When private customers or companies buy insurance, they transfer risk that may arise from their personal or business activities to the insurance company. The insurance company is better able to manage and absorb the risk because it aggregates risks from a large number of customers. Moreover, the insurance company has better knowledge of the probability of a specific event occurring as well as the severity of the losses that might be incurred. Insurance companies also offer their clients additional services, such as loss prevention and safety advice, loss settlement advice and other legal services.
Private customers and businesses alike benefit greatly from the services offered by insurers. In particular, as far as business is concerned, the transfer of risks associated with commercial and investment activities allows the economy as a whole to function more effectively.
The service provided by insurance companies depends on an uncertain factor, i.e. the occurrence of the insured risk. Cooperation amongst insurers can enhance efficiency, for instance by helping insurers to share large and unpredictable risks or to gain better understanding of certain specific risks. Competition concerns arise, however, where such cooperation distorts competition and exceeds what is necessary to achieve substantial efficiency gains.
As early as 1972, the Commission stated in its Second Report on Competition Policy that the EU competition rules apply to the insurance industry. The Court confirmed this in 1987 in Verband der Sachversicherer when it found that a recommendation by an insurance association to its members on the level of gross insurance premiums was at odds with the EU competition rules.
European Competition Network (ECN) - Insurance
Insurance markets are still largely national, so often the national competition authorities are best placed to address possible competition issues. Information exchange is clearly necessary between the Commission and national competition authorities so that, where possible, coherent or even joint action can be taken.
The Commission set up the insurance network of the ECN, consisting of insurance experts from all 27 national competition authorities. The insurance network facilitates the exchange of information and best practice and serves as a forum for discussion amongst experts. It is designed to develop synergies and enhance the use of resources.
The Regulation grants an exemption to the application of competition rules to certain types of agreements in the insurance sector, namely agreements on:
- Joint compilations, tables and studies
- Co-(re)insurance pools (common coverage of certain types of risks).
A detailed history of the IBER is available here.
Report on the functioning and future of IBER
The European Commission has adopted a report focusing on the functioning and future of the Insurance Block Exemption Regulation (Commission Regulation (EU) No 267/2010) which exempts certain types of cooperation in the insurance sector from EU antitrust rules under certain conditions.
The Regulation came into force on 1 April 2010 and will expire on 31 March 2017. The Commission is required by Council Regulation 1534/91 to submit to the European Parliament and the Council a report on the regulation not later than six years after its entry into force.
The Report presents the preliminary findings and conclusions of the Commission's Review and is accompanied by a Staff Working Document (SWD).
On 26 April 2016 the Commission held a meeting with stakeholders to present and discuss the report's findings.
80 persons attended the meeting.
Studies on issues pertaining to the insurance production process with regard to the application of the Insurance Block Exemption Regulation (IBER)
Against the background of the on-going IBER Review two studies were commissioned to Europe Economics by the Commission following a tender in 2015. These studies will contribute to the overview of the insurance market.
Switching of tangible and intangible assets between different insurance products, August 2016
Executive Summary in French
This study investigates supply-side substitutability in the context of large, unconventional non-life risk, such as nuclear, cyber and natural catastrophe. The study’s focus is on the ability of insurers to switch tangible and intangible assets between different insurance products in the short-term, and on identifying the various constraints that may impede this process.
Different forms of cooperation between insurance companies and their respective impact on competition, August 2016
Executive Summary in French
This study compares different forms of cooperative insurance structures, not limited to pools, setting out the advantages and disadvantages of each type of cooperative structures for both insurers and clients. This research also analyses the different competitive dynamics associated with each form of insurance cooperation scheme. The research moreover identifies potentially non-essential features, from the perspective of maximising the efficiency of these schemes.
Study on co(re)insurance
Study on co(re)insurance pools and on ad-hoc co(re)insurance agreements on the subscription market, July 2014
New edition of the study which was commissioned by the European Commission to Ernst & Young following a tender in 2011. This new edition is an amended version of the edition published on February 8th 2013, Following the first edition of the report and comments received by some pools, the report was updated. It provides an:
- Overview of co(re)insurance pools after the adoption of the new BER;
- Overview of ad-hoc co(re)insurance agreements on the subscription market;
- Analysis of similarities and differences between co(re)insurance pools and ad-hoc co(re)insurance agreements on the subscription market.
The information gained through this survey will contribute to improving the level and extent of public information on these co(re)insurance schemes.
The study was performed at EU27 level and will be used in the future review of the Block Exemption Regulation (EU) No. 267/2010, which will expire on 31 March 2017. In this regard, a Report to the European Parliament and Council was submitted by 31 March 2016.
The report also takes a closer look at market practices concerning ad-hoc co(re)insurance agreements following up on the Commission's report on the Business Insurance Sector Inquiry, published in 2007.
The Commission has organised a workshop on 12 March 2013 where Ernst & Young presented the findings of the study. The presentation was followed by a discussion of the main findings.
In 2005 the Commission launched a sector inquiry to gain better understanding of the functioning of the sector and ultimately to detect possible distortions of competition. The inquiry focused on the provision of insurance products and services to business and also covered reinsurance as well as insurance and reinsurance intermediation.
The inquiry's results have helped the Commission to assess structural and behavioural aspects affecting competition in the market, including forms of existing cooperation, conditions of competition and market entry barriers. The inquiry revealed that there were a number of practices at all levels of the supply chain that may prevent the insurance markets from working as well as they should.