Regulation 358/2003 establishes that it is necessary to subject them to certain conditions. The approach adopted is sufficiently broad, however: insurance pool agreements are allowed market shares up to ceilings of 20% and 25%, and a three-year exemption, not subject to a market-share ceiling, is introduced for agreements relating to new risks. For the purposes of the Regulation, "new risks" means any risk that requires the development of an entirely new insurance product. Risks that have recently changed (as a result of terrorism, for example) are not covered by Regulation 358/2003.
• The introduction, installation and maintenance of security devices. In order that legislation which is more stringent than European legislation and has a major impact on competition should not have considerable market repercussions, the Regulation lays down that provisions applicable to agreements concerning security devices should be harmonised with single market rules. The exemption, however, is subject to certain conditions, in particular that each insurance undertaking must be allowed to select devices and installation and maintenance undertakings not subject to a joint procedure.

The Commission may withdraw any exemption, however, where it finds that studies on the impact of future developments are based on unwarranted assumptions, where standard policy conditions create a significant imbalance between the rights and obligations arising from the contract, or where pools give rise to a dominant position or market sharing.

The Regulation expires on 31 March 2010.

Last updated: 08.03.2007