On 24 March 2010, the European Commission adopted a revised block exemption regulation (“BER”) in relation to the insurance sector to replace Regulation 358/2003, which expires on 31 March 2010. The new BER will come into force on 1 April 2010 and is valid for seven years. A transitional period of six months will apply.
The new BER renews the exemption from the application of the competition rules for two of the previous four types of agreements covered by Regulation 358/2003, namely (i) joint compilations, tables and studies and (ii) common coverage of certain types of risks (pools).
The Commission has concluded that agreements on standard policy conditions and security devices are not specific enough to the insurance sector to require protection under the new BER. Furthermore, because such agreements may also generate anti-competitive effects, the Commission has decided that subjecting them to the general requirement that companies undertake their own assessment is compatible with the competition rules. Thus, instead of being outright exempted under the BER, the insurers will now have to meet the higher hurdle of showing that these types of cooperation benefit customers.
Renewed exemptions:
Joint compilations, tables and studies
The Commission has retained this exemption because it recognises that the sharing of past statistical data allows insurance companies to better price risk and also lowers barriers to entry for new insurance companies. However, the scope of the new exemption has been amended in three ways:
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exchanges of information are now only permitted where they are necessary to achieve certain objectives, such as facilitating the rating of risks;
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the exemption now relates to joint “compilation” of information, rather than “calculations”;
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the new exemption introduces two further conditions: the exchange of information may not contain any indication of the level of commercial premiums; and
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the information must be made available on reasonable, “affordable” and non-discriminatory terms to consumer or customer organisations (such disclosure may, however, be resisted on public policy terms, e.g. where the information relates to nuclear security).
Common coverage of certain types of risks:
There are three main differences between the new and the previous exemption for the pooling of risks:
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insurance companies may now be members in more than one pool on the same relevant market even if they exercise a determining influence in the other pool(s);
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the calculation of the market share for an insurance company now takes into account its market share within the pool in question, within other pools and outside, thereby bringing the definition in line with general competition rules. The flexibility threshold for subsequent increases in market share is raised from 2% to 5%; and
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the definition of “new risks” has been amended so that it now includes, in addition to risks which did not previously exist, existing risks whose nature has been so materially altered as to make it impossible for an insurance company to manage the risk effectively.
Please click here for the full text of the regulation.
For further information, please contact:
Paula Riedel (paula.riedel@linklaters.com, (+44) 20 7456 3537).
