Over two years ago, the European Commission (“EC”) initiated an inquiry into the state of competition in the European Union (“EU”) business insurance industry. In explaining the purpose of the inquiry, the EC notes in its Final Report that “[t]aking into account indications that competition in this sector within the common market may be restricted or distorted, the sector inquiry aimed at further investigating the sector and the practices concerned with a view to ultimately identifying any concrete restrictive practices or distortions of competition that may fall within the scope of Articles 81 or 82 of the Treaty.” Some of the areas the EC’s inquiry focus on are the Block Exemption (the EU’s equivalent to McCarran-Ferguson), reinsurance and co-insurance, intermediary compensation, “best terms and conditions” clauses, horizontal cooperation, and long-term contracts.
The Final Report concluded that follow-up was necessary with respect to: (1) the setting of reinsurance or co-insurance premiums, with a focus on the use of a lead and following market in conjunction with “best terms and conditions” clauses; (2) whether long-term contracts prevent insurers from entering or competing in a market; and (3) intermediaries and conflict of interest issues. The Final Report stated that it was not persuaded that the Block Exemption needed to be continued past its 2010 expiration date, but would review the matter “definitively” before March 2009, as called for by the EU Treaty. With respect to those issues it had not specifically deferred, the EC invited additional industry comment.
The EC published its Interim Report in January 2007, at which time it requested commentary from European Union insurance industry participants. A public hearing on the Interim Report was held in February 2007, with approximately 45 industry participants responding to the EC’s call for comments. The EC pledged to issue a report in September 2007, which it has now done.
The EC’s Final Report and the working document that sets forth the EC’s detailed findings, as well as documents related to the Interim Report, which can be accessed by clicking here.
